Pension Lump Sum vs Annuity Calculator
Compare the monthly income a pension lump sum could generate against the offered monthly pension. Free and accurate.
- Income from lump sum
- 3299.78
- Difference
- 299.78
- Better option
- Take the lump sum
How to use
- Enter the lump sum your pension is offering.
- Enter the annual return you expect and the number of years you need income for.
- Enter the monthly pension you were offered, then compare which option pays more.
Examples
- $500,000 at 5% / 20 yr vs $3,000:
income from lump sum $3,299.78 - Difference:
$3,299.78 − $3,000 → +$299.78 (take the lump sum)
FAQ
- How is the income from the lump sum calculated?
- It uses the amortization formula: Income = P·r·(1+r)^n / ((1+r)^n − 1), where P is the lump sum, r is the monthly rate (annual ÷ 12 ÷ 100), and n is the number of months. This is the monthly income the lump sum could pay out over the term while fully depleting it.
- How do I decide which is better?
- If the income the lump sum could generate is at least as much as the offered monthly pension, taking the lump sum gives you more income for the same period. Otherwise the pension pays more.
- What does this calculation leave out?
- It does not account for taxes, inflation, survivor benefits, or longevity beyond the chosen term. Treat it as a starting comparison rather than complete financial advice.