How this calculator works
Each future pension payment is discounted to today at the return you think you could earn on the lump sum, then all are added up.
If your pension has a cost-of-living increase, payments rise each year before discounting.
If the payments are worth more today than the lump sum, the pension is the better deal at that return.
The break-even return is the rate at which both are worth exactly the same. You would need to beat it, reliably, to come out ahead with the lump sum.
Worked example
$300,000 lump sum or $1,800 a month for 22 years
- At a 5% return, the payments are worth about $290,800 today.
- That is less than the $300,000 lump sum.
- The break-even return is a little under 5%, so a reliable 5% favours the lump sum.
Questions people ask
What about living longer than expected?
A monthly pension keeps paying for life, protecting you against outliving your money; a lump sum can run out. Use a longer life expectancy to test this.
Is my pension guaranteed?
Most private pensions are insured by the Pension Benefit Guaranty Corporation up to limits; public pensions depend on the plan sponsor.
How is the lump sum taxed?
Rolling it directly into an IRA defers tax. Taking it as cash makes it taxable income in that year.
Can I leave the money to heirs?
A lump sum can be inherited; a single-life pension stops at death, though joint-and-survivor options continue for a spouse at a lower amount.
Last reviewed October 2, 2026