Pension Lump Sum vs. Monthly Income Comparison
Weigh a one-time lump sum against a lifetime monthly pension using break-even math and implied returns.
The single-life or joint amount you're comparing.
The trade
Return the lump sum must earn to match the pension to age 88
6.5%
To replace $2,000/month until age 88, the $300,000 lump sum needs about 6.5% per year — a demanding hurdle for a safe portfolio, which suggests the pension is priced generously.
- Pension payout rate (year one)
- 8.0%
- Lump invested at 5%, withdrawing the pension amount
- Lasts 19 yr 8 mo
- Lump sum depleted around age
- 82
- Total pension checks by 88
- $624,000
- Lump untouched at 5% until 88
- $1,066,702
Cumulative pension vs. remaining lump sum
View data table
| Pension received | Lump remaining | |
|---|---|---|
| Age 63 | $24,000 | $290,791 |
| Age 65 | $72,000 | $270,935 |
| Age 67 | $120,000 | $248,995 |
| Age 69 | $168,000 | $224,754 |
| Age 71 | $216,000 | $197,968 |
| Age 73 | $264,000 | $168,371 |
| Age 75 | $312,000 | $135,668 |
| Age 77 | $360,000 | $99,533 |
| Age 79 | $408,000 | $59,607 |
| Age 81 | $456,000 | $15,490 |
| Age 83 | $504,000 | $0 |
| Age 85 | $552,000 | $0 |
| Age 87 | $600,000 | $0 |
| Age 88 | $624,000 | $0 |
What this may mean for you
The math is only half the decision. The pension is longevity insurance that can't be outlived (backed within PBGC limits); the lump sum offers control, inheritance, and inflation flexibility — but transfers every risk to you. Survivor needs and your health belong at the center of this one, ideally with a professional.
Results are estimates for educational purposes and may not reflect your complete financial or tax situation.
Understanding this calculator
A lump-sum offer is really a price tag on your pension. The sharpest way to judge it is the implied return: the investment return the lump sum would have to earn to replicate those monthly checks for as long as you expect to live. If the implied return is high — say 7% — the pension is rich and hard to beat safely. If it's low, the lump sum buys you flexibility without giving up much.
Numbers aren't the whole story. Monthly pensions are longevity insurance — they can't run out, but most private ones don't adjust for inflation, and payments usually shrink or stop for your spouse unless you chose a survivor option. Lump sums offer control, inheritance, and Roth-conversion flexibility, but transfer all the investment and longevity risk to you. PBGC backing, your health, and your spouse's needs all belong in the decision.
Assumptions and methodology
- Implied return solves for the discount rate where the present value of the monthly payments (to your plan-to age, with any COLA you set) equals the lump sum.
- The drawdown view invests the lump at your assumed return and withdraws the same monthly amount, showing when it would run out.
- Cumulative totals simply add up pension checks to your planning age versus the lump sum growing untouched.
- Taxes, survivor options, PBGC limits, and inflation differences beyond your COLA input are not modeled.
Official sources
Last reviewed August 30, 2026. Year-specific figures show their tax or data year in the tool; data is reviewed when the IRS, SSA, and CMS publish annual updates.
Common questions
Which should I take?
This calculator can't answer that — it shows the trade. A high implied return, good health, and a need for guaranteed income favor the pension; poor health, strong other income, or estate goals can favor the lump sum. This is a decision worth professional advice.
Why does life expectancy matter so much?
The pension's value is the sum of checks you live to collect. Living to 95 makes the same monthly amount far more valuable than living to 78.
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Want a second set of eyes on this?
If you'd like to talk through what these numbers mean for your situation, you can schedule a free, no-pressure conversation. No products, no pitch — just questions answered.