Pension calculator
Whether a pension lump sum or the monthly payments are worth more, and the return that would match.
About this calculator
This pension calculator helps you choose between a lump sum and monthly pension payments. Enter both offers, your age and how long you want to plan for.
It values the monthly pension in today's money, finds the return the lump sum would need to match it, and shows how long the lump sum would last.
How it works
The pension is valued as the lump sum you would need today to pay the same monthly income until the age you plan for, discounting each payment at your expected return. The matching return is the rate at which that value equals the lump sum.
Last reviewed:
Worked example
- Monthly pension: $2,000
- Lump sum offered: $300,000
- Age when payments start: 65 years
- Age you plan for: 88 years
- Return you could earn on the lump sum: 5% a year
The monthly pension is worth more by: $31,079 (in today’s money, at your expected return)
Common questions
Should I take a pension lump sum or monthly payments?
Monthly payments last for life, which protects you if you live long. A lump sum suits people who need flexibility, want to leave money to heirs, and can invest it well.
What is the break-even return?
The yearly return the lump sum must earn to pay the same income until the age you plan for. If it is higher than you can safely earn, the pension is the better deal.
Are pensions protected?
In the US, the PBGC insures most private-sector pensions up to legal limits if the plan fails. A lump sum taken out of the plan loses that protection.
Sources and further reading
The story behind it
Where the idea came from: In 1875 the American Express Company set up one of the first private pension plans in the United States.
Traditional pensions that pay for life have since become rarer, replaced by savings plans such as the 401(k). When a pension does offer a lump sum, comparing it with the value of the monthly payments is the key test.
Why you can trust this calculator
- It runs in your browser. Nothing you type into it is sent anywhere.
- The method is explained on this page, so you can check it yourself.
- Free to use, with no sign-up.
- Results are estimates, not financial advice.
- Spotted a mistake? Tell us and we'll look into it.
After 15 years as a mathematics educator, I built CalculStore to give students, teachers, professionals and anyone working with numbers simple, reliable tools.
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