Pension Calculator: Lump Sum or Monthly Payments
Compare a pension lump sum with monthly payments: the return the pension gives, its value today, the break-even age and how long the lump sum would last.
What it does
Many pension plans let you choose between a single lump sum and a lifelong monthly payment. The calculator finds the return the pension pays on the lump sum you give up, values the payments today at the return you could earn yourself, and shows when the payments add up to the lump sum and how long the lump sum would last if you took the same income from it.
How to use it
- Type the lump sum offered, the monthly pension and the age payments start.
- Type how long you expect to live, the yearly increase and the return you could earn.
- See which option is worth more, the pension's return and the break-even age.
The arithmetic runs in your browser. Nothing you type is sent anywhere and nothing is stored, so you can use these with real numbers.
Frequently asked questions
Should I take a pension lump sum or monthly payments?
Take 300,000 or 1,800 a month from 65 to 85: the pension pays 432,000 in all, a 3.96% return. If you can earn 5%, the pension is worth 275,298 today, less than the lump sum; at 3% the pension is worth more.
When do the monthly payments add up to the lump sum?
300,000 ÷ 1,800 = 167 months: starting at 65, the payments reach the lump sum at 78 years 11 months. After that, every payment is extra.
How long would the lump sum last?
Invested at 5% and paying out 1,800 a month, the 300,000 lasts until 88 years 4 months. The pension pays for life however long you live; what is left of a lump sum can go to your heirs.
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