Pension Lump Sum vs Annuity Calculator

About this calculator

When a defined-benefit pension pays out, many plans let the retiree choose between a lump sum today or a lifetime annuity of fixed monthly payments. The two options are only comparable once you put them on the same footing: this calculator projects the monthly annuity payments over your expected payout period and compares that running total, discounted for the time value of money, against the lump sum offered today.

The right choice depends heavily on your discount rate assumption, life expectancy, and what you'd realistically earn if you invested the lump sum yourself. A lump sum gives control and flexibility — you can invest it, pass it to heirs, or spend it as needed — while an annuity guarantees income for life but usually stops at death and offers no upside if you live a long time. Financial planners walk retirees through this exact trade-off; this tool gives you the numbers to start that conversation.