Pension Lump Sum vs Annuity Calculator
Compare taking a pension lump sum vs. lifetime annuity payments
Your Information
Annual: $48,000
Comparison Analysis
Present Value of Annuity
$386,470
At 7% discount rate
Annuity Implied Return
2.48%
⚠ Lower than your expected return
Break-Even Point
0 years
Age 65 when annuity exceeds lump sum
💡 Recommendation
Consider the Lump Sum
Lump sum has $363,530 higher present value
Value Comparison Over Time
| Period | Lump Sum Value | Annuity Total Received | Difference |
|---|---|---|---|
| 10 Years | $1,475,364 | $364,800 | +$1,110,564 |
| 20 Years | $2,902,263 | $729,600 | +$2,172,663 |
💰 Lump Sum Advantages
- ✓ Complete control over investments
- ✓ Flexibility for emergencies
- ✓ Estate value for heirs
- ✓ Potential higher returns
- ✓ Tax planning flexibility
📊 Annuity Advantages
- ✓ Guaranteed lifetime income
- ✓ No investment risk
- ✓ Longevity protection
- ✓ Spouse survivor benefits
- ✓ No management required
📚 Understanding Your Options
Key Considerations
Your decision depends on health status, other income sources, risk tolerance, and need for liquidity. If in excellent health, annuity may provide more value. If poor health or need flexibility, lump sum may be better.
Tax Impact
Lump sum can be rolled to IRA tax-free, deferring taxes until withdrawal. Annuity payments are fully taxable as ordinary income each year. Consider your current and future tax brackets.
Hybrid Strategy
Some plans allow partial lump sum. Consider taking enough for near-term needs or debts, while keeping annuity for guaranteed base income. Combine with Social Security for comprehensive planning.
Disclaimer: This calculator provides estimates for comparison purposes only. Actual results depend on investment returns, longevity, tax rates, and plan features. Consult a financial advisor and review your pension plan documents before making this irreversible decision.