How is the Pension: Lump Sum vs Monthly calculated?

We convert the monthly pension into a single value today (its present value) so it can be compared apples-to-apples with the lump-sum offer.

What data and assumptions does it use?

Standard present-value-of-an-annuity formula (public domain); the discount rate is a shown, configurable assumption.

Income · Live reading

Pension: Lump Sum vs Monthly

Lump sum or monthly — which wins? Move a dial — your result responds instantly.

Calibrate

Drag to set each value — estimates are fine.

Lump-sum offer

The one-time payout being offered.

Monthly pension offer

The lifetime monthly payment being offered.

Years you expect to collect

How many years you expect to receive the pension.

Discount rate

The return you could earn investing the lump sum instead.

David Duston

Money Works Group

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Lump-sum offer
Monthly pension offer
Years you expect to collect
Discount rate

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How this is calculated →

This is an educational comparison using a discount-rate assumption shown with your results; it ignores taxes, COLA, and survivor options.