Pension Lump Sum vs Annuity Calculator

2026 rules

Compare your pension's monthly payments with the lump-sum offer.

Your numbers

Lump-sum offer

Monthly pension

Age when payments start

Age you plan for (life expectancy)

Yearly cost-of-living increase on the pension

Return you'd expect on the lump sum

Survivor option

Result

Return the lump sum must earn to match5.23%

Pension per year$28,800
Pension value today at 5.0%$407,894
Lump-sum offer$400,000
Pension worth more by$7,894
Yearly income the lump sum supports to age 88$29,655
Plan typeSingle life

A pension pays for life however long you live; a lump sum can run out but can be left to heirs. Rolling the lump sum to an IRA keeps it tax-deferred.

How it works

The calculator values the pension as the payments you'd receive to your planning age, discounted at the return you'd expect on the lump sum. The break-even return is the rate that makes the two equal.

A cost-of-living increase on the pension makes it worth much more. Most private pensions don't have one.

2026 figures: IRS Rev. Proc. 2025-32 (2026 inflation adjustments).

Questions

Is a pension lump sum taxable?

Only if you take it as cash. Rolling it directly into an IRA keeps it tax-deferred until you withdraw.

What protects my pension if the company fails?

The PBGC insures most private pensions up to a yearly limit, so very large benefits may be cut.