Take the monthly pension or the lump sum? The break-even math, honestly
| Live to… | Total pension received | Lump sum grown & drawn equally | Winner |
|---|
The pension-or-lump-sum letter is a one-time, irreversible decision worth six figures — and it's answerable with two numbers this calculator computes: the implied return your invested lump sum must earn to replicate the checks, and the break-even age past which the annuity wins. Everything else — health, spouse, inflation protection, your honest investing behavior — adjusts the verdict around those two anchors.
| Ratio | Reading (fixed pension, ~65 start) |
|---|---|
| Above ~7% | Generous annuity — beating it safely with investments is hard; lean annuity |
| ~5.5–7% | The genuine gray zone — the calculator's break-even table decides |
| Below ~5.5% | The lump likely wins for anyone with market discipline — the buyout is priced cheap |
Benchmark: a private single-premium immediate annuity for a 65-year-old currently pays roughly 6.5–7.5%. If your pension pays less than an insurer would for the same lump, the lump is the better raw material.
It's rarely all-or-nothing in effect: taking the annuity while investing other savings aggressively, or taking the lump and buying a private annuity with part of it (see the Annuity Payout Calculator), both build the floor-plus-upside structure retirement researchers favor: guaranteed income covering essential expenses, market money covering the rest.
Lump sums are computed from IRS-prescribed interest rates — when rates rise, lump offers shrink (sometimes 20–30% in a year). The offer also excludes the insurance value of lifetime income. This calculator's implied-return figure reveals exactly how the offer is priced.
The PBGC insures private single-employer pensions up to ~$7,300/month at age 65 (less for early retirement or large survivor options). Benefits under the cap are safe; executives and high earners above it bear real sponsor risk — a legitimate lump argument for them.
Only through a direct IRA rollover (never cash — the tax hit is brutal), and only if you'll actually invest with discipline for decades. The honest question isn't whether markets can beat the implied return — it's whether YOUR behavior will.
A 100% joint-and-survivor option might reduce $2,400 to ~$2,100 but pays until BOTH spouses die — usually worth it for couples with similar ages. Run the calculator with the survivor-option figures; the annuity's break-even improves when two lifetimes collect.
Most private pensions: no COLA — the fixed check erodes ~2–3%/yr in purchasing power, the annuity's biggest weakness. Public pensions often have COLAs, which make them dramatically more valuable; the COLA field prices this.
No — the amounts are actuarially set. Your choices are the offered options (and their timing: lump values change with rate resets, sometimes worth asking when the next reset lands).
Yes — every figure computes locally in your browser.
Two anchors — implied return and break-even age — plus honest answers about health, spouse and self-discipline settle this decision calmly. It's irreversible; give it the weekend it deserves, not the fifteen minutes the deadline pressure suggests.