Pension Lump Sum vs Annuity Calculator

How it is calculated

The tool adds up the pension payments over the number of years you choose and subtracts the lump sum: annuity total = monthly pension × 12 × years and difference = annuity total − lump sum. The lump sum and the monthly pension are in dollars; years is how long you expect to collect. A positive difference means the payments add up to more than the lump sum over that period, a negative one (printed like -$70,000.00) means the lump sum is larger. The sum is simple and undiscounted: it ignores inflation, investment returns on the lump sum, taxes, survivor benefits and any cost-of-living increases, so it is a first comparison, not a valuation. Years can be fractional (15.5 works) but must be between 0 and 100; more than 100 years, or any negative or empty input, gives no result.

Common mistakes

• Entering the annual pension in the monthly field. The tool multiplies by 12 itself, so a yearly figure overstates the total twelvefold.
• Reading a positive difference as proof that the pension wins. The totals are not discounted, so $360,000 spread over twenty years is worth less today than $360,000 now, and the lump sum could be invested.
• Using the retirement-plan quote with a different payout horizon than you actually expect. The result moves directly with years, so test a short and a long period rather than a single guess; at 15 years the same offer shows -$70,000.00 in favour of the lump sum.
• Forgetting the details that sit outside the arithmetic: whether payments stop at death, whether a spouse continues to receive them, and whether they rise with inflation.