Pension Calculator | Lump Sum vs Annuity

Pension calculator: lump sum, survivor, and early retirement

Three payout comparisons on illustrative inputs: lump-sum breakeven, survivor reductions, and early-retirement penalties.

What this calculator does

Runs three pension comparisons on user-entered offers. Lump sum vs. annuity (section 01) projects COLA-adjusted cumulative annuity receipts against a compounded lump sum, prints a 6% rule read, breakeven age, and 25-year totals. Survivor benefits applies fixed reduction factors (9% / 11% / 13%) to single-life pay for 50% / 75% / 100% continuation and estimates simplified lifetime values to age 85. Early retirement multiplies years early by a penalty rate (capped at 100%) and compares COLA-grown lifetime totals for early versus normal start. Charts appear for lump-sum and survivor modes. Does not import plan documents, mortality tables, or tax withholding.

How the Math Works

Lump-sum mode computes implied payout rate (12 × monthly annuity) ÷ lump sum and flags annuity when the rate is ≥ 6%. Each projection year adds COLA-grown annuity receipts while the lump compounds at your ROI assumption; breakeven is the first age where annuity cumulative exceeds the lump path within 30 years. Survivor mode applies fixed reduction factors (9% / 11% / 13%). Early mode applies years × penalty% (capped at 100%) to the normal benefit.

Survivor and early-retirement panels

Survivor mode shows reduced monthly pay, spouse continuation after the member, and simplified lifetime totals to age 85. Early-retirement mode applies the penalty schedule to the normal benefit and compares COLA-grown lifetime totals for an early start versus waiting. Dollar outcomes depend on the ages, penalty rate, and COLA assumption in the form.

Limits of illustrative pension math

Real plans use participant-specific factors, qualified joint-and-survivor annuity rules, and IRS limits on lump-sum offers. The 6% rule read and breakeven chart ignore taxes, investment fees, and sequence-of-returns risk on the lump path. Survivor reduction percents are fixed teaching factors, not your plan's quotes. Pension elections are usually irrevocable once income starts; treat every output as a structured what-if before talking with your plan administrator or a fiduciary advisor.

Pension Calculator FAQ

How does Lump sum vs. annuity mode work?

In section 01 select Lump sum vs. annuity, then enter Lump sum amount, Monthly annuity offer, Estimated annual ROI (%), Current age, and COLA rate (annual) in section 02. The 6% rule read card flags Monthly annuity when annual payments ÷ lump sum is at or above 6%. Breakeven age (cumulative) is when COLA-adjusted annuity receipts exceed the invested lump sum in the 30-year projection (may read Never at high return assumptions).

What does the 6% rule read mean on this page?

The widget divides annual annuity payments by the lump sum amount and compares the result to 6%. At or above the benchmark, the card reads Monthly annuity; below it, Lump sum. It is a quick screen, not a plan document or tax recommendation.

How does Survivor benefits mode work?

Choose Survivor benefits in section 01. Section 02 takes Single-life monthly payment, a Survivor option (50%, 75%, or 100%), Member age, and Spouse age. The snapshot shows your reduced payment, the spouse continuation amount, and a modeled reduction percent (9% / 11% / 13% for the three options). Lifetime panels assume both lives to age 85.

What do the survivor lifetime value numbers mean?

The white panel totals nominal payments to age 85: single-life pay for the member's remaining years versus joint-life pay (reduced amount while both are alive, then survivor-only years). At defaults the joint total is only about $360 above single life because the spouse continuation window is 3 years.

How does Early retirement mode work?

Select Early retirement in section 01 and enter Normal retirement pension (monthly), Years until normal retirement, and Early retirement penalty (% per year) in section 02. The engine applies years × penalty (capped at 100%) to the normal benefit. Defaults: 5 years early at 5%/year → 25% total reduction and $2,250/mo versus $3,000 normal.

What is COLA on this calculator?

In lump-sum mode, COLA rate (annual) in section 02 raises the monthly annuity each year in the cumulative projection. Early-retirement lifetime panels also grow payments at the same 2% default baked into the engine (there is no separate COLA field in that mode). Survivor mode does not apply COLA in the current widget.

When does breakeven age show Never?

When COLA-adjusted annuity cumulative never exceeds the invested lump within the 30-year projection, the card displays Never. That can happen even when the 6% rule read favors the annuity if your lump ROI assumption is high enough.

What does this calculator not model?

It does not pull your plan's actual mortality tables, spousal consent rules, tax withholding, qualified domestic relations orders, or partial lump-sum splits. Reduction percents for survivor options are fixed illustrative factors, not your plan's actuarial factors. Use outputs for comparison only; pension elections are typically irrevocable.

Pension Calculator: Payout Option Comparison

Analysis mode

Lump sum vs. annuity inputs

25-year cumulative (illustrative)

Reading payout comparisons by mode

Example: $500,000 lump vs $3,000/mo annuity (default)

Survivor benefits mode

Early retirement mode