Offered a lump sum instead of your monthly pension? See what the payments are worth today, the age you'd need to live past for the pension to come out ahead, and the rate that makes them equal.
How it's calculated
The pension is a stream of monthly payments. Its present value is each payment divided by the growth it would have earned, added up:
PV = Σ paymentt ÷ (1 + i)ᵗ i = (1 + yearly rate)1/12 − 1, t in months from now
With a COLA, the payment rises by that percent every 12 payments. With a survivor benefit, your spouse gets the share you enter for the extra years.
Break-even age. Imagine investing the lump sum at the same rate and paying yourself the pension amounts from it. The age it runs dry is the break-even age: live past it and the pension pays more. At a 0% rate that's simply the lump sum ÷ the monthly pension.
Implied rate. The rate at which the pension's present value equals the lump sum. If you don't expect to earn more than this on the lump sum, safely, the pension pays more under these assumptions.
Worked example
At 65 you're offered $2,000 a month for life, or $300,000 now. Planning to 85 (240 payments) at 5% a year, the pension is worth $307,133 today, a little more than the lump sum. Invested at 5%, the $300,000 could pay $2,000 a month until about age 84.2; after that the pension wins. The two are equal at about a 5.3% rate. At a 0% rate the break-even is 300,000 ÷ 2,000 = 150 months, age 77.5.
Limitations
- Longevity. A pension pays as long as you live. You can't know your age at death, so try several ages.
- Survivor options usually lower your own monthly amount. Enter the reduced payment the plan quotes for that option.
- Safety. Private pensions in the US are generally insured by the PBGC up to limits; a lump sum is yours, but so is the investment risk.
- Taxes and rollovers. Rolling a lump sum into an IRA usually defers tax; taking it as cash may not. Ask the plan or a tax professional.
A planning estimate, not financial, tax or investment advice. Every assumption is listed under the result.
Sources
How we checked this
Before every update, this calculator is run in a real browser with these known answers, and it must match all of them:
- $2,000 a month from 65 to 85 at 5% is worth $307,133 ✓
- …vs a $300,000 lump sum: break-even at age 84.2 ✓
- …and the two are equal at a 5.3% rate ✓
- …so the pension pays more under these assumptions ✓
- With a 2% COLA to age 90: $423,506 ✓
- Starting in 5 years (age 60 now): $240,647 ✓
- Adding 50% to a spouse for 5 more years: $327,240 ✓
- 0% rate: break-even is just $300,000 ÷ $2,000 = 150 payments, age 77.5 ✓
Last checked October 26, 2026. Spotted something wrong? The math is done in your browser with the formula shown on this page, so you can check any result by hand.
Questions people ask
Should I take the pension lump sum or monthly payments?
Compare the lump sum with the pension's present value at a rate you could realistically earn. If you expect to live past the break-even age, or you value a guaranteed lifetime income, the monthly pension tends to win.
How do I calculate the present value of a pension?
Divide each monthly payment by (1 + monthly rate) raised to the number of months until it's paid, and add them up. $2,000 a month from 65 to 85 at 5% a year is worth about $307,133.
What is a pension break-even age?
The age at which the monthly payments you've received are worth more than the lump sum, if the lump sum had been invested at the same rate.
What discount rate should I use?
The return you could reasonably expect on the lump sum with similar safety. A lower rate makes the pension look more valuable; a higher one favors the lump sum.
Does a COLA make a big difference?
Yes. A 2% yearly increase on $2,000 a month from 65 to 90 adds about $76,000 of present value at a 5% rate.