One promise for life, or one check now.

Worked examples.

Four illustrations under stated assumptions. Hypothetical; the tool shows the shape of the trade, not which to take.

1. A $2,500-a-month pension from 65, against a $400,000 lump sum invested at 5 percent and paying the same $2,500 a month: the lump sum runs out at 86. The pension pays $780,000 by 90.
2. At 7 percent the same lump sum holds through 90 with about $190,537 left. The break-even return for this offer, to 90, is 6.0% a year.
3. If the pension rises 2 percent a year, the lump sum has to keep up: it runs out at 82 at 5 percent, and the break-even return climbs to 8.1%.
4. The lump sum can be rolled to an IRA without tax; taken in cash it is taxable at once. The pension is taxable as it is paid. A survivor option on the pension lowers the monthly amount and changes the comparison for a couple; neither side of this tool models it.

How the comparison works.

Take the lump sum, invest it at the return you assume, and pay yourself exactly what the pension would have paid. If the account is still standing at the age you plan to, the lump sum matched the pension with money left over; if it runs out first, the pension was the larger promise. The break-even return is the yearly return at which the account lands at zero exactly at the planning age, which turns the whole comparison into one number to judge against what you believe markets will do.

The number is not the decision. The pension carries the plan's longevity risk and its credit risk; the lump sum carries yours. A pension with a survivor option protects a spouse; a lump sum can be inherited. Health, other income, the plan's funding, and the size of the pension against your other resources all matter, and none of them is on the slider.

Methodology and limits.

1. Inputs. The monthly pension, the lump sum, the starting and planning ages, a nominal return on the invested lump sum, and any yearly pension increase.
2. The loop. Each year the lump-sum balance earns the return and pays out the year's pension, withdrawn through the year (a mid-year approximation). The pension total is the sum of the payments through the planning age.
3. The break-even return. Found by bisection: the return at which the balance reaches zero in the planning year.
4. Validation. With no return, a lump sum of 120 monthly payments lasts exactly ten years; just above the break-even return the lump sum lasts, just below it it runs out. A change that breaks either fails the build.
5. Not modeled. Tax on either side, survivor options, plan-insurance limits, inflation on the lump-sum withdrawals beyond the pension increase, and mortality. Hypothetical; educational, not advice.

Revision history.

September 7, 2026

Added should you buy points (the bought-down loan against the plain one on the same principal and term, so the position is the interest saved less the cost of the points; true break-even as the first month at or above zero beside the simple rule; the horizon verdict; the return the points earn to the horizon as the monthly-compounded rate at which their cost equals the present value of the saving plus the lower balance owed, by bisection; the largest points count that pays off within the horizon; and the seller-paid case set against the same dollars off the price).

September 7, 2026

Added two mortgage assumption tools: refinance break-even (the simple rule, closing costs over the monthly saving, beside the month-by-month count of interest paid on each loan, where total cost is the balance plus the closing costs plus the interest so far, so the new loan's position is the interest saved less the costs; the reset-the-clock effect flagged when a longer term catches up), and 15-year or 30-year mortgage (the same cash on both paths, the 15-year payment invested after the loan is gone against the difference invested for thirty years, compared at year 15, year 30, and a chosen horizon, with the break-even return by bisection).

September 7, 2026

Added three assumption tools: Roth or traditional 401(k) (the same take-home cost grown at one return and taxed at each end, so the answer turns on the two rates; the plan limit from the annual record), pay off the mortgage or invest (two month-by-month paths, the extra to the mortgage and then the freed payment invested, against the extra invested throughout, with the optional interest deduction), and how much life insurance (the present value of the income to replace as a growing annuity, plus debts, final expenses, and education, less existing coverage and savings, beside the ten-times-income rule).

September 6, 2026

Added two assumption tools: sell or keep the house (carrying costs and appreciation against rent and the return on freed equity, with the home-sale exclusion), and the long-term care cost projection (today's rate at care inflation to the start year, summed over the years of care, with the set-aside today).

September 4, 2026

First release of the longevity projection (year-by-year, spending and outside income indexed to inflation, a fixed return on the remainder, with the sustainable-spending solver) and the pension-versus-lump-sum comparison (the lump sum invested and paying the pension, with the break-even return solver).

Canonical address: https://consideratecapital.com/tools/pension-or-lump-sum