Pension or Lump Sum?
Pension or lump sum: at what return does the lump sum match the pension? Every piece below can be linked to, so it opens in a window on your reader's screen, current as of the record. No form to fill in.
2026 law · Reviewed September 7, 2026 · The full page, with methodology and sources · the terms · All tools
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The monthly pension, the lump sum, the ages, a return, and any pension increase; out: the age the invested lump sum runs out paying the pension, and the break-even return. In a frame it carries no cookies, no tracking, and a visible link back to the methodology. Your site has to allow frames; most do. The link that opens it in a small window is on the professionals page.
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- In plain words.
- Some employers offer a choice: a fixed monthly pension for as long as you live, or one lump sum now. This tool imagines investing the lump sum and paying yourself the same monthly amount from it, and shows the age the lump sum would run out at the return you choose. It also finds the return the lump sum would need to earn to last as long as the pension.
- Why it matters.
- The offer letter gives two numbers that are hard to compare. The break-even return turns them into one: earn more than it, and the lump sum wins; earn less, and the pension wins.
- An example.
- A pension of $2,500 a month against a $400,000 lump sum: invested at five percent and paying the same $2,500, the lump sum runs out at about 86. To last to 90 it would need to earn about six percent a year.
- Where it stops.
- It leaves out tax, a survivor option that keeps paying a spouse, the insurance that backs private pensions, and inflation on the withdrawals beyond the pension increase you set. Your health and your spouse's are the other half of the decision.
Worked examples
Four illustrations under stated assumptions. Hypothetical; the tool shows the shape of the trade, not which to take.
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- 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.
- 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.
- 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%.
- 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.
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The clean address, a citation generated from the record so it can never carry a stale review date, and an address for every section so you can point a reader at the exact table or method.
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- Link
- https://consideratecapital.com/tools/pension-or-lump-sum
- Citation
- Considerate Capital, "Pension or Lump Sum?," reviewed September 7, 2026, https://consideratecapital.com/tools/pension-or-lump-sum.
Link to a section
- The calculator https://consideratecapital.com/tools/pension-or-lump-sum#calculator
- Worked examples https://consideratecapital.com/tools/pension-or-lump-sum#facts
- How the comparison works https://consideratecapital.com/tools/pension-or-lump-sum#how-it-works
- Methodology and limits https://consideratecapital.com/tools/pension-or-lump-sum#methodology
- Revision history https://consideratecapital.com/tools/pension-or-lump-sum#revision-history
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