Pension vs lump sum calculator
Compare a pension paid every month with a lump sum paid now. The pension is brought back to today’s value with a discount rate you choose.
Result
28,542.93Lump sum ahead by (today’s value)
- Present value of the pension
- 271,457.07
- Total pension paid (not discounted)
- 360,000.00
- Age when the pension catches up
- 88
- Pension value if it stops 5 years earlier
- 217,821.70
- Pension value if it lasts 5 years longer
- 317,723.41
Inputs
- Pension per month
- 1500
- Lump sum offered instead
- 300000
- Age at start
- 65
- Pension paid until age
- 85
- Discount rate
- 3
- Yearly pension increase
- 0
How it is calculated
Present value = sum of payments, each divided by (1 + d)^k, with d the equivalent monthly rate and k the month.
Result
Lump sum ahead by (today’s value)
- Present value of the pension
- 271,457.07
- Total pension paid (not discounted)
- 360,000.00
- Age when the pension catches up
- 88
How it is calculated
- Present value = sum of payments, each divided by (1 + d)^k, with d the equivalent monthly rate and k the month.
- Payments are made at the end of each month and increase every month at the equivalent rate.
- The scenarios redo the maths 5 years shorter and 5 years longer.
Example
1,500 a month from 65 to 85 at 3%, against 300,000: the pension is worth 271,457.07 today, the lump sum is ahead by 28,542.93. The pension catches up at about 88.
Good to know
- Simplified actuarial model: a fixed length instead of survival odds, with no tax or survivor benefit.
- The discount rate moves the result a lot: try several values.
Frequently asked questions
What is this tool used for?
Compare a pension paid every month with a lump sum paid now. The pension is brought back to today’s value with a discount rate you choose.
How is the result calculated?
Present value = sum of payments, each divided by (1 + d)^k, with d the equivalent monthly rate and k the month.
What should I check before using the result?
Simplified actuarial model: a fixed length instead of survival odds, with no tax or survivor benefit.