Pension Payout Option Calculator

Compare a pension lump sum against annuity income options.

About Pension Payout Option Calculator

The comparison depends heavily on the discount rate: a high rate favours the lump sum while a low one favours guaranteed income. Pension income also carries no investment or longevity risk. The joint and survivor option costs income now to protect a surviving spouse later, which is a decision about the survivor rather than about total value.

Formula

Pension Payout Option

Present value = monthly income × annuity factor at the chosen discount rate

discount rate: The return you could earn on the lump sum instead
implied payout rate: Annual income as a share of the lump sum offered

Worked example

With the default values below, Pension Payout Option Calculator returns Present Value of Single Life Income of $358,412.52. Change any input above and every figure here is recalculated in your browser.

Inputs used

Lump sum offerminimum 0: 420,000
Single life monthly incomeminimum 0: 2,300
Joint and survivor monthly incomeminimum 0: 2,050
Retirement ageaccepts 50–80 years: 65 years
Life expectancyaccepts 60–105 years: 86 years
Discount rateaccepts 0–15 %: 5 %

Results

Present Value of Single Life Income: $358,412.52
Present Value of Joint and Survivor Income: $319,454.64
Higher Present Value Option: Lump sum has the higher present value at this discount rate
Implied Payout Rate on the Lump Sum: 6.571%
Break-Even Age Against the Lump Sum: 80.2 years

Step by step

1Values used
2Pension Payout Option
3Present Value of Single Life Income= 358,412.52
4Present Value of Joint and Survivor Income= 319,454.64
5Higher Present Value Option= Lump sum has the higher present value at this discount rate
6Implied Payout Rate on the Lump Sum= 6.571
7Break-Even Age Against the Lump Sum= 80.2 years

Assumptions and limits

The result is derived only from the 6 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax or compounding frequency into account.
Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
This is a general illustration, not financial, tax or legal advice. Rules, thresholds and rates vary by jurisdiction and change frequently, and individual circumstances materially affect outcomes. Consult a qualified adviser before making any decision based on these figures.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

This is a general illustration, not financial, tax or legal advice. Rules, thresholds and rates vary by jurisdiction and change frequently, and individual circumstances materially affect outcomes. Consult a qualified adviser before making any decision based on these figures.

Frequently Asked Questions

How is Pension Payout Option calculated?

Present value = monthly income × annuity factor at the chosen discount rate The comparison depends heavily on the discount rate: a high rate favours the lump sum while a low one favours guaranteed income. Pension income also carries no investment or longevity risk.

Why does Pension Payout Option matter?

The joint and survivor option costs income now to protect a surviving spouse later, which is a decision about the survivor rather than about total value.

What values do I need to enter?

This calculator takes 6 inputs: Lump sum offer, Single life monthly income, Joint and survivor monthly income, Retirement age, Life expectancy, Discount rate. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.