Lump Sum vs Annuity Calculator

Computes the NPV of your annuity stream and compares to the lump-sum offer, with explicit longevity + survivor + interest-rate parameters.

What the calculator assumes

• Discount rate — your expected real return if you invest the lump sum. Typical: 4-7% for a diversified portfolio post-fees.
• Life expectancy — single point estimate. Reality: bell curve around a median. Healthy couples should assume longer than population median.
• Survivor election — the annuity amount assumes this reduction already. Lower survivor % = higher monthly payment now but less for surviving spouse.
• Static annuity — no inflation adjustment. Most corporate annuities are fixed-dollar. Federal pensions often have COLA — big difference.

Factors the calculator doesn't include

• Longevity uncertainty. If you live to 95 instead of 85, the annuity is substantially better. If you pass at 75, the lump sum is.
• Spouse situation. If your spouse relies on the income, J&S annuity is insurance.
• PBGC coverage. Private pensions are PBGC-insured up to ~$85K/yr at 65. Above that, insolvency risk matters.
• Investment risk. Lump sum exposes you to sequence-of-returns risk early in retirement.
• Estate goals. Annuity dies with you (or spouse); lump sum goes to heirs.
• Cognitive decline. Annuity requires zero management; lump sum requires continuous decisions.
• Current interest rates. Corporate lump-sum offers are calculated against prevailing rates. Low rates = bigger lump sums; high rates = smaller.