Start with the break-even age
The first question the calculator answers: at what age does the total of the monthly pension catch up to the lump sum? If break-even lands well past your life expectancy, the lump sum tends to win. If you're healthy with longevity in the family and break-even comes early, the guaranteed monthly check often wins.
The case for the monthly pension
A monthly pension is guaranteed income for life — you can't outlive it and you can't lose it in a market crash. For people who'd rather not manage a large sum, that certainty is worth a lot. A cost-of-living adjustment raises its value further, and a survivor benefit can protect a spouse.
The case for the lump sum
A lump sum gives you control and flexibility: you can invest it, leave whatever's left to heirs, and reach it in an emergency. It also removes any risk tied to your former employer's plan. The trade-off is that managing it is now your job — and a bad run of early market returns can do real damage.
Don't forget taxes and rollovers
A lump sum paid directly to you is taxed as income and usually has 20% withheld. Rolling it into an IRA defers the tax and keeps the whole amount invested — see the tax calculator for the difference. The monthly pension is simply taxed as you receive it.
A simple way to decide
Run the numbers above, then ask: do I already have guaranteed income (like Social Security) covering my essentials? If yes, a lump sum's flexibility is easier to justify. If the pension would be your main safety net, the guaranteed check is hard to beat. When it's close, this is exactly the kind of one-time, high-stakes call worth running past a fiduciary advisor.
Common questions
Can I take part lump sum, part monthly? Some plans allow a split — ask your plan administrator; it can be the best of both.
What return do I need to beat the pension? Whatever rate makes the invested lump sum reproduce the monthly check for life — the present value in the calculator reflects that break-even return.
Is the monthly pension safe? Private pensions are backed by the PBGC up to federal limits; a very large pension may exceed those limits, one point in favor of a lump sum.