How it works
It values the pension stream today, then calculates what the rolled-over lump sum could pay you monthly at your expected return. The difference shows which delivers more monthly income on these assumptions.
Who this is for
Anyone deciding between keeping a monthly pension as-is or rolling the equivalent lump sum into a 401(k) or IRA and drawing it down themselves.
Worked example
A $1,600 monthly pension compared against rolling $240,000 into an account earning 6% over 22 years comes out close: the pension is worth about $234,200 today, while the rolled-over lump sum could support roughly $1,639 a month — about $39 a month more than the pension pays, on these assumptions. That's a near-toss-up before factoring in investment risk.
Frequently asked questions
Why is investment risk not in the numbers? This assumes a constant return every year, which real markets don't deliver — a bad early sequence of returns can do real damage that a pension's guarantee never faces.
Does rolling over trigger taxes? A direct rollover to another retirement account doesn't trigger immediate tax; taking the lump sum as cash does. See the tax calculator.
What if my pension has a COLA? A rising pension is worth more than this flat comparison shows — check the COLA calculator before deciding.