Pension Calculator

We compute the present value of the pension as the PV of an ordinary annuity: PV = adjusted annual payment × (1 - (1 + r)^-n) / r, where r is the chosen discount rate and n is years of payment.

We compute the net lump sum after an assumed immediate tax rate then project it forward using a real growth rate (after-tax return minus inflation). We also calculate the annual annuity equivalent that a net lump sum would purchase at the chosen discount rate to provide a like-for-like annual-payment comparison.

This tool produces numeric comparisons: present value of the pension, projected value of an invested lump sum, and the annuity-equivalent annual payment implied by the lump sum.

Use results as a starting point. Key inputs (discount rate, expected return, taxes, survivor options, and life expectancy) materially change outcomes.

If a pension pays $42,000/year, retirement at 65, life expectancy 90 (25 years), and discount rate 3%: the calculator shows the present value of that stream at the chosen discount rate.

If offered $500,000 lump sum taxed at 25%, invested at a 5% after-tax return with 2% inflation, the calculator projects the invested value over the same horizon and computes what annual payment that net lump sum equates to at the discount rate.