Lump Sum vs Annuity Calculator
Pension buyout or lottery payout: lump sum or annuity? Compare the lump sum to the present value of the payments at the return you could earn.
Financial advisors for big payout decisions
Learn moreIt’s a present-value question
The choice hinges on the return you can earn. The annuity’s value today is the present value of its payments; if you can invest the lump sum at a higher rate, the lump sum wins. The annuity offers guaranteed income and protects you from spending it all — worth real money for some.
How it’s calculated & sources
We discount the stream of payments to present value at your assumed rate and compare it to the lump sum. A higher discount rate lowers the annuity’s present value, favoring the lump sum.
Benchmark: compare the lump sum to the present value of the payments — the standard pension/lottery decision math. Taxes and longevity also matter.
Results update as you type and are general estimates, not personalized financial, tax, medical or legal advice. Verify with a professional.
Worked example
$30,000/year for 25 years has a present value of about $423,000 at a 5% discount rate — less than a $500,000 lump sum, so the lump sum wins for a confident investor.
Frequently asked questions
What discount rate should I use?
Use a realistic return for how you’d actually invest — conservative if you’d keep it safe, higher if you’d invest in stocks. It’s the single most important input.
Does the annuity have advantages?
Yes — guaranteed income, protection from overspending or bad markets, and sometimes inflation adjustments. Those are worth a premium for many people.