Annuity Planning · Tool 4 of 12
Pension Lump Sum vs Annuity
Compare a buyout offer to the monthly pension options. NPV, IRR, and breakeven year for each. generalized from FERS to any corporate / state / municipal pension.
Recommendation
LUMP SUM CLEARLY BETTER
Even the best pension's IRR 2.53% < your 5.50% return assumption.
Best option
J&S 75%
That option's IRR
2.53%
NPV by pension option
$153k
$171k
$176k
$166k
Life-only
J&S 50%
J&S 75%
J&S 100%
Each bar is the net present value of the pension stream minus the lump sum. Positive means the pension wins.
Option-by-option
| Option | Monthly | NPV (vs lump) | IRR | Lump runs out |
|---|---|---|---|---|
| $2,800 | $152,784 | 2.59% | Doesn't run out | |
| $2,600 | $170,568 | 2.57% | Doesn't run out | |
| $2,500 | $175,950 | 2.53% | Doesn't run out | |
| $2,350 | $165,888 | 2.31% | Doesn't run out |