Pension: Annuity vs Lump Sum in 2026
Find your break-even age with our [Annuity vs Lump Sum Calculator](/calculators/finance/annuity-vs-lumpsum-calculator).
The Core Decision
- Option A: $450,000 lump sum today
- Option B: $2,200/month ($26,400/year) for life
Break-Even Analysis (Invest Lump Sum at 6%, Withdraw $2,200/Month)
| Year | Lump Sum Remaining | Total Annuity Paid |
|---|---|---|
| Year 10 | $318,000 | $264,000 |
| Year 15 | $215,000 | $396,000 |
| Year 22.5 | $0 (exhausted) | $594,000 |
Break-even: approximately age 82-85 for someone retiring at 62.
Live beyond break-even → annuity wins. Die before break-even → lump sum wins for heirs.
How Investment Return Changes the Math
| Return on Lump Sum | Break-Even Age |
|---|---|
| 4% | Age 78 |
| 6% | Age 83 |
| 8% | Age 89 |
| 10% | Never (lump sum almost always wins) |
When to Take the Annuity
- Excellent health, family longevity expected
- Low investment confidence
- No heirs to leave money to
- Pension from stable government or well-funded company employer
- Spouse with no other retirement income
When to Take the Lump Sum
- Health concerns or shorter life expectancy
- Strong investing track record
- Company is financially shaky or pension underfunded
- Children or heirs you want to benefit
- Want flexibility to spend differently each year
The Survivor Benefit Factor
Joint-and-survivor annuity pays a reduced amount ($1,700/month) but continues for your spouse. This dramatically changes the calculation for married couples — use our [Pension Lump Sum vs Monthly Calculator](/calculators/finance/pension-lump-sum-vs-monthly-calculator) for married analysis.
Related Tools
- [Retirement Withdrawal Calculator](/calculators/finance/retirement-withdrawal-calculator) — Sustainable drawdown from lump sum
- [Social Security Optimization Calculator](/calculators/finance/social-security-optimization-calculator) — Coordinate with SS timing