Calculator inputs
The page uses one stacked layout overall, while the calculator fields switch to 3 columns on large screens, 2 on smaller screens, and 1 on mobile.
Example data table
| Scenario | Current Age | Start Age | Annual Pension | COLA | Buyout Offer | Discount Rate | Survivor % |
|---|---|---|---|---|---|---|---|
| Sample employee | 55 | 65 | $36,000 | 2.00% | $425,000 | 5.00% | 50% |
| Conservative case | 60 | 65 | $28,000 | 1.50% | $310,000 | 4.00% | 75% |
| Later retirement case | 52 | 67 | $42,000 | 2.50% | $465,000 | 5.50% | 50% |
Formula used
- Annual pension in year t: Paymentt = Base Pension × (1 + COLA)t
- Survivor adjustment: After participant life expectancy, Paymentt = Base Payment × Survivor %
- After-tax pension payment: Net Payment = Gross Payment × (1 − Annuity Tax Rate)
- Present value of pension: PV = Σ [Net Paymentt ÷ (1 + Discount Rate)n]
- Estimated equivalent buyout: Buyout ≈ Σ [Gross Paymentt ÷ (1 + Transfer Rate)n]
- After-tax buyout: Net Buyout = Buyout × (1 − Lump Sum Tax Rate)
- Future value at pension start: FV = Net Buyout × (1 + Net Return)Years to Start
- Modeled withdrawal: Withdrawal = FV × r ÷ [1 − (1 + r)−Years]
This model uses deterministic life expectancies and simplified tax treatment. Actual plan factors, rollover rules, mortality tables, and legal options can change real results.
How to use this calculator
- Enter your current age, pension start age, and expected lifespans.
- Type the annual pension benefit expected at commencement.
- Add COLA, tax assumptions, and survivor percentage.
- Enter the actual buyout offer, or leave it blank to estimate one from the modeled annuity stream.
- Set a personal discount rate for value comparison and an investment return for the buyout scenario.
- Press the calculate button to show results above the form.
- Review the summary table, cash-flow schedule, and graph before making any decision.
- Use CSV or PDF export to save your scenario for discussion with an adviser.
FAQs
1) What does this calculator compare?
It compares the after-tax value of keeping a pension annuity versus taking a lump sum buyout. It also estimates withdrawal capacity, break-even age, and survivor impact.
2) Why are there separate discount and investment rates?
The discount rate measures how you value future pension cash flows today. The investment return estimates how a buyout might grow before and during retirement withdrawals.
3) What if I do not know the actual buyout offer?
Leave the lump sum field empty. The calculator will estimate an equivalent offer by discounting projected gross pension payments with the transfer valuation rate.
4) Does this model include survivor benefits?
Yes. After the participant life expectancy age, the model can continue a reduced payment through the spouse life expectancy using the survivor percentage you enter.
5) How is break-even age calculated?
Break-even age is the first age where cumulative after-tax pension payments equal or exceed the after-tax lump sum value used in the comparison.
6) Are taxes handled exactly like a real plan?
No. The tool applies simplified tax rates. Real outcomes depend on rollovers, withholding, account type, basis, state taxes, and future tax brackets.
7) Why might the pension look better even with a large buyout?
A pension can still win when longevity is long, COLA is meaningful, tax drag on the lump sum is high, or investment assumptions are more conservative.
8) Should this calculator replace professional advice?
No. It is a planning tool. Final decisions should be checked against plan documents, distribution options, retirement goals, estate priorities, and adviser guidance.