Lump Sum Pension vs Monthly Annuity
A **monthly annuity** from your pension is insured income for life—favors longevity and spending discipline. A **lump sum** rolled to an IRA offers control, heirs, and investment risk—you must self-manage withdrawal rate.
Step by step
1. Compare internal rate
Implied return on annuity vs portfolio assumptions.
2. Model longevity
Break-even age when lump sum invested beats annuity.
3. Tax withholding
Lump rollover must be direct to IRA to avoid 20% mandatory hold.
Lump sum vs monthly pension
Married couples should compare joint-and-survivor annuity options.
- Monthly annuity: Longevity insurance; less investment risk.
- Lump sum IRA: Flexibility; market risk; legacy to heirs.
Use our calculators
Common mistakes
- Spending lump sum in year one
- Ignoring survivor benefit election
FAQ
Is PBGC insurance relevant?
Yes for private pensions—check funded status.