Pension Lump Sum or Monthly Check? Calculator

Try an example: Retiring at 65 Married, joint and 50% Left at 55, pension at 65 Retiree buyout at 72

03How Long You Might Collect

04Taxes: Roll It Over or Take the Cash

05How the IRS Minimum Lump Sum Is Set

A private-sector pension plan may pay more than the IRS minimum but never less (a badly underfunded plan can be barred from paying lump sums at all). The minimum is the present value of your accrued pension (the benefit at normal retirement age, or the immediate benefit after it) using two things the IRS publishes:

• Three interest rates, called segment rates, taken from the yields on high-quality corporate bonds in a single month. Payments due in the next 5 years are discounted at the first rate, payments 5 to 20 years away at the second, and payments more than 20 years away at the third.
• A mortality table, the same for men and women, giving the chance of dying at each age. The IRS updates it every year to reflect longer lives. The 2027 table expects an average 65-year-old to live to about 86.

Each plan chooses its own "stability period" (a month, a quarter or a year in which the rates stay fixed) and a "lookback month" from one to five months before that period. That is why two people retiring on the same day from different plans can get lump sums based on different months.

IRS minimum present value segment rates (Internal Revenue Code section 417(e)), latest 12 months published. The full history back to January 2024 is in the rate menu above.

06Rules to Know Before You Choose

• Your spouse must sign. If you are married, the default pension is a joint and survivor annuity paying your spouse at least 50% of the check after you die. Taking the lump sum or a single-life pension needs your spouse’s written consent, witnessed by a notary or a plan representative, within the 180 days before the payments start.
• The decision is usually final. Once a lump sum is paid the pension is gone, and once monthly payments start you generally cannot switch to a lump sum later unless the plan offers a special window.
• Roll it over directly. A direct rollover to an IRA or another employer plan is not taxed and nothing is withheld. If the money is paid to you, 20% is withheld for federal tax; you have 60 days to roll it over, but you must make up the withheld 20% from other money or it is taxed.
• Early retirement subsidies. Some plans pay a generous pension to people who retire early, but leave that subsidy out of the lump sum. If your early pension is unusually large, the lump sum may be worth noticeably less than the check.
• Small pensions can be cashed out without asking. A plan may pay out a benefit worth $7,000 or less without your consent.
• The PBGC guarantee. For a single-employer plan that ends in 2027, the Pension Benefit Guaranty Corporation guarantees up to $8,114 a month at 65 ($7,302 for a joint and 50% survivor pension with a spouse of the same age), and less for pensions that start younger. Benefits above the limit could be cut if the plan failed while underfunded.
• Lump sum windows. Companies sometimes offer a one-time lump sum to former employees or retirees to shrink their pension plans. Since 2019 the IRS has said it will not object to these offers to retirees who are already receiving a pension. The offer is optional, and the same comparison applies.
• Government and most church pensions are not subject to the IRS minimum or to the PBGC, and government plans often do not offer a lump sum of the pension at all.

07How We Calculate

• Estimated value at IRS rates: every monthly payment from the start age to age 120 is discounted at the segment rate for how far away it is and multiplied by the chance it is paid under the IRS 417(e) mortality table for the year chosen. Payments are made at the start of each month, deaths are spread evenly through each year of age, and any cost-of-living increase is applied once a year. For a joint and survivor pension, the survivor’s share is paid only after you die if your spouse is still alive, with both lives on the same table. This values the monthly pension you enter. The legal minimum is worked out on your accrued benefit at normal retirement age (or the immediate benefit after that age), so early retirement subsidies, survivor-option adjustments and the plan’s own conventions can make a plan’s figure differ, sometimes by a lot.
• Break-even return: the single yearly rate at which the expected value of the check equals the lump sum, using the mortality table adjusted for the health you picked (better than average multiplies each year’s chance of dying by 0.7, worse than average by 1.6, serious health problems by 3). These are round illustrative multipliers, not a medical estimate of your own life span.
• If you invest the lump sum: the whole lump sum earns the return you enter, every year, with the same amount as the check taken out each month from the start age. Real returns go up and down, and a bad stretch early in retirement does more damage than the averages suggest. For a joint and survivor pension the withdrawals stay at the full check for the whole period, as if both of you were still alive.
• Taxes: 2026 federal brackets and standard deduction (including the extra amounts at 65 and over) and the state’s 2026 brackets and rules for pension income, compared with the same year with no lump sum. The 10% additional tax applies before 59 1/2 unless the age 55 rule covers you; at 59 the calculator asks whether you will be past 59 1/2 on the payment date. The age 55 rule is applied when you are 54 or older at the payout, since it covers leaving in the calendar year you turn 55. City and county income taxes are not included.

Not included: inflation (all figures are in future dollars as paid), the value of other benefits tied to the pension such as retiree health coverage, the plan’s funding level, period-certain and level-income options, and any after-tax contributions you made to the plan.

08Frequently Asked Questions

09Sources

• IRS: Minimum present value segment rates (417(e)), monthly table
• IRS Notice 2026-65: segment rates for September 2026
• IRS Notice 2025-40: 2026 mortality tables, including the 417(e) unisex table
• IRS Notice 2026-27: 2027 mortality tables, including the 417(e) unisex table
• Treasury Regulation 1.417(e)-1: minimum lump sums, stability periods and lookback months
• 26 U.S. Code 417: joint and survivor annuities, spousal consent and minimum present value
• 26 U.S. Code 411(a)(11): the $7,000 involuntary cash-out limit
• PBGC: maximum monthly guarantee tables
• IRS Topic 413: rollovers from retirement plans (20% withholding, 60-day rule)
• IRS Topic 410: pensions and annuities
• IRS: exceptions to the 10% additional tax on early distributions (age 55 separation rule)
• IRS Notice 2019-18: lump-sum offers to retirees already receiving a pension
• Milliman (April 2022): how a one-point rise in rates shrinks lump sums

Interest rates: IRS, latest month September 2026. Mortality: IRS 417(e) unisex tables. PBGC limits: 2027 table. Taxes: IRS Rev. Proc. 2025-32 and the Retirement Runway Calculator’s state rules. Last checked November 5, 2026. Estimates for information only; not financial or tax advice. Related: Retirement Runway Calculator · RMD Calculator · Roth Conversion Calculator.