Pension Lump Sum vs Annuity: Present Value, Break-Even Age & Risk Trade-offs
Value a pension offer the way an analyst would: PV at different discount rates, the annuity's implied return with RATE, break-even ages, mortality-weighted expected value, COLA vs fixed payments in real dollars, a drawdown path, the probability of running out and joint-and-survivor options: 8 graded labs on one fictional retiree. Illustrative rates and life table, not financial advice.
The first lesson is free — no account needed.
About this course
A pension lump sum versus annuity course that values one fictional retiree's pension offer the way an analyst would, in a spreadsheet, for people approaching retirement, financial planning students and HR and benefits staff. Maya can take $310,000 now or $1,850 a month for life. You value the annuity at six discount rates, find its implied return with RATE for each age at death, find the break-even age with and without the time value of money, weight each payment by the probability that she is alive to receive it, compare a fixed annuity with a COLA in today's dollars, follow a drawdown of the lump sum to the age it runs out, estimate the probability of running out from return scenarios, and compare joint-and-survivor options for her husband. Illustrative rates and life table, educational only, not financial advice. The first lab is free.
Lessons
- Present Value of a Level Annuity at Different Discount RatesFree
- The Annuity's Implied Return: RATE by Age at Death Pro
- Break-Even Age: When Cumulative Payments Overtake the Lump Sum Pro
- Mortality-Weighted Value: Survival Probabilities × Payments Pro
- Inflation: COLA vs Fixed Annuity in Real Dollars Pro
- Drawdown from the Lump Sum: Balance Path, Run-Out Age & a Chart Pro
- Probability of Running Out: Return Scenarios & a Weighted Shortfall Pro
- Joint & Survivor Options: Reduction %, Survivor Factors & Household Value Pro