How it works

A useful distinction

A survivor option insures a different horizon

Compare single-life and joint-survivor streams after changing only the spouse’s assumed lifetime. A smaller starting pension may fund more years of household payments; the initial monthly difference alone cannot value that survivor stream.

Comparing pension payment streams

Pension choices can differ in starting date, payment amount, and survivor benefits. Compare the timing of those streams as well as their present value under the selected discount rate. A later start may change the payment without making every scenario equivalent. The calculation values the entered streams; it does not determine personal longevity or establish which pension election best fits a household.

Payment present value: formula and assumptions

Discount each monthly payment back to the present, including the specified annual payment increase.

Life expectancy, survivor benefits, guarantees, and insurer or plan risk require consideration beyond this mathematical comparison.

Single, survivor & later pension streams: formula and assumptions

Present value = sum(monthly payment / (1+annual discount)^(months/12)).

Build monthly single-life, joint-survivor and later-start streams using explicit lifetime assumptions. COLA steps at each anniversary. Results compare cash flows, not probabilities of living to an age.

Worked example

Reference example currency: USD. These fixed examples do not change with your calculator preferences.

Using the Payment present value example:

Inputs

Monthly pension payment ($): 2500
Payment duration: 25
Annual discount rate (%): 4
Lump-sum offer ($): 400000
Annual payment increase (%): 0

Method

Discount each monthly payment back to the present, including the specified annual payment increase.

Result

Example result

Pension payment present value: $477,193.70

Lump-sum offer: $400,000.00

Present-value difference: $77,193.70

These are illustrative inputs. Change the values to explore a different scenario.

Formula references

Investor.gov: financial tools (opens in a new tab)

References explain the underlying methods; they do not imply endorsement or individual professional review of Finflo.

Common questions

What does the pension present value represent?

It discounts the modeled payments over the entered horizon. It is not a guaranteed transfer value or an insurer's quote.

Does the survivor comparison predict either person's lifespan?

No. The cash-flow streams use the lifetime assumptions you enter. They compare scenarios rather than probabilities of surviving to particular ages.

Prepared by Finflo. See our methodology and editorial policy. Read the relevant professional-advice limitations.

Pension Calculator

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