Pension Buyout Calculator: $273,000 Net Buyout vs $193,721 Pension PV
Use this guide to understand the assumptions, inputs, results, and next steps behind the calculator.
Created by Luis Gonzalez · Last updated October 15, 2026
A pension buyout exchanges a promised stream of future payments for a lump sum today. The offer’s value depends on payment size, start date, cost-of-living adjustments, taxes, investment returns, lifespan, and the security of the pension plan. This calculator estimates the after-tax buyout and the present value of pension payments under the assumptions you enter.
With the defaults, the $350,000 offer becomes a modeled $273,000 net buyout after a 22% tax assumption. The after-tax present value of the pension is $193,721, making the modeled difference $79,279 in favor of the buyout. The calculator labels this result “The buyout appears favorable,” but it is a scenario comparison—not individualized financial or tax advice.
How the Calculator Compares the Choices
Enter the buyout offer, monthly pension, current age, pension start age, life expectancy, expected investment return, annual COLA, and tax rate. The calculator discounts after-tax pension payments using the expected return. It then compares that present value with the buyout after the entered tax rate.
The default example works as follows:
- Net buyout: $350,000 × (1 − 22%) = $273,000.
- Annual pension: $2,000 × 12 = $24,000.
- Pension begins at age 62, seven years after the current age of 55.
- The calculator’s discounted, after-tax pension present value is $193,721.
- Difference: $273,000 − $193,721 = $79,279.
The calculator’s reported break-even age is “none” for this example: its year-by-year comparison does not find cumulative pension payments exceeding the modeled invested buyout balance by age 85. It also reports a 70 buyout score. That score is a calculator-specific ratio score, not a probability that the buyout will outperform.
Why the Highest Present Value Is Not the Whole Decision
A lump sum offers control, flexibility, and the potential to leave remaining assets to heirs. It also transfers investment and longevity risk to you. If you spend too quickly, invest poorly, or live longer than expected, the lump sum may not provide the same lifetime security as a pension.
A monthly pension can provide predictable income for life, depending on the plan and the payment option chosen. But the payment may stop at death unless you elect a survivor benefit, which can reduce the monthly amount. Compare the exact single-life and joint-and-survivor offers, not just the headline monthly payment. The pension income calculator and pension withdrawal calculator can help frame income needs and distribution choices.
| Buyout offer | Estimated net at 22% tax | Difference vs. $193,721 pension PV |
|---|---|---|
| $250,000 | $195,000 | $1,279 |
| $300,000 | $234,000 | $40,279 |
| $400,000 | $312,000 | $118,279 |
The table holds the pension present value and tax assumption constant to show how the offer changes the comparison. It does not capture changes in plan terms, payment options, or tax rules. A higher lump sum may look attractive under the model but still be a poor fit if you need guaranteed income or would not invest the proceeds prudently.
Taxes and Plan Protections Matter
The calculator applies one flat tax rate to both the lump sum and pension payments. Actual taxation depends on how the payment is distributed, your other income, account type, and any rollover. A direct rollover to an eligible retirement account may defer current income tax; a payment made directly to you can have withholding and tax consequences. Confirm the plan’s distribution options and consult IRS guidance before choosing.
The calculator does not model a rollover, state tax, tax brackets, survivor option, pension-plan solvency, or required minimum distributions. If the buyout is rolled into a tax-deferred account, taxes may be due later when money is withdrawn. Use the pension withdrawal tax calculator and pension tax by state calculator to explore additional tax factors.
Ask whether the plan is covered by the Pension Benefit Guaranty Corporation (PBGC) and what protections apply. PBGC insurance has limits and conditions; it does not necessarily guarantee every promised benefit. See PBGC’s pension plan information. The Department of Labor also provides information on retirement plan rights and protections.
Formula
Net buyout =
buyout offer × (1 − tax rate)
After-tax pension payment in year n =
monthly pension × 12 × (1 + COLA) ^ years since pension starts
× (1 − tax rate)
Pension present value =
sum of each after-tax pension payment
÷ (1 + expected annual return) ^ year index
Difference =
net buyout − pension present value
The calculator discounts pension payments using the expected return from the current age’s year index. Its present-value result therefore depends heavily on the return assumption. A higher discount rate lowers the modeled present value of distant pension payments; it does not make the pension itself less secure or change the plan’s actual payment.
Before You Elect
Request the formal offer, payment-option details, rollover instructions, survivor-benefit comparison, and plan funding information. Compare the offer with a pension present value estimate and a defined-benefit pension projection before making an irrevocable election.
Frequently Asked Questions
Quick answers to the questions people usually have after running the retirement calculator.
1Does a larger buyout always make it the better choice?
No. A larger offer improves the calculator’s comparison, but it does not measure longevity protection, survivor income, investment behavior, or the value you place on guaranteed payments.
2Should I take the lump sum or keep lifetime payments?
Choose based on income needs, risk tolerance, health and longevity expectations, survivor needs, taxes, and the plan’s terms. Guaranteed lifetime income may be valuable if it covers essential spending; a lump sum may suit someone who prioritizes control and has other reliable income.
3Does the calculator include Social Security or other retirement income?
No. It compares only the entered buyout and pension assumptions. Add Social Security, savings, and other income in a broader plan using a retirement calculator with pension and Social Security.
4Does the 22% tax rate mean I will owe exactly 22%?
No. It is a flat modeling assumption. The actual tax result depends on the distribution method and your full tax situation. A direct rollover may have different current tax treatment than taking the money as cash.
5What does “no break-even age” mean?
It means the calculator did not find an age within its modeled horizon when cumulative pension payments exceeded its modeled invested-buyout balance. It is not a guarantee that the buyout will remain ahead in real life.
6What if the pension has no COLA?
Set COLA to 0% and compare the present value again. A fixed nominal payment loses purchasing power as prices rise, while a COLA-adjusted payment may preserve some of its value.