How to calculate the "lump sum" dollar value of a pension

[Adam Zapple]

Can anyone tell me how to value a $50,000 dollar per year pension that I take at 43 years old?  I am a male, if that matters.  There is no cost of living increase...it will remain $50000 until my wife and I both pass.

[Car Jack]

Look on immediateannuities.com and shop for an immediate annuity.  Enter various lump sum numbers until the average payout is $50k a year.

Why do you need to know the lump sum equivalent? 

[MDM]

Can anyone tell me how to value a $50,000 dollar per year pension that I take at 43 years old?  I am a male, if that matters.  There is no cost of living increase...it will remain $50000 until my wife and I both pass.

It depends on your joint life expectancy and the rate of return you would get on the lump sum.

See Excel's "PV" calculation.

[Adam Zapple]

Look on immediateannuities.com and shop for an immediate annuity.  Enter various lump sum numbers until the average payout is $50k a year.

Why do you need to know the lump sum equivalent? 

I'm having a hard time figuring out how a fixed payout asset like a pension fits into my total FI number.  I just figure it is another tool I can use.  I have no intents of selling it.

[Huskie87]

Do you have an annuity or a pension?  You say 'I don't plan on selling it'... you can't sell a pension, so I'm wondering if you actually have an annuity.  Or do you have the ability to take a lump sum from the pension?

Are you being given different payout options?  The way you describe is a joint with 100% survivor.  Is this the only option you're being given?


At age 43 you and your wife will have an (average) life expectancy of 38 years.  $50,000 discounted at a 5% rate over that time period is roughly $850,000.

[Adam Zapple]

I definitely have a pension.  I was under the impression you could sell just about anything to JG Wentworth at 877-CASH-NOW :)  (This is a local advertisement that comes on in my area trying to buy legal settlements etc)

[TomTX]

I definitely have a pension.  I was under the impression you could sell just about anything to JG Wentworth at 877-CASH-NOW :)  (This is a local advertisement that comes on in my area trying to buy legal settlements etc)

Sure, but they discount more like 50%. Gotta pay for those commercials.