Lump Sum vs. Payments Calculator
This calculator compares a lump sum offered today with a yearly payment over a set number of years, using the return you could otherwise earn, so you can see which is actually worth more. Use it for a pension buyout, a settlement, a severance package, or an inheritance structured as payments.
Lump Sum vs. Payments Over Time
Cash up front, or the same total paid out over time: which is actually worth more today?
Lump sum, today
Payment stream, in today's dollars
Want to walk through what this means for you? Let's talk about it
Educational estimate only: assumes payments arrive once a year and a constant discount rate. Nothing is saved or sent.
"Same total" almost never means "same value"
Whoever is offering the choice usually presents both totals as roughly equivalent. They rarely are, once you account for the simple fact that a dollar today can be put to work today, while a dollar arriving in year twelve has spent eleven years doing nothing for you.
This calculator uses a discount rate, essentially what you could reasonably expect to earn if you had the money now, to convert the future payment stream into today's dollars, so it can be compared honestly against the lump sum actually on the table.
The math is only part of the decision. Taxes often land differently on a lump sum than on spread-out payments, and there's real value in not having to trust that payments keep arriving on schedule for a decade or more. Worth running the numbers, and then talking through the parts a number can't capture.
More free tools: Financial Calculators · The Investable Date Calculator · The Squeeze Test · Then vs. Now · The Financial Pyramid · The Wealth Builder Tax Leak Audit · The Retirement Tax Leak Audit · The Wealth Builder Decision Matrix · The Retirement Decision Matrix