Pension Buyout Offer Acceptance Calculator
Pension buyouts offer a lump sum in exchange for surrendering future monthly pension payments. Calculate the NPV of the offered lump sum vs. the present value of expected lifetime pension payments to decide.
Why Buyouts Are Offered
Pension plan sponsors offer buyouts to reduce balance sheet liability and PBGC premiums. Once you take the lump sum, you're off their books forever. Companies typically offer 70-90% of the actuarial NPV — making buyouts mathematically unfavorable on average. But individual circumstances (health, spouse, plan funding status) can flip the analysis.
Discount Rate Selection
The discount rate dominates the analysis. Use a rate reflecting your alternative investment opportunities AND the credit risk of the plan. PBGC-insured plans: 4-5% (Treasury+). Underfunded plans: 7-10% (high yield bond+). Single-employer non-PBGC plans (uncommon): 10%+ to reflect default risk.
Survivor And Inheritance Considerations
Standard pension dies with you (or your spouse if joint and survivor option chosen). Lump sum becomes part of your estate, inheritable by anyone. For households with strong heir-oriented goals, lump sum often wins even when NPV math suggests otherwise.
Source: PBGC.gov 2026 maximum guarantee table, Society of Actuaries pension buyout research, DOL pension protection rules. Last updated: May 2026.