Online Tool Store
Lump Sum vs Annuity Comparison
Compare a lump sum payout against a stream of annuity payments by discounting the annuity to its present value, helping you see which option is actually worth more today. Runs entirely in your browser.
🔒 This tool runs entirely in your browser. Your files are never uploaded to a server.
Example
Lump Sum vs Annuity Comparison
- Lump sum
- $500,000
- Annuity
- $30,000 / yr × 25
Example shown — replace it with your own figures.
Result
How it works
- Enter the lump sum amount, plus the annuity's payment, term, and rate.
- The tool discounts each future annuity payment back to today's value.
- Compare the lump sum against the annuity's total present value.
The formula
The present value of an ordinary annuity is:
PV = Payment × [1 − (1 + r)^−n] / r
Example: $30,000/yr for 25 years at 5% discounts to roughly $422,900.
FAQ
What discount rate should I use?
A common starting point is your expected long-term investment return — often 4-7% — since that's the rate the annuity payments are being compared against.
Why can the annuity total more but still be worth less today?
Money received later is worth less than money received now, since it could otherwise be invested and grow — that's the whole idea behind present value.
Does this account for taxes?
No — this compares raw present values only. Lump sums and annuity payments are often taxed differently, so check the after-tax picture separately.
How we compare
| Feature | Online Tool Store | Financial advisor consultation | Manual spreadsheet formula |
|---|---|---|---|
| No appointment needed | Yes | No | Yes |
| Adjustable discount rate | Yes | Yes | Manual |
| Instant, in-browser result | Yes | N/A | Recalculate each time |
For a quick first-pass comparison before a real financial decision, this is faster than building the formula yourself.