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Leaving a job or retiring with a traditional pension? You may be offered a choice: a check every month for life, or one lump sum now. This page shows the facts that decide the trade: how long the monthly payments take to add up to the lump sum, what return the lump sum would need, the PBGC limit if the plan fails, the IRS rates that set the lump sum, and the tax and spouse rules.
Checked Oct. 24, 2026
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A $200,000 lump sum or $1,200 a month starting at 65. The payments add up to $200,000 after 13 years 11 months (about age 78). To pay $1,200 a month until 90 and run out then, the $200,000 would have to earn about 5.26% a year; to 85, 3.88%; to 95, 6.00%. By SSA's 2023 life table, a 65-year-old man has about a 24.1% chance of reaching 90, and a woman 34.9% (SSA).
If a private company's traditional pension plan fails, the Pension Benefit Guaranty Corporation (PBGC) pays the benefits, up to a legal limit. The limit depends on the year the plan ends (or the year the employer went bankrupt, if it was in bankruptcy then) and your age when PBGC payments start. Most benefits are under the limit (PBGC).
| Age | 2026 straight life | 2026 joint & 50% survivor | 2027 straight life | 2027 joint & 50% survivor |
|---|---|---|---|---|
| 45 | $1,947.44 | $1,752.70 | $2,028.41 | $1,825.57 |
| 50 | $2,726.42 | $2,453.78 | $2,839.77 | $2,555.79 |
| 55 | $3,505.40 | $3,154.86 | $3,651.14 | $3,286.03 |
| 60 | $5,063.35 | $4,557.02 | $5,273.87 | $4,746.48 |
| 62 | $6,153.92 | $5,538.53 | $6,409.78 | $5,768.80 |
| 65 | $7,789.77 | $7,010.79 | $8,113.64 | $7,302.28 |
| 67 | $9,425.62 | $8,483.06 | $9,817.50 | $8,835.75 |
| 70 | $12,931.02 | $11,637.92 | $13,468.64 | $12,121.78 |
| 75 | $23,680.90 | $21,312.81 | $24,665.47 | $22,198.92 |
Monthly amounts. Joint-and-50% amounts assume both spouses are the same age. Applies only to single-employer plans PBGC takes over, not multiemployer (union) plans, which have separate PBGC rules; government plans, and church plans that haven't chosen PBGC coverage, aren't covered at all (29 U.S.C. 1321(b)). PBGC's page lists every age from 45 to 75 (full tables).
For private pension plans, the lump sum can't be less than the value of your monthly benefit figured with an IRS mortality table and IRS interest rates called segment rates (26 U.S.C. 417(e)(3)): the first rate is used for payments due in the next 5 years, the second for years 5 to 20, the third after 20. When rates go up, lump sums go down for the same monthly pension. Your plan picks a "lookback month" whose rates it uses for a set period (for example a whole plan year) and must use it the same way for everyone (26 CFR 1.417(e)-1(d)(4)); the election packet tells you which.
| Month | First segment | Second segment | Third segment |
|---|---|---|---|
| Aug. 2026 | 4.65% | 5.75% | 6.73% |
| July 2026 | 4.62% | 5.62% | 6.51% |
| June 2026 | 4.49% | 5.43% | 6.18% |
| May 2026 | 4.42% | 5.47% | 6.31% |
| April 2026 | 4.27% | 5.34% | 6.22% |
| March 2026 | 4.24% | 5.35% | 6.25% |
| Feb. 2026 | 3.96% | 5.15% | 6.11% |
| Jan. 2026 | 4.03% | 5.20% | 6.12% |
| Dec. 2025 | 4.03% | 5.17% | 6.11% |
| Nov. 2025 | 4.07% | 5.15% | 6.01% |
| Oct. 2025 | 4.01% | 5.04% | 5.83% |
| Sept. 2025 | 4.06% | 5.12% | 5.93% |
| Aug. 2025 | 4.20% | 5.29% | 6.08% |
From the IRS table of minimum present value segment rates (IRS). Aug. 2026 rates were 0.45, 0.46 and 0.65 points higher than Aug. 2025.
Facts, not financial advice. We republish PBGC and IRS figures with dates and do simple arithmetic. Your plan's election packet is what counts. No partner links on this page.
It depends on how long you live, what the lump sum could earn, your other income, and whether a spouse needs survivor payments. Two simple checks: how many years of payments it takes to add up to the lump sum, and what yearly return the lump sum would need to pay you the same amount every month to a given age. This page runs both; it doesn't tell you which to pick.
Private pension plans can't pay less than the value of your monthly benefit figured with IRS interest rates (the section 417(e) segment rates) and an IRS mortality table. Higher rates make the lump sum smaller. Each plan sets which month's rates it uses (its "lookback month") for a period such as a plan year, and must apply it the same way to everyone.
For a single-employer plan that ends in 2026, PBGC can guarantee up to $7,789.77 a month at age 65 as a straight-life annuity ($7,010.79 joint-and-50% survivor with a same-age spouse). It's lower at younger ages (for example $5,063.35 at 60) and higher at older ages. For plans ending in 2027 the age-65 limit is $8,113.64. Most PBGC benefits are below the limit.
Usually yes, for a married participant in a traditional pension plan. The plan must pay a joint and survivor annuity (the survivor gets 50% to 100%) unless you and your spouse agree in writing to a different form, and the spouse's consent must be witnessed by a notary or a plan representative.
If it's paid to you, it's taxable income for that year, the plan must withhold 20% for federal income tax, and you may owe a 10% additional tax if you're under 59½ (no 10% tax if you left that employer in or after the year you turned 55, or 50 for many public safety workers). A direct rollover to an IRA or another plan isn't taxed until you take the money out, and nothing is withheld.
Only small benefits. If the value is over $7,000, the plan can't pay it out immediately without your consent (the limit was $5,000 before the SECURE 2.0 Act).
Education only, not investment, tax or legal advice. Limits and rules come from the IRS and SSA with dates; any returns are examples you can change. Confirm with your plan provider, IRS.gov or a tax professional before acting.