Choosing $24,000 Now or $100 a Month Forever: Here’s What I Learned

Whenever I hear about someone getting a pension from their job, I’ll admit — I feel a little jealous. Other than Social Security, every dollar I’ll have in retirement is money I’ll have to save on my own.

Of course, that’s the reality for most workers today. Private-sector pensions have mostly disappeared, replaced by 401(k) plans that put the burden of saving squarely on employees. If you’re lucky, your company might chip in with a match.

I’m self-employed, so I don’t even get that. Then again, I also get to set my own schedule — and yes, occasionally work from the beach — so it’s not all bad.

Recently, though, I came across a Reddit post that caught my attention. The author had earned a pension and now faced a big decision: take a $100 monthly payout for life, or cash out for $24,000 upfront.

It’s not an easy call. But there’s actually a straightforward way to figure out which choice makes the most financial sense.

It's all about calculating your break-even age

The choice between a pension payout and a lump sum really depends on one thing: your life expectancy.

To figure it out, calculate your break-even age — the point where the total from monthly payments equals the lump sum. For example, $100 a month versus $24,000 upfront works out to 240 months, or 20 years. That means if you start at 65, you’d break even at 85.

If you think you’ll live beyond 85, go with the monthly checks. If not, the lump sum may be smarter.

Still, it’s not just about math. The monthly payout offers stability — guaranteed money for life, no matter what. But a lump sum gives you flexibility. You can invest it, grow it, or use it for something meaningful right now — like taking that once-in-a-lifetime trip while you’re still healthy enough to enjoy it.

The best choice depends on your priorities: security later or freedom now.

It's not that simple

While the earlier example is simple math, real-life finances are rarely that straightforward.

One crucial concept to factor in is the time value of money — the idea that a dollar today is worth more than a dollar tomorrow because it can be invested and grow over time.

Let’s say you could earn a 5% annual return on your investments. That changes everything. On paper, $100 a month for 20 years equals $24,000. But once you account for compound growth, the lump sum option quickly pulls ahead.

If you invest the $24,000 upfront at 5%, it compounds far faster than reinvesting $100 each month as you receive it. In fact, under those assumptions, it would take nearly 78 years for the smaller monthly payments to catch up to the growth of that initial investment.

So unless you expect to live well past 100, taking the lump sum and letting compound interest work in your favor usually makes more financial sense.

Consult a financial advisor for help

It happens to be that the poster here isn't looking at such a large pension. But if yours is considerably more generous, then I'd highly recommend talking to a financial advisor and getting their help in making the decision.

A financial advisor can help you run the numbers to figure out which route to take. They can also point out the different factors you'll need to consider when deciding what to do – ones you or I may not be thinking of.

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