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How to Evaluate the Pension vs. Lump Sum Decision
Michael Kitces in Nerd's Eye View July 22, 2015
"While there are several factors that go into the pension-vs.-lump-sum decision, ultimately the trade-off can be boiled down to calculating the internal rate of return (IRR) of the promised pension cash flows, which reveals the 'hurdle rate' of return that a lump sum portfolio would have to earn to generate to reproduce those same payments over the same time horizon. Of course, the longer the retiree is expected to live, the greater the number of anticipated pension payments, and the greater the portfolio hurdle rate will be."
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