Lump Sum vs Annuity at Retirement Calculator NZ
This calculator compares taking a retirement lump sum and managing it yourself against converting it to an annuity that pays a guaranteed income, a choice that comes up with some superannuation schemes and retirement products in New Zealand. The two approaches trade control against certainty. Taking the lump sum lets you keep the capital invested, draw what you need, and leave anything remaining to your estate, but it puts the investment and longevity risk on you: poor returns or a long life can see the money run low. An annuity hands that risk to the provider in return for a set income, giving certainty but usually no leftover capital. This tool helps you see the trade-off in numbers. You enter the lump sum on offer, the annual income the annuity would pay, the period to compare over, and the return you expect if you invest the lump sum, and it shows the total income the annuity provides over the period against the balance that would be left if you invested the lump sum and drew the same income. A positive leftover suggests the lump sum could deliver the same income with capital to spare, if returns hold; a depleted balance shows where the annuity's certainty earns its keep. General information, not financial advice.
Assumes a steady return; poor returns or a longer life favour the annuity's certainty. Annuities remove market and longevity risk. General information, not advice.
How it works
The annuity total income is the annual income times the years. For the lump sum, the calculator grows it at your expected return while drawing the same annual income each year, and reports the balance left at the end. A positive balance means the lump sum matched the annuity income and still had capital remaining; a zero balance means it would have run out.
Worked example
A 300,000 dollar lump sum invested at 4 percent, drawing the 18,000 dollar annuity income for 20 years, would leave about 121,332 dollars at the end, while the annuity simply pays 360,000 dollars total over the period. If returns hold, the lump sum looks better; if they disappoint, the annuity's guarantee matters.
Related calculators
- Annuity vs Drawdown: drawdown detail.
- How Long Will Money Last: drawdown length.
- Safe Withdrawal Rate: sustainable income.
- Super + KiwiSaver Income: total income.