How the lump sum vs annuity calculator works
Last updated 10 November 2026
At retirement you may have to choose between taking some of your savings as cash and buying an income for life. This tool shows what happens if you take the cash and draw the same income yourself.
How it works
- Each month the balance grows by the return you enter and then the monthly income is drawn.
- It shows how long the money lasts, or the balance left after the years you chose.
- It also shows the lump sum needed to pay the income for the whole period.
Worked example
With the starting figures:
- The income is 6.8% of the lump sum each year.
- At the return entered the money lasts and R 6 534 545 is left.
The choice behind the tool
At retirement many people can take part of their savings as cash and use the rest to buy an income for life. Some people have the choice of taking the lot as cash. This tool shows the sums if you take the cash and draw the same income from it yourself, so you can see what each choice involves.
What you enter
- The lump sum you would take
- The monthly income you would want to draw
- The return you expect the money to earn
- The years you want the income to last
What the result shows
Each month the money grows by the return and then the income is drawn. The tool shows how long the money lasts, or what is left after the years you chose. It also shows the sum needed to pay that income for the whole period, and the income as a share of the lump sum each year.
The main risks
- Returns are not guaranteed and can be negative in some years.
- Living longer than the horizon you chose is the main risk of drawing down a lump sum.
- Inflation reduces what a fixed income buys over time. Some annuities rise each year and some do not.
- Tax applies to lump sums and annuity income. This tool does not work it out.
What this does not do
The tool shows arithmetic. It does not say which choice is better, because that depends on health, family, other income and tax. Annuity quotes also differ by provider. Treat the results as an illustration and use quotes and a licensed adviser for a real decision. See also the retirement annuity tax calculator.
Things to watch
- Returns are not guaranteed and can be negative.
- Annuity income may or may not rise with inflation. Check the quote.
- Living longer than the horizon is the main risk of drawing down a lump sum.
This is not financial advice. Read the full disclaimer.
Like every tool on MoneyMzansi, this one runs in your browser. Nothing you enter is sent or stored, so download your data if you want to keep it.