You are forgetting that the concept of "time" doesn't pertain to the spiritual world. I do know that it says a rasha doesn't stay in gehinnom longer than 12 months. However, in Bava Basra 74a it relates a story about the amora R' Nachman. He was walking in the desert, and an arab showed him a crack in the ground where Korach was swallowed up, and when he put his ear to the ground he heard them say "Moshe is true and his Torah is true, and we are liars". So why was Korach still burning up many years after he died?
Whatever time may mean in the spiritual world, we know it is something we can’t relate to. The Torah speaks on our terms. We don’t know what spiritual pain is. We don’t know how God calculates punishment.
One must know what he doesn’t know. However, there is something that I understand about God’s ways of rewarding and punishing that I think may help you. God is not human. He does not feel pain, as He is perfect and can have no deficiencies. God does not feel angry or sad or depressed or happy. When the Torah refers to God’s middos, it means that God is acting with those middos, he is taking the course of action that a human being would take in the case that a human being would be feeling that midda. More simply, if I were upset at someone, I would punish him. When God is “upset”, he would use the midda of “upset” and takes a retaliatory course of action.
I think that even more than that, reward and punishment are perhaps what we would call a consequence. Just as the consequence for dropping a glass on concrete is a smashed glass, the consequence for doing an aveira is punishment. God mercifully delays punishment and pushes it off with chesed and rachamim in hopes that the human will do teshuva, but once someone dies he has no option to do teshuva. (That may be a partial answer to why getting punished in this world is “a better deal”. God may lessen a punishment to give the recipient the ability to perform better in another area at that time.) If getting punished is a self directed consequence, God’s involvement would be only to “lessen” the punishment. A rasha doesn’t deserve extra “lessening”.
On another note, I have another idea as to what reward and punishment in the next world are.
In spirituality, there is no space. There is no near or far. So what do we mean when we say “closer to God”?
Close in a spiritual sense means more relatable, or more similar. When someone correctly uses the middos that God uses, such as kind and mercy, he becomes more similar, or “closer”, to God. When someone uses middos that are the opposite of God’s way, such as evil or destructive, he becomes less similar, or “further”, from God. The gan eden and gehinnom that we refer to in the next world may be the neshamas experience of being closer or further from God. That’s a direct consequence of your actions in this world. The pain or regret the neshama feels of being further from God is not “punishment” and “reward”. It is a direct consequence of your actions. Keep in mind that the next world is forever. If you’re far from God in some way, it’s for eternity. Time doesn’t pass or stay put. It is simply unconstrained by the concept of time as we are. And you can’t fix it. So you’re stuck with your deficiency forever. That is something you directly did yourself, and God will not change consequence. That’s how God runs this world. He has rules. (I’m not claiming to know the slightest amount about how God runs this world. I am only relating a perception.) Perhaps also when one gets punished in this world, he changes himself, his neshama, and therefore a miniscule amount of pain on this world can cause an enormous change in his neshama that translates into a closeness to God.
I’m sorry for the lack of sources. This is a view that I formed throughout life, and I don’t know much knowledge about anything. But this idea seems to concur with the hashkafa I’ve learnt, and it reverberates strongly within me. I don’t claim to know anything, I just wish to share my feelings.