Pension Calculator
Calculate your estimated pension benefit using years of service, final salary, and benefit multiplier. Plan your retirement income.
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Annual Benefit
$35,000
Monthly Benefit
$2,917
Replacement Rate
50%
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Frequently Asked Questions
- Most defined benefit pensions use: Monthly Benefit = Years of Service ร Final Salary ร Benefit Multiplier. A typical multiplier is 1.5โ2.5% per year. Example: 30 years ร $60,000 ร 2% = $36,000/year = $3,000/month.
- Defined benefit (DB): employer guarantees a specific monthly income in retirement based on salary and service years. Defined contribution (DC): employer and/or employee contribute to an investment account (401k, 403b) โ the retirement income depends on investment performance.
- The benefit multiplier (accrual rate) is the percentage of salary earned per year of service. Government/public sector pensions often use 2โ2.5%. Private sector pensions (rarer today) may use 1โ1.5%. This multiplier is the key driver of your ultimate benefit.
- It varies widely. US state and local government pensions average around $25,000โ$35,000/year for career employees. Federal employees under FERS average about $20,000/year. Private sector pensions are increasingly rare and vary more. Social Security supplements most pension income.
- Many plans offer a lump sum buyout โ a one-time payment equivalent to the present value of lifetime monthly payments. Whether to take it depends on your health, investment confidence, and need for guaranteed income. Monthly payments are safer for longevity risk; lump sums offer flexibility.
- Vesting is the minimum service required to earn pension benefits. Cliff vesting (full benefit after a set period, e.g., 5 years) or graded vesting (partial benefit that grows each year) are common. Leaving before full vesting means reduced or no pension benefit.
- Some government employees are covered by a Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) that reduces Social Security benefits if they receive a pension from non-covered employment. Most private sector workers with pensions also receive full Social Security.
- Break-even = Lump sum รท Monthly benefit ร 12. If offered $300,000 lump sum vs $2,000/month, break-even = 300,000 รท 24,000 = 12.5 years โ age ~77 if you retire at 65. Live past the break-even and monthly payments win.