Pension Calculator
Estimate a defined benefit pension from years of service, final average salary and your plan’s accrual rate. Example: 30 years at 2% of an $80,000 final average salary pays $48,000 a year, or $4,000 a month.
Show steps
How to use the Pension Calculator
- Enter your years of credited service and your plan’s accrual rate.
- Enter your final average salary.
- Add any survivor or early retirement reduction and an optional yearly cost-of-living increase.
- Press Calculate for annual and monthly pension.
Formula and method
Annual pension = years of service x accrual rate x final average salary. Apply any reduction for early retirement or a survivor benefit. Income replacement = pension / final salary.
Worked example: 30 years, 2%, $80,000
| Step | Result |
|---|---|
| Benefit percent (30 x 2%) | 60% |
| Annual pension (60% x $80,000) | $48,000 |
| Monthly pension | $4,000 |
| Replacement of final salary | 60% |
Pension by years of service at 2% accrual ($80,000 salary)
| Years | Percent of salary | Annual pension |
|---|---|---|
| 10 | 20% | $16,000 |
| 15 | 30% | $24,000 |
| 20 | 40% | $32,000 |
| 25 | 50% | $40,000 |
| 30 | 60% | $48,000 |
| 35 | 70% | $56,000 |
Defined benefit versus 401(k)
A defined benefit pension pays a formula-based income for life, while a 401(k) depends on contributions and investment returns. Pensions are most common for government and union workers.
Frequently asked questions
How is a pension calculated?
Years of service times accrual rate times final average salary.
What is an accrual rate?
The percent of salary earned for each year of service, commonly 1.5% to 2.5%.
What is final average salary?
The average of your highest-paid years, often the last 3 to 5.
What is vesting?
The service period after which you earn the right to a pension.
Do pensions have cost-of-living adjustments?
Some do. Check your plan.
How much of my salary will a pension replace?
Commonly 40% to 70% for a full career.
Sources
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