Pension Calculator

What does a pension calculator work out?

A pension calculator estimates the monthly payment a defined-benefit plan will make for life by multiplying three figures the plan defines — credited years of service, the accrual rate per year, and the final average salary — and then applying the plan's early-retirement reduction, any joint-and-survivor reduction and any cost-of-living adjustment.

A second mode converts the plan's lump-sum offer and the monthly stream into comparable present values at a discount rate you choose.

At the defaults — 20 years, 1.5% a year, a $75,000 final average salary, retiring at the normal retirement age of 65 — the pension is $22,500 a year, $1,875 a month, replacing 30% of the final salary; over a 25-year retirement that is $562,500 of payments with no COLA. The chart shows the monthly benefit for each possible retirement age, so the cost of leaving early is visible.

How much will my pension be?

Years of service × accrual rate × final average salary. 25 years × 2% × $80,000 = $40,000 a year, or $3,333 a month. The formula sits in your plan's Summary Plan Description, which you can request from your employer or administrator at any time.

The accrual rate varies widely: most private-sector plans pay 1%–1.5% per year; many public-sector plans pay 2%–2.5%. The final average salary is rarely your last year's pay — most plans average the highest 3 or 5 consecutive years to stop a final-year spike inflating the benefit; career-average plans average every working year and pay less for the same formula.

Credited service follows the plan's vesting schedule — most require 3–5 years before any benefit is earned — and only the credited years on your benefit statement count. Enter those, not your total years with the employer.

How does early retirement reduce a pension?

Retiring before the plan's normal retirement age (NRA) usually brings a reduction, most often a flat percentage per year early: at 5% a year, retiring at 62 instead of 65 cuts the benefit by 15% — 30 years × 2% × $90,000 = $54,000 a year becomes $45,900, $3,825 a month instead of $4,500.

Some plans use an actuarial-equivalent reduction instead, which is larger the earlier you go; the plan document says which. The cut is permanent, and there is a second cost: fewer years of service. The chart on the Benefit tab assumes continuous service, so each year earlier is one year less of accrual and one more year of reduction — at the defaults the $1,875 at 65 is $1,355 at 62 and $1,055 at 60. Plans with a "rule of 80" or "rule of 85" waive the reduction once age plus service reaches the threshold; that provision is plan-specific and not modelled here.

Should I take the pension lump sum or the annuity?

When a plan offers a lump sum, the choice is a single payment today against a stream of monthly payments for life. The present value converts the stream into today's dollars at a discount rate that stands for what you could earn on the money: $1,875 a month for 25 years is worth $320,738 at 5%, $562,500 undiscounted.

Against a $300,000 offer the annuity is worth more at that rate. The break-even return is the rate at which the two are equal — 5.68% in that example. Earn more than that on the lump sum, every year for 25 years, and the lump sum comes out ahead; earn less and the annuity does. The comparison is deterministic: a constant return, a fixed horizon, no mortality table and no inflation beyond the COLA you enter — a 2% COLA raises the stream's value at 5% to $390,638.

The plan's quoted lump sum is not an estimate: it is calculated under IRC §417(e) with the IRS mortality table and the 24-month-average segment rates, so it falls when rates rise. The value this page shows is what the stream is worth to you at your rate; it is not the plan's actuarial figure, and nothing here recommends one option over the other.

How do a COLA and a survivor option change a pension?

A cost-of-living adjustment raises the monthly benefit each year by a stated percentage. Most private-sector plans have none, so inflation erodes the benefit — a $2,000 payment with a 2% COLA is $2,390 in year 10 (nine raises: × 1.02^9); without one it is still $2,000. CSRS, FERS, CalPERS and many state plans carry full or partial CPI-linked COLAs.

Entering the rate under Advanced shows the growth and raises the present value of the stream. A joint-and-survivor (J&S) annuity reduces your monthly benefit so that payments continue to a named beneficiary after your death — 50%, 75% or 100% of the reduced amount. ERISA requires private plans to offer at least a 50% J&S as the default for married participants unless the spouse waives it in writing. Enter the reduction percentage from your plan's option quote; 3%–12% is typical for a 50% J&S depending on the age gap.

This calculator is plan-agnostic: it models the standard formula and the common options, not FERS, CSRS, CalPERS, STRS, military retirement or any particular state or local plan, each of which has its own formula, vesting, COLA and survivor rules.

Is my pension insured, and when do I need a professional estimate?

The Pension Benefit Guaranty Corporation insures most private-sector defined-benefit plans. If a plan ends without enough money, the PBGC pays up to a statutory maximum that changes each year: $7,789.77 a month for a straight-life annuity at age 65 in 2026 ($7,431.82 in 2025), less at younger ages and for survivor options.

The result panel says whether your estimated benefit sits inside that figure. Government and church plans are not covered. Under IRC §417(e) a plan must convert the annuity to a lump sum with the IRS-prescribed mortality table and segment rates, not a fixed rate of its own, which is why the plan's quote and this page's present value can differ substantially.

This calculator gives an estimate under the assumptions you enter and cannot reproduce your plan's exact calculation; only the administrator's benefit statement can. It is not financial, tax or investment advice. Request a formal estimate before any election, and for a large lump-sum decision consider a fee-only adviser or an actuary who can see the plan document.