Pension Calculator
A defined-benefit pension from salary, accrual rate and years of service, adjusted for retiring early or late, and the lump sum it is worth today.
Result
Annual pension: $33,750.00
On your plan’s figures, as you entered them. Your plan’s own statement is the authority.
- Monthly pension
- $2,812.50
- Before the early or late adjustment
- $33,750.00
- Share of final salary
- 37.5%
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Results are arithmetic on the returns, rates and horizons you enter, not a forecast and not investment, tax or retirement advice. The site supplies no expected return, inflation rate, contribution limit, tax rate or withdrawal rate. Real returns vary from year to year, and fees, taxes and the order of returns all change the outcome. Check anything that matters with a qualified adviser. Read the full disclaimer
How to use the Pension Calculator
- Enter your final average salary, your plan's accrual rate and your years of service, all from your plan documents.
- Enter the age you will retire and the plan's normal retirement age, with the plan's adjustment for each year early or late.
- Optionally enter how many years you expect to receive payments and a discount rate, to value the pension as a lump sum.
How the benefit is calculated
A defined-benefit pension pays a yearly amount set by a formula, most often your final average salary, times an accrual rate, times your years of service. Each of those comes from your plan. This page supplies none of them, because there is no typical accrual rate: plans differ widely.
Retiring early or late
Plans usually reduce the pension for each year you start it before the normal retirement age, and some increase it for each year after. Enter your plan’s rate: three years early at 5% a year pays 85% of the full benefit. Some plans use different rates for different years, or a table; this page uses one rate.
Lump sum or payments
The lump sum shown is the present value of the payments: what they are worth today at the discount rate you enter, if they last the years you enter. The answer depends heavily on that number of years, and no mortality table is used, so try several. A plan’s own lump-sum offer uses its own rates and tables and can differ.
Survivor options, which reduce your pension to continue payments to a spouse, are not modelled.
With your numbers
- Benefit = $90,000.00 × 1.5% × 25 years = $33,750.00 a year
- Lump sum = present value of $2,812.50 a month for 25 years at 5% = $481,106.38
Quick reference
On your plan’s figures, as you entered them. Your plan’s own statement is the authority.
| Example | Annual pension |
|---|---|
| 90,000, 1.5%, 25 years | $33,750.00 |
| 90,000, 2%, 30 years | $54,000.00 |
| Three years early at 5% a year | $28,687.50 |
| Lump sum over 15 years | $33,750.00 |
| Lump sum over 35 years | $33,750.00 |
| Two years late at 6% a year | $25,200.00 |
Common questions about the Pension Calculator
- What is an accrual rate?
- The share of your salary you earn as pension for each year you work. At 1.5% a year, 25 years of service earns 37.5% of your final average salary as a yearly pension. Plans set their own rate, and many use a career average rather than a final salary; your plan's summary description says which.
- Should I take the lump sum?
- This page does not answer that; it shows what moves the arithmetic. A lump sum is worth more than the payments if you would receive them for only a short time, and less if you live long. With a 33,750 pension at a 5% discount rate, the payments are worth about 356,000 over 15 years, 481,000 over 25 and 557,000 over 35. Inflation protection, survivor benefits, the plan's security and your own health all matter too.
- What happens if I leave the employer early?
- You usually keep the pension you have earned, calculated on your service and salary so far, payable from the plan's retirement age. Enter those figures to see it.
- Is my pension linked to inflation?
- That depends entirely on the plan. Some raise payments each year, some by a capped amount, and many not at all. This page shows a level payment, and in today's money a level payment shrinks every year.