Pension Calculator
Calculate your estimated pension benefits based on your salary, years of service, and your pension plan formula. This calculator helps you understand what to expect from your defined benefit pension plan.
Pension Results
Pension Breakdown
Key Insights
Replacement Rate: 0% of final salary
Break-even Age: 0 years
Present Value: $0
Tip: Consider tax implications and inflation when planning
Understanding Pension Plans
A pension plan is a defined benefit retirement plan that promises a specified monthly benefit upon retirement. Unlike 401(k) plans, pensions guarantee a lifetime income stream, making them valuable for retirement security.
How Pension Calculations Work
Most pensions use a formula:
Monthly Benefit = (Years of Service × Accrual Rate × Final Salary) ÷ 12
Example: 30 years × 2.5% × $75,000 = $56,250 annually ÷ 12 = $4,687 monthly
Types of Pension Plans
| Plan Type | Description | Common Formula |
|---|---|---|
| Final Average Pay | Based on average salary over final years | 2-2.5% per year |
| Career Average | Based on average salary over entire career | 1.5-2% per year |
| Flat Benefit | Fixed dollar amount per year of service | $50-100 per month per year |
| Hybrid Plans | Combination of defined benefit and contribution | Varies by plan |
Pension Payment Options
- Single Life Annuity: Payments continue until death, no survivor benefits
- Joint & Survivor: Reduced payments continue to spouse after death
- Period Certain: Guaranteed payments for specified period (10, 15, or 20 years)
- Lump Sum: One-time payment of present value (may be taxable)
- Combination: Partial lump sum with reduced monthly payments
Cost of Living Adjustments (COLA)
COLA protects pension payments from inflation by increasing benefits annually. Not all plans include COLA, and the percentage varies.
- Fixed COLA: Set percentage increase (e.g., 2% annually)
- Capped COLA: Increases up to a maximum percentage
- Inflation-Indexed: Based on CPI or other inflation measures
- No COLA: Fixed payments that lose purchasing power over time
Tax Considerations
- Pre-tax Contributions: Employer contributions are not taxed until distributed
- Taxable Benefits: Pension payments are taxed as ordinary income
- State Taxes: Some states offer pension income exclusions
- Rollovers: May be able to roll over to IRA to defer taxes
Important: Pension calculations are estimates based on typical formulas. Actual benefits depend on your specific plan provisions, vesting requirements, and any plan changes. Always consult your plan administrator or financial advisor for personalized calculations.