Pension Calculator
Calculate your estimated pension benefits based on years of service, final average salary, and accrual rate. Compare payment options including single life and joint & survivor benefits with COLA adjustments.
What is a defined benefit pension plan?
A defined benefit pension guarantees a specific monthly payment in retirement, typically based on salary and years of service. The employer funds and manages the plan, bearing investment risk. Common formula: (Years of Service * Accrual Rate * Final Average Salary). For example: 30 years * 2% * $80,000 = $48,000/year ($4,000/month).
How is my pension benefit calculated?
Most pensions use: Final Average Salary (FAS) - typically highest 3-5 consecutive years, Years of Service - time working for employer, Accrual Rate - usually 1.5-2.5% per year. Formula: Annual Pension = Years * Rate * FAS. Example: 25 years * 2% * $75,000 = $37,500/year. Some plans use career average or flat dollar amounts per year worked.
Should I take a lump sum or monthly pension payments?
Monthly payments provide guaranteed lifetime income with no investment risk, often with COLA increases and survivor benefits. Lump sum gives control, inheritance potential, and flexibility, but you manage investment risk and longevity risk. Consider: health/longevity, investment skills, need for guaranteed income, interest rates (affect lump sum amount), and other retirement income sources.
What is a pension survivor benefit?
Survivor benefits continue payments to your spouse after you die. Common options: Single Life (highest payment, stops at death), 50% Joint & Survivor (reduced payment, spouse gets 50% after your death), 75% or 100% Joint & Survivor (more reduction, spouse gets 75-100%). The reduction is permanent even if spouse dies first. Choose based on spouse's age, health, and other income.
Are pension benefits taxable?
Yes, pension income is typically taxed as ordinary income in retirement. If you contributed after-tax dollars, that portion is tax-free (rare). Most pensions are fully taxable since contributions were pre-tax. Plan for federal and state taxes. Consider: withholding elections, estimated tax payments, qualified charitable distributions (QCD), and how pension affects Social Security taxation.
What happens to my pension if I change jobs?
Depends on vesting schedule (typically 5 years). Not vested: lose employer contributions, may get your contributions back. Vested: you earned the benefit, but it may be small if you leave early since based on years of service and final salary. Some plans allow rolling to new employer's plan. Staying longer significantly increases pension value due to higher salary and more service years.