Pension Calculator
A defined benefit pension pays a set amount each month, based on your pay and years of service. This estimates that monthly amount from a plan formula, and shows what a single lump sum would be worth in its place.
- Free
- Works offline after your first visit
- Saves on this device
- No sign-up
- Updated
How it works
The yearly pension is your final average salary, times years of service, times the benefit percent per year. Your plan states that percent. Divide the yearly figure by twelve for the monthly amount.
The lump sum is the present value of those monthly payments over the number of years you enter, discounted at the rate you choose. A higher discount rate gives a smaller lump sum. Plans set their own lump sum rules, so check the figure with your plan.
Worked example
With a final average salary of $70,000.00, 25 years of service and 1.8% per year, the pension is $2,625.00 a month. A lump sum equal to 20 years of those payments, at a 4% discount rate, is about $433,182.38.
Questions
Is the lump sum the same as the plan's cash value?
Not always. Plans calculate lump sums with their own life expectancy and rate tables, so yours may differ.
What is the benefit percent?
It is the share of salary your plan gives for each year worked. Your plan documents or annual benefit statement list it.
Does this include Social Security?
No. It covers only the pension you enter.
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