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Pension Calculator
A pension calculator estimates what a defined-benefit pension will pay each year. Enter your final average salary, your plan's multiplier, and your years of service, and it works out your annual pension and your monthly pension — so you can see what a longer career or a higher final salary is worth in retirement.
Common defined-benefit multipliers are 1.5%, 2%, and 2.5% per year of service.
| Final average salary | |
| Replacement rate | |
| Annual pension | |
| Monthly pension |
How it works
A defined-benefit pension pays a set amount each year in retirement, based on your salary and how long you worked — unlike a 401(k) or IRA, where the amount depends on how much you saved and how investments performed. Many public-sector workers, such as teachers, police officers, and other government employees, still have this kind of pension, and it is often their main source of retirement income.
Your final average salary is usually the average of your salary over your last three to five years of work, when your pay is normally at its highest. Your plan's multiplier is the percentage of that salary you earn for each year of service — 2% a year is a common figure, though some plans use 1.5% or 2.5%. Pick your plan's figure from the preset list, or enter a custom one if your plan differs. The multiplier is the single biggest lever after years of service: at 1.5% over 30 years the pension replaces 45% of salary, at 2% it replaces 60%, and at 2.5% it replaces 75%. Your years of service is how long you worked under the plan.
The formula is:
Monthly pension = Annual pension ÷ 12
Replacement rate = multiplier × years of service
The replacement rate tells you what share of your working salary the pension replaces. A 2% multiplier over 30 years replaces 60% of your final average salary, which is a solid base — but most retirees still need savings or other income on top, because living costs in retirement are rarely only 60% of working costs. Also check your plan's details: some pensions cap the replacement rate, some reduce the payment if you retire early, some offer cost-of-living increases and some do not, and some pay a survivor benefit to a spouse after you pass away. This calculator gives the basic figure before tax and before any of those adjustments.
Worked example
A teacher retires with a final average salary of $80,000, a plan multiplier of 2% per year of service, and 30 years of service.
The annual pension is $80,000 × 0.02 × 30 = $48,000 a year. The monthly pension is $48,000 ÷ 12 = $4,000 a month.
The replacement rate is 0.02 × 30 = 60%, so the pension replaces 60% of the teacher's final average salary. If the same teacher had worked only 20 years, the pension would be $80,000 × 0.02 × 20 = $32,000 a year — each extra year of service is worth $1,600 a year for life in this example, which is why the last few years before retirement matter so much.
FAQ
How does a pension calculator work?
It multiplies your final average salary by your plan's multiplier and your years of service. That gives your annual pension, which divided by 12 gives your monthly pension.
What is a final average salary?
It is usually the average of your salary over your last three to five years of work. Plans use an average rather than a single year so that one unusual year does not set your pension.
What is a typical pension multiplier?
A common multiplier is around 2% per year of service, though plans vary from about 1.5% to 2.5%. Check your plan's documents for the exact figure that applies to you.
What is a replacement rate?
The replacement rate is the share of your final salary your pension replaces. A 2% multiplier over 30 years gives a 60% replacement rate.
Is my pension taxed?
In most cases pension payments are taxed as ordinary income when you receive them, though the rules depend on your plan and where you live. This calculator shows the amount before tax.
Which multiplier does my pension plan use?
Check your plan documents: common defined-benefit multipliers are 1.5%, 2%, and 2.5% per year of service. On an $80,000 final salary over 30 years, 1.5% gives $36,000 a year, 2% gives $48,000, and 2.5% gives $60,000.