Pension Calculator
Calculate pension benefits and lump sum vs annuity options
Pension Details
Usually average of last 3-5 years
Common: 1.5% to 2.5% per year of service
For benefit projection
Annual increase in pension
For present value calculation
Percentage to surviving spouse
Pension Analysis
Enter your pension details and click Calculate
Analyze your pension benefit options
Understanding Pension Benefits
How Pensions Work
Defined benefit pensions provide a guaranteed monthly income in retirement, typically based on a formula using your salary and years of service:
Monthly Benefit = Final Salary × Years of Service × Multiplier%
Common Pension Formulas
- Final Average Salary: Average of last 3-5 years
- Career Average: Average of all years
- Flat Benefit: Fixed amount per year of service
Lump Sum vs Annuity Decision
Many pensions offer a choice between:
- Annuity: Guaranteed monthly payments for life
- Lump Sum: One-time payment you invest yourself
Factors Favoring the Annuity
- Long life expectancy
- No desire to manage investments
- Need for guaranteed income
- Good COLA provisions
- Spouse needs survivor benefits
Factors Favoring the Lump Sum
- Poor health or family history
- Confident in investment ability
- Concern about pension plan funding
- Want to leave inheritance
- Already have guaranteed income (Social Security)
Important Considerations
- PBGC Insurance: Federal insurance covers most private pensions
- Tax Impact: Lump sum can be rolled to IRA tax-free
- Survivor Benefits: Consider spouse if choosing annuity
- Inflation: COLA protects purchasing power over time
Disclaimer: This calculator is for informational purposes only and should not be considered financial, tax, or legal advice. Results are estimates based on the information provided and current tax laws. Consult a qualified professional for advice specific to your situation.
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