Pension Calculator
This pension calculator does four jobs. Enter your final average salary, your years of service and your plan's multiplier, and it shows the yearly and monthly pension and the share of that salary the pension replaces. Enter a lump sum offer and the monthly pension, and it shows what the payments add up to, what they are worth today at your discount rate and the month in which they reach the lump sum. Enter two offers with different cost-of-living increases, and it shows both side by side and when the lower one catches up. Enter a single-life and a joint-and-survivor pension from your plan's offer, and it shows what the joint option costs each month and what each pays over the years you assume. Every number comes from you and your plan document, and the calculator does not tell you which option to take. The results are estimates before taxes.
Your plan document says how to work it out.
Decimals such as 22.5 work.
Take it from your plan document.
Yearly pension
$22,500.00
Monthly pension
$1,875.00
Share of final average salary
37.50%
The numbers in the fields at the start are examples, not figures from any plan. The result is an estimate before taxes, and your plan document decides the real figure. The calculator multiplies the three numbers and nothing else. It applies no early-retirement reduction, survivor benefit, Social Security offset or vesting rule.
The amount in the first 12 months.
Your own assumption of how long you will draw the pension.
Your own assumption. Enter 0 for no discounting.
Optional. Raises the payment once every 12 payments.
Present value of the pension
$297,039.34
Total of all payments
$432,000.00
Lump sum above the present value
$2,960.66
Payments reach the lump sum in
Month 167
The 240 monthly payments add up to $432,000.00. Discounted to today they are worth $297,039.34. That is $2,960.66 less than the lump sum of $300,000.00. Counted without discounting, the payments reach the lump sum in month 167, which is 13 years and 11 months of payments.
The numbers in the fields at the start are examples, not figures from any plan. The calculator discounts monthly. The monthly rate is the yearly rate ÷ 12, and each payment falls at the end of its month. The result is an estimate before taxes. The years of payments and the discount rate are your own assumptions, and your plan document decides the real amounts. The calculator applies no survivor benefit and no Social Security offset.
The amount in the first 12 months.
Raises the payment once every 12 payments. Empty counts as none.
The amount in the first 12 months.
Raises the payment once every 12 payments. Empty counts as none.
Your own assumption of how long you will draw the pension.
Your own assumption. Enter 0 for no discounting.
| Over 300 payments | Offer A | Offer B |
|---|---|---|
| Monthly, last year | $2,000.00 | $2,895.19 |
| Total of payments | $600,000.00 | $691,854.47 |
| Present value | $378,904.97 | $419,451.79 |
Offer B has the higher total, by $91,854.47. Offer B has the higher present value, by $40,546.82. Offer B starts lower and its monthly payment catches up in month 73. Its running total catches up in month 137, which is 11 years and 5 months of payments.
The numbers in the fields at the start are examples, not figures from any plan. The calculator shows both offers on the same years and the same discount rate and does not say which one to take. Your plan document says whether a pension has an increase and how large it is. The results are estimates before taxes.
From your plan's offer.
From your plan's offer.
From your plan's offer.
Optional. Raises every payment once every 12 payments.
Your own assumption.
Your own assumption. Enter 0 if the survivor dies first.
Your own assumption. Enter 0 for no discounting.
Enter the single-life pension from your plan's offer as an amount above 0.
The single-life pension, the joint pension and the survivor's share come from your plan's offer, so those fields start empty. The calculator has no typical reduction. The years and the discount rate are your own assumptions. It shows the figures and does not say which option to take: that depends on your health, your spouse's and your other income, which it does not know. The results are estimates before taxes.
How to use the Pension Calculator
- Choose a mode. "Pension from a plan formula" works out a pension from three numbers in your plan document. "Lump sum or monthly pension" compares those two. "Two offers with a COLA" compares two monthly pensions with different yearly increases. "Single life or joint and survivor" compares those two payout options.
- For the plan formula, enter your final average salary, your years of service and the multiplier in percent per year of service. Take all three from your plan document. The fields start with example numbers, so replace them.
- Read the yearly pension, the monthly pension and the share of your final average salary. The results update as you type, so there is no button to press.
- For the comparison, enter the lump sum offered, the monthly pension, the number of years you expect to draw it and a yearly discount rate. The years and the rate are your own assumptions. Enter 0 as the rate to compare without discounting.
- If your pension rises each year, enter the cost-of-living increase in percent. The calculator raises the payment once every 12 payments. Leave it at 0 for a pension that stays level.
- Read the present value of the pension, the total of all payments, the gap to the lump sum and the month in which the payments reach the lump sum.
- For two offers, enter each monthly pension with its cost-of-living increase, then the years of payments and a discount rate. Read the last year's payment, the total and the present value of each, and the months in which the lower offer catches up.
- For single life or joint and survivor, enter the single-life pension, the joint pension and the survivor's share from your plan's offer. These fields start empty. Then enter how many years you expect the retiree and the survivor to draw it, and a discount rate.
How the pension calculator works
Yearly pension = final average salary × years of service × multiplier ÷ 100 Monthly pension = yearly pension ÷ 12 Share of salary = years of service × multiplier, in percent Present value = payment 1 ÷ (1 + i)^1 + payment 2 ÷ (1 + i)^2 + … + payment n ÷ (1 + i)^n i = yearly discount rate ÷ 100 ÷ 12 n = years of payments × 12 Joint total = joint pension for the retiree's years + joint pension × survivor's share for the survivor's years Survivor months to match = (single-life total − joint total over the retiree's years) ÷ the survivor's monthly payment, rounded up
The plan formula mode multiplies your three numbers and takes the monthly pension from the unrounded yearly figure. The comparison mode discounts monthly. The monthly rate is the yearly rate ÷ 12, and each payment falls at the end of its month. With a cost-of-living increase of g percent, payments 1 to 12 are the monthly pension you entered, payments 13 to 24 are that amount × (1 + g ÷ 100), and each later year multiplies by the same factor again. The total is the plain sum of all payments. The difference is the present value as shown minus the lump sum. The month in which the payments reach the lump sum is the first month in which their plain running total is at least the lump sum. The calculator does not round the single payments. It rounds each result once, to the cent, with half a cent rounded up. Dollar amounts take at most two decimals. Amounts and results stop at $50 trillion, because the calculator cannot show larger figures to the cent. The two-offer mode runs the same payments for each offer, with its own increase. The joint-and-survivor mode runs the increase through both the retiree's and the survivor's years. With an increase, the survivor months are counted with the raised payments, so the division above is only exact at 0%.
Worked example
These are example numbers, not figures from any plan. They are the numbers the fields start with, so you can check each result. In the plan formula mode, a final average salary of $60,000, 25 years of service and a multiplier of 1.5% give a yearly pension of $22,500.00, a monthly pension of $1,875.00 and a share of 37.50%. In the comparison mode, a lump sum of $300,000, a monthly pension of $1,800, 20 years of payments, a discount rate of 4% and an increase of 0% give 240 payments that add up to $432,000.00. Their present value is $297,039.34, which is $2,960.66 less than the lump sum. Counted without discounting, the payments reach the lump sum in month 167, which is 13 years and 11 months of payments. In the two-offer mode, $2,000 a month with no increase and $1,800 a month with a 2% increase, over 25 years at 4%, add up to $600,000.00 and $691,854.47. Their present values are $378,904.97 and $419,451.79. The second offer's payment catches up in month 73 and its running total in month 137. For joint and survivor the fields start empty, so try made-up figures that come from no plan: $2,000 single life, $1,800 joint, a 50% survivor's share, 20 years for the retiree, 5 for the survivor and 4%. The joint option costs $200.00 a month, 10.00%, and the survivor gets $900.00. In total, single life pays $480,000.00 and joint $486,000.00. Present values are $330,043.72 and $319,026.91. The survivor needs 54 months of payments for the totals to match.
Three more comparisons
Each one starts from the example numbers of the comparison mode and changes one field. The result depends on the years and the rate you assume, which is why the calculator leaves both to you.
A 2% yearly increase
Set the cost-of-living increase to 2. The payments add up to $524,823.19 and their present value is $351,547.92. That is $51,547.92 more than the lump sum. The payments reach the lump sum in month 149.
A discount rate of 0%
Set the discount rate to 0 and the increase back to 0. The present value equals the total of all payments, $432,000.00. That is $132,000.00 more than the lump sum, and the payments still reach the lump sum in month 167.
10 years of payments
Set the discount rate back to 4 and the years of payments to 10. The 120 payments add up to $216,000.00 and their present value is $177,786.31, which is $122,213.69 less than the lump sum. The payments never reach the lump sum, so the calculator shows "Not reached".
Frequently asked questions
Which pension formula does the calculator use?
Final average salary × years of service × multiplier ÷ 100. You type all three numbers from your own plan document. The calculator has no built-in plan and suggests no multiplier, and the numbers in the fields at the start are examples. If your plan works out the pension another way, this mode does not fit it.
How does it compare a lump sum with a monthly pension?
It discounts every monthly payment to today at the yearly rate you enter ÷ 12, with each payment at the end of its month, and adds them up. That sum is the present value. The calculator shows it next to the plain total of the payments and tells you how far it is above or below the lump sum. It does not say which option to take.
Which discount rate and how many years should I enter?
Both are your own assumptions, and the result moves with them. The calculator suggests neither number. A rate of 0 compares the plain total of the payments with the lump sum.
Does the pension calculator include taxes or early retirement?
No. The results are estimates before taxes. The plan formula and lump sum modes apply no survivor benefit. No mode applies a Social Security offset or a vesting rule, and there is no reduction for retiring early. If your plan's offer already includes a reduction, it is in the amount you type. Your plan document decides the real figure.
How much does a survivor benefit reduce a pension?
Your plan's offer states it, and the calculator has no typical figure to use in its place. Those fields start empty and it gives no result until you fill them. Enter the single-life and joint amounts as your plan quotes them, and it works out the monthly reduction and its share of the single-life pension.
Should I pick single life or joint and survivor?
The calculator does not say. The answer depends on your health, your spouse's, your other income and how long each of you lives, and it knows none of these. It shows what each option pays over the years you assume, and how many months of survivor payments make the totals match. Try the survivor's years at 0 as well, for the case where your spouse dies first.
How do I compare two pension offers with different COLAs?
Use the mode "Two offers with a COLA". A lower pension with an increase starts behind and can pass a higher level one. In the example, $1,800 a month rising 2% a year passes $2,000 a month in month 73, and its running total catches up in month 137. The calculator shows the totals and present values and does not say which to take, because that rests on how long you draw it and the discount rate you assume.
What does the cost-of-living increase do?
It raises the monthly payment by the percentage you enter once every 12 payments, starting with payment 13. Enter 0 for a pension that stays level. Your plan document says whether your pension has such an increase.