Pension Calculator — defined-benefit formula & replacement

How it works

One multiplication. The annual benefit is years of service × the multiplier (also called the accrual or crediting rate) × the final average salary — the average of your highest few years of pay, often the last three or five. The multiplier times the years is the replacement ratio: the share of final salary the pension replaces, so a 2% multiplier over 30 years replaces 60%. Each year of service adds the same increment — the multiplier times final salary — which is the service-years sweep on this page. This is a defined-BENEFIT plan: the formula fixes the benefit, unlike a 401(k) or IRA where you accumulate a balance and draw it down (the retirement calculator) or Social Security's separate PIA formula. The multiplier and final-average-salary definition are your plan's; enter them from your plan document.

Worked example

Two named sources anchor the formula with published cases. The Equable Institute publishes the default verbatim: 30 years of service, a 2% multiplier, a $75,000 final average salary → 30 × 0.02 × $75,000 = $45,000 a year, $3,750 a month, replacing 60% of salary. Emparion publishes a second: 25 years at 1.5% on $100,000 → $37,500 a year. The remaining preset — 20 years at 1.7% on $60,000 → $20,400 — is this calculator's own computation of the same formula on those inputs, not a published case.

Frequently asked questions

How is a defined-benefit pension calculated?

Years of service × the plan multiplier × final average salary. The multiplier (typically around 2%) sets how much of your salary each year of service earns; 30 years at 2% replaces 60% of your final average salary. It is a formula benefit, independent of investment returns.

What is the multiplier?

The accrual or crediting rate — the percentage of final average salary each year of service adds to the benefit. Plans commonly use 1.5% to 2.5%; a higher multiplier means a larger pension for the same career length, which is why it is the number to confirm in your plan document.

What is final average salary?

The average of your highest-earning years, usually the last three or five, as your plan defines it — not necessarily your very last year's pay. Because the benefit scales directly with it, whether the plan averages three years or five, and whether it includes overtime, materially changes the result.

What does the replacement ratio tell me?

The share of your final salary the pension replaces — years × multiplier, shown directly. Combined with Social Security and personal savings, it helps gauge whether retirement income will cover pre-retirement spending; a 60% pension plus Social Security often approaches full replacement.

Does this include cost-of-living adjustments?

No — the annual figure is the starting benefit, and the lifetime total is undiscounted with no COLA. Many public pensions add annual increases and many private ones do not; a plan with COLAs pays more over time than the flat lifetime figure here suggests.

How is this different from a 401(k) or Social Security?

A 401(k) or IRA is a defined-CONTRIBUTION account — you accumulate and draw down a balance, which the retirement calculator projects. Social Security uses its own PIA formula on lifetime earnings. This page is the defined-BENEFIT formula: a benefit fixed by service and salary, carrying the plan's investment risk on the employer rather than you.

How accurate is this, and what does it exclude?

The formula is applied exactly to your inputs. It excludes early-retirement reductions and late-retirement increases, survivor and joint-life options that lower the benefit for continued spousal payments, cost-of-living adjustments, vesting requirements, and any Social Security offset some plans apply. Confirm your multiplier, final-average-salary definition, and reductions in your plan's summary description.