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Calculation Machine

Pension Calculator

Defined benefit pension income.

Reviewed by the Calculation Machine team · Updated 24 October 2026 · How we check our maths

Your values

ⓘ Live results

Results
Annual pension
$42,120.00
Monthly pension
$3,510.00
Replacement ratio
54%
Value after 10 years of COLA
$51,344.04
20-year total (with COLA)
$1,023,405.22

Quick answer

A defined benefit pension is usually years of service × accrual multiplier × final average salary. With 30 years of service, a 1.8% multiplier and a $78,000 final average salary, the pension is 30 × 0.018 × $78,000 = $42,120 a year ($3,510 a month), replacing 54% of pre-retirement pay.

What the Pension calculator does

This calculator estimates the yearly and monthly income from a traditional (defined benefit) pension, the kind most US public-sector workers — teachers, police, firefighters, state and federal employees — and some private-sector and union workers still earn. It also shows how a cost-of-living adjustment (COLA) raises the benefit over time and the total paid over 20 years.

You need three numbers from your plan's handbook or annual benefit statement: your credited years of service, the final average salary (often the average of your highest three or five consecutive years), and the accrual multiplier per year of service. Many plans also reduce benefits for retiring before a set age, cap the total percentage, or offer survivor options that lower the monthly payment; this estimate ignores those, so confirm with your plan administrator before deciding when to retire.

The benefit is shown before income tax. To see how it combines with other income, use the Social Security calculator and the retirement savings calculator.

The formula

Annual pension = years × (multiplier ÷ 100) × final average salary Replacement ratio = annual pension ÷ final average salary Benefit in year k = annual pension × (1 + COLA ÷ 100)ᵏ

Formula variables
SymbolMeaningUnit
yearsCredited years of service in the planyears
multiplierAccrual rate (benefit factor) earned per year of service% per year
final average salaryAverage pay over the plan's averaging period, often the highest 3 or 5 years$/year
COLAAnnual cost-of-living increase applied to the benefit%

This is the standard final-average-pay benefit formula used by most US public pension plans and described in the Department of Labor's pension guidance. The 10-year value and 20-year total compound the COLA once a year from the first year of retirement. The model does not apply early-retirement reductions, benefit caps, survivor-benefit reductions, COLA caps, or Social Security offsets, and it does not suit cash balance plans, which grow an account balance instead.

Worked examples

Career public employee with COLA

A state employee retiring with 30 years of service, a $78,000 final average salary, a 1.8% multiplier and a 2% yearly COLA.

Inputs

  • Years of service30
  • Final average salary78000 $
  • Accrual multiplier1.8 %/yr
  • Annual COLA2 %

Result

  • Annual pension$42,120.00
  • Monthly pension$3,510.00
  • Replacement ratio54%
  • Value after 10 years of COLA$51,344.04
  • 20-year total (with COLA)$1,023,405.22

The pension starts at $42,120 a year and rises to $51,344.04 after 10 years of 2% COLAs. Total payments over 20 years exceed $1 million, which shows how valuable a lifetime, inflation-linked benefit is.

Teacher with a 2% multiplier and no COLA

A teacher with 25 years of service, a $65,000 final average salary and a 2% multiplier, in a plan with no automatic COLA.

Inputs

  • Years of service25
  • Final average salary65000 $
  • Accrual multiplier2 %/yr
  • Annual COLA0 %

Result

  • Annual pension$32,500.00
  • Monthly pension$2,708.33
  • Replacement ratio50%
  • Value after 10 years of COLA$32,500.00
  • 20-year total (with COLA)$650,000.00

The pension is $32,500 a year, 50% of final pay. With no COLA its buying power falls each year: at 3% inflation it buys roughly a quarter less after 10 years, so other savings need to fill the gap.

Shorter career with a high multiplier

A firefighter with 20 years of service, a $95,000 final average salary, a 2.5% multiplier and a 1.5% COLA.

Inputs

  • Years of service20
  • Final average salary95000 $
  • Accrual multiplier2.5 %/yr
  • Annual COLA1.5 %

Result

  • Annual pension$47,500.00
  • Monthly pension$3,958.33
  • Replacement ratio50%
  • Value after 10 years of COLA$55,125.69
  • 20-year total (with COLA)$1,098,374.19

Twenty years at 2.5% also replaces 50% of pay: $47,500 a year. Public-safety plans often use higher multipliers because careers are shorter and retirement ages earlier.

Typical accrual multipliers

Multipliers vary by plan, hire date and job category, and some plans step up the multiplier after a set number of years. Use the figure in your own plan documents rather than these ranges.

Common multiplier ranges and what they replace after 30 years
Multiplier per yearTypical plansReplacement after 30 years
1.0% – 1.1%US federal FERS basic annuity30% – 33%
1.5% – 2.0%Many state and local general-employee plans45% – 60%
2.0% – 2.5%Many teacher plans60% – 75%
2.5% – 3.0%Police and firefighter plans75% – 90%

Lump sum or monthly annuity?

Some plans let you take the pension as a single lump sum instead of monthly payments. To compare, find the present value of the payments you would give up: the lump sum needed today, invested at a given rate, to pay the same income for your expected lifetime. The present value calculator or annuity calculator helps with that.

  • The annuity guarantees income for life, can include a COLA and survivor benefit, and removes investment and longevity risk.
  • The lump sum gives control and can be left to heirs, but you take on market risk and the chance of outliving it.
  • Your health and family longevity matter: the longer you expect to live, the more the lifetime annuity is worth relative to a fixed lump sum.

This is a major, usually irreversible decision, so it is worth getting advice from a fee-only financial planner.

Ways to raise your pension before you retire

  • Work longer: each extra year adds one multiplier's worth of salary to the benefit and often raises the final average salary too.
  • Avoid early-retirement reductions: many plans cut benefits by several percent for each year you retire before normal retirement age.
  • Buy service credit: some plans let you purchase credit for military or prior public service.
  • Check the averaging period: if the plan uses your highest three years, a promotion in the last few years has an outsized effect.

How to use the Pension Calculator

  1. 1Enter your credited years of service from your latest pension statement. Include projected years if you are estimating a future retirement.
  2. 2Enter your final average salary as the plan defines it (for example, the average of your highest three years).
  3. 3Enter the accrual multiplier as a percentage, for example 1.8 for 1.8% per year.
  4. 4Enter the plan's annual COLA, or 0 if increases are not automatic.
  5. 5Read the annual and monthly pension, replacement ratio and how the COLA grows the benefit.

Frequently asked questions

How is a pension calculated?

Most defined benefit plans multiply years of service by an accrual percentage and by your final average salary. Thirty years at 2% on a $70,000 average gives 60% of $70,000, or $42,000 a year.

What is a good pension replacement ratio?

Planners often suggest needing 70%–80% of pre-retirement income in total. A pension replacing 50%–60%, plus Social Security or savings, usually reaches that.

What is a pension COLA?

A cost-of-living adjustment raises the benefit each year to offset inflation. Some plans give a fixed percentage, some link it to the Consumer Price Index with a cap, and some give none.

Is pension income taxable?

In the US, pension payments are generally taxable as ordinary federal income, except any part that represents your own after-tax contributions. State treatment varies, and some states exempt public pensions.

What happens to my pension if I leave before retirement?

If you are vested, you keep a deferred benefit based on your service and salary at the time you leave, usually payable from the plan's retirement age. If not vested, you typically receive only a refund of your own contributions.

References

  • What You Should Know About Your Retirement Plan — US Department of Labor, Employee Benefits Security Administration
  • Publication 575, Pension and Annuity Income — Internal Revenue Service
  • FERS Information – computation of the basic annuity — US Office of Personnel Management

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