Enter your years of service, final average salary, and your plan's accrual rate to estimate your annual and monthly pension.
On this page's own default — $70,000 final average salary, 1.5% accrual — one additional year of service adds $70,000 × 1.5% = $1,050 a year to the pension, for as long as it's collected. Negotiating the accrual rate up by just 0.1 points instead (to 1.6%) adds $70,000 × 0.1% × 25 years = $1,750 a year — a bigger jump from a smaller-looking number, since the rate change applies across every year already worked, not just the next one.
This page takes that average as a single input and trusts it — it has no way to check whether the figure entered is truly the average of the highest 3 or 5 years a specific plan actually uses, versus just the most recent salary. For someone whose pay has been rising, plugging in the latest (highest) salary instead of the true multi-year average overstates the pension; for someone who took a late-career pay cut, it could understate it. Confirm the exact averaging window your plan's own rules specify before treating this page's output as final.
A lump-sum buyout offer competes against $26,250 a year for as long as the pension would have been paid. Valued as a 25-year stream of payments at a 5% discount rate — a plausible rate for money that would otherwise sit in safe, diversified investments — that stream is worth about $369,966 today, using the same annuity-discounting math as the Present Value Calculator. Any buyout offered well below that figure is asking to trade a guaranteed income stream for meaningfully less than its own worked-out value.
Most defined benefit pensions use a straightforward formula: annual pension = final average salary × accrual rate × years of service. The accrual rate is a percentage set by the specific plan — commonly somewhere around 1-2% per year of service — and "final average salary" is typically an average of your highest-earning consecutive years (often the final 3 or 5), not simply your very last paycheck. Multiply the three inputs together and you get your estimated annual benefit at retirement.
The accrual rate is the percentage of your final average salary you earn as annual pension for every year you worked under the plan — it's set entirely by your specific pension plan's rules, not a universal figure, and can vary meaningfully between employers, job types, and even tiers within the same plan (some plans reduce the accrual rate for years worked past a certain threshold). Check your plan's summary plan description, your employer's benefits portal, or ask your HR or pension administrator directly for the exact rate that applies to you.
A pension (a "defined benefit" plan) promises a specific payout formula regardless of how any underlying investments perform — the employer bears the investment risk and is on the hook to fund the promised benefit. A 401(k) (a "defined contribution" plan) instead depends entirely on how much is contributed and how those contributions perform in the market, with the employee bearing all of the investment risk and reward. See the 401(k) Calculator to model that side of retirement savings separately.
Traditional private-sector pensions have become far less common than they were a few decades ago, as most private employers shifted toward 401(k)-style defined contribution plans, which shift both cost and investment risk off the employer's balance sheet. Pensions remain much more common in the public sector, however — many government, military, and unionized jobs still offer a defined benefit pension, often alongside a supplemental defined contribution plan.
Worked example: 25 years of service, a $70,000 final average salary, and a 1.5% accrual rate: annual pension = 70,000 × 0.015 × 25 = $26,250 per year, or $2,188 per month — equal to 37.5% of the final average salary. See the Retirement Calculator to combine this pension income with other savings and estimate your overall retirement readiness.
Pension or lump sum? Employers offering a buyout are asking you to trade a lifetime payment stream for cash today, and the only fair comparison is the present value of that stream discounted at a rate you could realistically earn. Value it with the present value calculator before treating the lump-sum offer as generous — the two frequently differ by a wide margin in the employer’s favour.