Pension Calculator
The plan formula, and what happens after you retire
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Long-range scenario, not a guarantee. Small changes in returns, inflation, fees, taxes, and withdrawal timing can materially change the result.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter your three highest years of pay. Nearly every US plan averages the highest three consecutive years rather than using your final salary, and on a career with normal raises that average lands 4-6% lower.
- 02
Enter your years of credited service and the plan's accrual rate — sometimes called the multiplier or the benefit factor. It is on your annual benefit statement, and 1.0-2.5% covers most plans.
- 03
Add the plan's benefit cap if it has one, as a share of average pay. Leave it at 0 if there is no cap; 75-80% is the usual figure where one exists.
- 04
Enter the age you plan to start the pension and the age the plan pays an unreduced benefit, plus the reduction it applies for each year in between.
- 05
Set the COLA the plan pays — 0 if the check never rises — and read the schedule. The gap between the two columns over 25 years is usually larger than every other decision on the page combined.
Formula
Annual pension = average pay × accrual rate × years of service, held to the plan's cap (a share of average pay), then multiplied by the early-retirement factor: 1 − (years before normal retirement age × the per-year reduction). The average pay is the mean of the highest consecutive years the plan counts — three in most plans. What the pension is worth afterwards is the sum of that benefit over the years you collect, each year multiplied by (1 + COLA) once more than the year before.
Example
Highest three years of $96,000, $92,000 and $88,000 average to $92,000. At a 2% accrual over 28 years of service that is $51,520 a year — under the plan's 75% cap of $69,000, so the cap does not bind. Starting at 60 against a normal retirement age of 65, five years early at 5% a year cuts it by 25%, to $38,640 a year, or $3,220 a month. That replaces 40.3% of the best year. With a 2% COLA it pays $1,237,651 over 25 years; with no COLA at all it pays $966,000, and the last check buys what $1,780 buys today.
Definitions
- Accrual rate
- The share of average pay the plan credits for each year of service, also called the multiplier or benefit factor. Usually 1.0-2.5%; public safety plans run higher.
- High-three average
- The mean of your highest three consecutive years of pay, the base nearly every US plan runs its formula on. A high-five average lands lower still.
- COLA
- A cost-of-living adjustment that raises the check each year. Common in federal and many state plans, rare in the private sector, and usually worth more than any other feature of the plan.
Good to know
One line of arithmetic, and three things that cut it
A defined-benefit pension is the simplest promise in retirement finance and the least understood: average pay, times a rate, times years of service. Everything else is subtraction. The plan holds the result to a cap — usually 75% or 80% of average pay — so past a certain point extra years add nothing at all. It reduces the result if you start before the plan's normal retirement age, permanently, at somewhere between 3% and 7% a year. And it decides, once and for all, whether the check rises with prices or stands still for the rest of your life. On the figures here, 28 years at a 2% accrual on a $92,000 average gives $51,520 a year, which five years of early reduction turns into $38,640. The formula was never the hard part; what the plan does to it afterwards is.
Why the base is an average and not your final salary
Almost no US plan runs on your last salary. FERS, most state and municipal systems and most legacy corporate plans use the highest three consecutive years of pay; a minority use five. That is not a technicality — it is a deliberate anti-spiking rule, written so a promotion or a pile of overtime in the last year cannot inflate a lifetime benefit. It costs real money to the retiree: on a career with normal raises the high-three average lands 4-6% below the final year, which on the example here is the difference between $38,640 and $40,320 a year, every year, for life. What counts as pay in that average is worth reading closely too, because the answer varies by plan and is frequently not what people expect. Overtime, shift differentials, unused annual leave, and the cash value of unused sick leave are counted by some plans and excluded by others, and in several state systems the treatment changed for anyone hired after a given date — so an older colleague's experience is a poor guide to yours.
The COLA is usually worth more than everything else you decide
A cost-of-living adjustment is the single biggest determinant of what a pension is worth over a retirement, and it is the one term a benefit statement almost never quantifies. Over 25 years at 2%, the $38,640 pension here pays $1,237,651 rather than $966,000 — a $271,651 difference, which is more than most people's entire retirement account. The mirror image is what a level check does against inflation: at 2.5%, a $3,220 monthly pension buys what $1,780 buys today by the twenty-fifth year, 55% of the purchasing power you started with. That is why the COLA question dominates the early-retirement question, the survivor question, and usually the take-the-lump-sum question too. Most private-sector plans have no COLA. Federal FERS and CSRS retirees get one, though FERS applies a haircut above certain inflation rates and does not begin it until 62 for most retirees. Many state plans pay a fixed 2% or 3% simple adjustment rather than a true index, and several have suspended or reduced theirs during funding crises — so a COLA written in a plan document is not always a COLA that arrives.
What stands behind the promise
A private-sector pension is insured by the Pension Benefit Guaranty Corporation, but the insurance has a ceiling that gets very little attention until it matters. For single-employer plans terminating in 2026 the maximum monthly guarantee at age 65 is $7,789.77 on a straight-life benefit — $93,477.24 a year — and it falls sharply at younger ages: $6,153.92 at 62, $5,063.35 at 60, $3,505.40 at 55. It is lower again for a joint-and-survivor form, and benefit increases adopted within five years of termination are only partly guaranteed. The multiemployer guarantee is a completely different and far lower formula. Two large groups sit outside all of it: government plans and church plans are not covered by the PBGC at all, so a state or municipal pension rests on the sponsor's funding and its legal protections rather than on federal insurance. None of this is a reason to distrust a pension — the vast majority pay in full — but it is the reason a very large pension is worth checking against the cap, and the reason a badly funded plan is worth watching.
Frequently asked questions
What is the pension formula?
Average pay × an accrual rate × years of service. Almost every US defined-benefit plan is that one line, with two things applied after it: a cap on the share of pay the formula will pay, and a reduction if you start before the plan's normal retirement age. The variation between plans is in what counts as pay, what counts as service, and how steep the early reduction is.
Is it my final salary or an average?
Almost always an average. FERS, most state and local systems, and most legacy corporate plans use the highest three consecutive years; some use five. The difference matters: on the defaults here, $96,000 / $92,000 / $88,000 averages to $92,000, and running the formula on the final year instead would add $1,680 a year to the pension for life.
How much does retiring early cost?
A permanent reduction, typically 3-7% for each year before normal retirement age, and it never steps back up. Starting five years early at 5% a year cuts the benefit by 25% — on the example here, from $51,520 to $38,640 a year, and $12,880 a year every year afterwards. Plan factors are steeper close to normal retirement age and flatter further out, so the flat rate here is an approximation of a curve.
Does a COLA really matter that much?
It is usually the largest single term in what a pension is worth, and a benefit statement almost never puts a number on it. On the example here a 2% COLA is worth $271,651 over 25 years — the difference between $1,237,651 and $966,000 of pension collected. Without one, a $3,220 monthly check buys what $1,780 buys today by the twenty-fifth year at 2.5% inflation: 55% of the purchasing power you started with.
Is my pension safe if the employer fails?
A private-sector plan is insured by the Pension Benefit Guaranty Corporation, but only up to a cap: for plans terminating in 2026 the maximum guarantee at 65 is $7,789.77 a month on a straight-life benefit, and it is lower at younger ages and lower again for a joint-and-survivor form. Government and church plans are not covered by the PBGC at all — a state plan's security rests on the state's funding, not on federal insurance.
Should I work another year for the pension?
Compare the extra accrual against the cap. Another year adds one accrual rate's worth of average pay to the formula — 2% of $92,000, or $1,840 a year on the example here, before any early-retirement reduction — plus whatever the higher salary does to the three-year average, plus one fewer year of that reduction. Once the benefit cap binds, though, extra service adds nothing at all, and that is the first thing to check.