Skip to content
Calcapedia
Menu
Money

Pension Calculator

Find your monthly pension from your years of service, then compare it with a lump sum and see your break-even age.

Level: Grades 7–8

  • Common Core standard 7.RP.A.3Use proportional relationships to solve multistep ratio and percent problems. Examples: simple interest, tax, markups and markdowns, gratuities and commissions, fees, percent increase and decrease, percent error.
Printable worksheet

Pension Calculator

Inputs

Your credited years in the plan. Part years are fine, such as 27.5.

The percent your plan pays for each year of service. Your plan booklet lists it.

Yearly pay as your plan averages it, often your highest three or five years.

The age at your first pension payment.

Leave blank if your plan doesn't offer one.

What you expect to earn after investment fees. A steady rate is a simplification.

Used to total the payments. Choose an age you could realistically reach.

Result

Monthly pension

$3,000.00

With 30 years at 1.5% of $80,000.00, your pension is about $3,000.00 a month before tax. Invested at 5%, a $500,000.00 lump sum would run out at about age 88.3, so the pension wins if you live longer than that.

Yearly pension
$36,000.00
Share of salary replaced
45%
Lump sum offered
$500,000.00
Break-even age, no investing
78.9When the payments have added up to the lump sum.
Break-even age, lump sum earning 5%
88.3The fairer test: when the invested money would run out.
Pension paid by age 90
$900,000.00
Lump sum left at age 90
$0.00If invested, with the same monthly amount paid out.

See the step-by-step solution ↓

Step-by-step solution

  1. Multiply your years of service by the multiplier. This is the share of your salary the pension replaces

    30×1.5%=45%

  2. Take that share of your final average salary to get your pension for a year

    45%×$80,000.00=$36,000.00

  3. Divide by 12 to get your monthly payment

    $36,000.0012=$3,000.00

  4. Divide the lump sum by the monthly payment. That's how many payments it takes to match it, with no investing

    $500,000.00$3,000.00=166.67 payments

  5. Round up to 167 whole months and add them to your starting age. This is the plain break-even age

    65+16712=78.9 years old

  6. Turn the 5% yearly return into a monthly rate, because the payments are monthly

    monthly rate=0.4074%

  7. Suppose you invest the lump sum and pay yourself $3,000.00 a month. The money lasts 280 months. After that, the pension is ahead

    65+28012=88.3 years old

  8. Total the payments from age 65 to age 90

    $3,000.00×300=$900,000.00

  9. Find what's left of the invested lump sum at age 90, if you paid yourself the same amount

    left at that age=$0.00

Test yourself

20 quick questions built from this calculator's formula: work out results, predict what happens when an input changes, and work backward from an answer. Every answer comes with the working.

Please note: Results are estimates for planning and comparison. Lenders, banks, and tax authorities may round differently or include fees not modeled here, so confirm figures with your provider before deciding.

What this calculator does

Find out what your pension will pay each month, and whether a lump sum offer beats it. Most traditional pensions use the same three numbers: your years of service, a multiplier and your final average salary.

If your plan offers a lump sum, enter that too. The calculator finds your break-even age, the point where the monthly payments pull ahead. It shows this two ways: with the lump sum sitting still, and with it invested. Don't worry if the choice feels big. The numbers make it much easier to see.

Where it's used

Why this math matters outside the classroom:

  • Estimating a benefit. A teacher with 28 years, a 2% multiplier and a $65,000 final salary works out $36,400 a year, about $3,033 a month.
  • Working one more year. A worker at 1.5% and $80,000 sees that year 31 raises the pension from $36,000 to $37,200 a year.
  • Comparing plans. Moving from a 1.5% to a 2% multiplier over 30 years lifts a pension on $80,000 of pay from $36,000 to $48,000.
  • Weighing a buyout. A retiree offered $500,000 in place of $3,000 a month finds that 167 payments would match it, with no investing.

Grade level and standards: Grades 7–8; Common Core State Standards for Mathematics 7.RP.A.3. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.

How to use it

  1. Enter your years of service, your multiplier and your final average salary.
  2. Enter the age when your payments start.
  3. If you have a lump sum offer, enter it with the yearly return you'd expect.
  4. Read your monthly pension, then compare the two break-even ages.

What the inputs mean

Years of service
Your credited years in the plan. Part years are fine, such as 27.5.
Pension multiplier
This is the percent of pay you earn for each year of work. Your plan booklet or annual statement will list it. Some plans use different multipliers for different years. If yours does, use a blended figure.
Final average salary
Plans define this in different ways. Many average your highest three or five years of pay. Some count overtime, and others don't. Your plan's rules decide.
Age when payments start
The age at your first pension payment.
Lump sum offered (optional)
Use the amount on your plan's election form. The offer usually depends on your age and on interest rates, so it can change from year to year.
Yearly return on the lump sum
This is a steady yearly rate, after investment fees. Real returns go up and down. Try a cautious rate as well as a hopeful one.
Age to plan to
This doesn't predict how long you'll live. It only sets the age for the totals. Try a few ages.

Formula and method

yearly pension = years of service × multiplier × final average salary
monthly pension = yearly pension ÷ 12
plain break-even age = starting age + (lump sum ÷ monthly pension) ÷ 12
invested break-even: L × (1 + i)^n − M × ((1 + i)^n − 1) ÷ i = 0, solved for n

The first two lines give your pension. Each year of work earns a slice of your salary, and the multiplier sets the size of that slice.

The plain break-even age ignores investing. It asks when the payments you've received add up to the lump sum. The result is rounded up to a whole month.

The invested break-even is the fairer test. L is the lump sum, M is the monthly pension, i is the monthly return, and n is the number of months. It asks how long the invested lump sum could pay you the same monthly amount. Once that money would be gone, the pension is ahead for life.

Worked example

You have 30 years of service, a 1.5% multiplier and an $80,000 final average salary. Payments start at 65. Your plan offers $500,000 instead, and you expect a 5% return.

  1. Share of salary replaced: 30 × 1.5% = 45%.
  2. Yearly pension: 45% × $80,000 = $36,000.
  3. Monthly pension: $36,000 ÷ 12 = $3,000.
  4. Plain break-even: $500,000 ÷ $3,000 = 166.67, which rounds up to 167 months. That's age 78.9.
  5. Invested at 5%, the $500,000 could pay $3,000 a month for 280 months. That's age 88.3.

Result: Your pension is $3,000 a month. If you invested the lump sum at 5%, the pension would pull ahead at about age 88.3.

Understanding the result

A later break-even age makes the lump sum look better. An earlier one favors the pension. Compare the invested age with how long you, or your spouse, might live.

A pension pays for as long as you live, however the markets do. A lump sum gives you control and can pass to your heirs, but you carry the investment risk. That's why the numbers aren't the whole answer.

If the result says never, the lump sum's earnings alone would cover the payment at your return rate. That return isn't guaranteed, so test a lower one too.

Assumptions and limitations

  • Payments stay the same every year, with no cost-of-living raises.
  • The lump sum earns one steady yearly return, and each payment comes at the end of a month.
  • The monthly rate is the one that compounds to your yearly return over 12 months.
  • Both choices are shown before tax.
  • It doesn't model taxes. A lump sum paid to you directly usually has 20% income tax withheld, while a direct rollover to an IRA can put off the tax. Taxes on the monthly payments and rolled-over money depend on your bracket.
  • It doesn't include early retirement reductions, service caps or survivor options. Choosing a survivor benefit usually lowers your monthly payment.
  • It uses one multiplier and one salary figure. Your plan's own statement is the final word on your benefit.
  • This is an estimate for planning, not financial or tax advice. A pension choice is often permanent, so consider talking to a qualified adviser first.

Frequently asked questions

How do I calculate my pension?

Multiply your years of service by your multiplier and your final average salary. For example, 30 × 1.5% × $80,000 is $36,000 a year, or $3,000 a month.

What is a pension multiplier?

It's the percent of your salary you earn for each year of service. A 2% multiplier means 20 years replaces 40% of your final average salary.

Should I take the lump sum or the monthly pension?

It depends on your health, your other income, your spouse and how you feel about investing. The monthly pension protects you from outliving your money. The lump sum gives you control. Use the break-even age to see the trade-off.

What does the break-even age mean?

It's the age where the pension starts to beat the lump sum. If you expect to live past it, the monthly payments come out ahead. If not, the lump sum does.

Is a pension lump sum taxed?

Usually, yes, unless you roll it over. Paid directly to you, it generally has 20% income tax withheld. A direct rollover to an IRA or another plan puts off the tax.

Sources

How this calculator is checked

Method: Standard defined-benefit service formula and the standard annuity balance equation, solved for the number of months. Tests use hand-worked cases and a month-by-month loop. Tax treatment read from IRS Topic 412. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-31. Found a problem? Tell us.

Embed this calculator

Put this Pension Calculator on your own website or blog for free. Paste this code where you want it to appear: