Estimate your annual and monthly defined-benefit pension from your final average salary, years of service, and the plan's accrual multiplier. See your income replacement ratio.
Defined-benefit estimate
Most defined-benefit pensions use a simple formula: Annual Pension = Final Average Salary × Years of Service × Accrual Multiplier. The multiplier (often 1%–2.5% per year of service) is set by the plan. So 30 years of service at a 2% multiplier on an $80,000 final average salary yields 80,000 × 30 × 0.02 = $48,000 per year, or $4,000 per month — a 60% income replacement ratio.
"Final average salary" is usually the average of your highest 3 or 5 years of pay, depending on the plan. The income replacement ratio (pension ÷ salary) shows how much of your working income the pension replaces; combined with Social Security and personal savings, retirees typically aim to replace 70%–85% of pre-retirement income. This estimate doesn't include cost-of-living adjustments, early-retirement reductions, or survivor options, which vary by plan.
Salary × Years × Multiplier. A 2% multiplier over 30 years replaces 60% of final salary.
Typically 1%–2.5% per year of service, set by your plan. Higher multipliers and longer service mean a bigger pension.
Pension ÷ salary. Combined with Social Security and savings, aim to replace 70%–85% of working income.
A defined benefit pension pays a formula-driven income for life, typically built from three factors: years of service, a multiplier, and a final or highest-average salary. Unlike a 401(k), the employer bears the investment and longevity risk — which is why these plans have largely disappeared from the private sector. The critical variables to check are which salary definition applies (final year versus highest three or five, which can differ substantially), whether there is any cost-of-living adjustment, and what survivor benefit is elected, since a joint-and-survivor option reduces the monthly payment in exchange for continuing to a spouse.
Annual pension = Years of service × Multiplier × Final average salaryMonthly = Annual ÷ 12Replacement ratio = Annual pension ÷ Final salaryLump sum equivalent ≈ Annual pension ÷ discount ratewhere:
Assumptions: Without a cost-of-living adjustment, a fixed pension loses roughly a third of its purchasing power over 20 years at 2% inflation. Private pensions are insured by the PBGC only up to statutory limits.
Compute a career pension and test what inflation does to it.
Result$49,200 a year ($4,100/month) — 60% replacement
The absent COLA is the hidden weakness: real purchasing power falls 39% over 20 years. When offered a lump sum instead, compare it against that $984,000 figure — but remember the pension also transfers longevity risk to the employer, which a lump sum does not.