Pension Projection Calculator

What this calculator does

This calculator projects both halves of a retirement built on two different foundations. It grows your defined contribution balance forward at your expected return, and it converts your expected monthly defined benefit pension into an equivalent capital value, so the guaranteed income and the invested pot can be read on the same scale.

That translation is the useful trick. A pension paying $2,000 a month sounds modest next to a six-figure 401(k) balance, but converted at a 4 percent withdrawal rate it represents $600,000 of capital. Most people with a legacy pension substantially underestimate what it contributes to their retirement.

When to use it

Run it when you have access to a traditional pension and need to know how much additional saving is genuinely required. Employees with a solid pension often over-save into a 401(k) because the pension does not appear on any balance statement, while those with a small frozen benefit assume it covers more than it does.

It is also the right starting point before a lump sum buyout offer, which employers increasingly make to reduce plan liabilities. Seeing the capital equivalent of the annuity next to the cash on the table converts a confusing decision into a straightforward comparison of two numbers.

Understanding the inputs

Expected DB pension per month should come from your plan's benefit statement rather than an estimate, and you should note whether the figure is for a single life annuity or a joint and survivor option, which typically pays 10 to 25 percent less. Also check whether it is quoted at your normal retirement age or your intended one.

Monthly DC contribution should include everything flowing into the 401(k), your deferral plus any employer match or profit sharing. Expected return should be conservative if retirement is close, since only the DC side carries market risk. The DB side is unaffected by returns entirely, which is precisely what makes it valuable.

How is this calculated?

Annual Pension = Final Salary × Years of Service × Accrual Rate (e.g., 1/60).

A worked example

Someone contributing $500 a month to a 401(k) for 30 years at 6 percent builds a DC pot of roughly $502,000. Alongside it, a pension paying $2,000 a month is $24,000 a year, which at a 4 percent withdrawal rate is worth about $600,000 in capital terms.

So the pension, which never appears on a statement as a balance, is worth more than three decades of 401(k) contributions in this example. It also carries no market risk. If that pension has no cost of living adjustment, however, its $24,000 buys roughly $16,600 of today's goods after 15 years at 2.5 percent inflation.

Limitations and assumptions

These are projections under fixed assumptions, not predictions. The DC side applies one flat return every year and takes no account of sequence-of-returns risk, so the balance you actually arrive with may differ substantially even if the long-run average proves correct.

The DB side is a simple capitalization at a chosen withdrawal rate, which ignores your health, your actual longevity, survivor options, whether the benefit is indexed, and the effect of income tax on both streams. It also assumes the pension is paid in full. Use plan documents for anything binding and treat these figures as a way of comparing shapes, not values.