Pension Calculator

A pension plan (also known as a defined benefit plan) is a retirement plan where an employer promises to pay a specified monthly benefit to employees upon retirement. The benefit is typically based on a formula involving years of service, age at retirement, and salary history.

Pension plans have become less common in the private sector, replaced by defined contribution plans like 401(k)s. However, they remain common in the public sector, including government jobs, teaching, and law enforcement. The Pension Benefit Guaranty Corporation (PBGC) insures private-sector defined benefit plans.

When leaving a job with a pension, employees typically have the option to take a lump-sum buyout or start receiving monthly payments at retirement age. Deciding between these options depends on factors including life expectancy, investment opportunities, and the need for guaranteed income in retirement.