How much will my pension be?

As you plan for your retirement and embrace your golden years, it’s crucial to grasp how your pension is determined, the monthly amount you can expect to receive, and the various factors that may influence your payments. With this understanding, you can tailor your overall retirement strategy to align with your lifestyle and financial requirements.

How much will my pension be?

Pension payments differ from person to person, as they are contingent on individual circumstances. There are four primary factors that influence the calculation of your monthly pension: your birth year, the age at which you claim benefits, your earnings history, and your work history.

Factors That Determine Your Social Security Benefits

Birth Year

You can start receiving a portion of your pension at age 62. However, to receive the full benefits you qualify for, you must reach your full retirement age, which varies based on your birth year. For those born between 1943 and 1954, the full retirement age is 66. If you were born between 1955 and 1959, you will reach full benefits after 66 years plus a certain number of months. For instance, if you were born in 1957, your full retirement age is 66 years and 6 months. For individuals born in 1960 or later, the full retirement age is set at 67.

Claiming Age

The age at which you claim your pension significantly affects the amount you’ll receive. As mentioned, you can begin claiming Social Security at 62, but this will result in a reduced benefit. If you wait until your full retirement age to claim, you will receive the full amount. Furthermore, delaying your claim until age 70 will maximize your monthly payment beyond the standard full benefit.

Earnings History

The more you earn throughout your career, the more you contribute to the U.S. Federal payroll tax, known as the Federal Insurance Contributions Act (FICA), which funds Social Security and Medicare.

Work History

Your average Social Security benefit is calculated based on your highest-earning 35 years of employment. Any years not worked are considered “zero years,” which can lower your average payment. Examples of such years include time spent raising children, caring for family members, or periods of unemployment.

How to Use the Retirement Savings Calculator

To make the process as easy as possible, you’ll need to input a few pieces of information: what you know and what you assume.

Your age

Your annual income

Spouse’s annual income (if applicable)

Current retirement savings

Desired retirement age

Years of retirement income

Future Social Security benefits

What You Assume

Expected annual inflation rate

Income replacement percentage

Pre- and post-retirement investment return

Your assumptions can make things a bit trickier, since they aren’t set in stone, but here’s some additional information to consider:

Inflation: Between 1980 and 2022, the U.S. saw an average annual inflation rate of 3.43 percent1; regardless of the inflation rate you set, our calculator uses this number to anticipate increases in your future income.

Income replacement percentage: This term refers to the percentage of your current income that you would need to live comfortably in retirement; many experts recommend between 70 and 90 percent for retirees, though you may choose to adjust this figure based on your own needs and preferences.

Pre- and post-retirement investment return: Retirement savings and investment portfolios tend to be more aggressive while you’re young and more conservative as you age; you can generally use higher pre-retirement earnings and lower post-retirement earnings for your calculations, especially if you plan to move your savings into less risky investment vehicles.