Unlock Your Future: A Step-by-Step Guide to Calculating Your Pension
Knowing how much you’ll receive from your pension is one of the most essential elements to planning for retirement.
Your pension is a key part of your retirement plan. Calculating it is simpler than you might think. Here's a breakdown of what you need to know:
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1. Service Credit
This reflects the total time you've worked for a qualifying employer.
For example:
Hourly: 1,720 hours = 1 year of service credit.
Daily: 215 days = 1 year of service credit.
Monthly: 10 months = 1 year of service credit.
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2. Benefit Factor
This percentage is based on your age at retirement and your membership tier. It typically increases the longer you work.
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3. Final Compensation
This is the average of your highest monthly pay rate, often calculated over your final 12 or 36 months of employment.
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To calculate your pension, you will need these elements:Â
Let’s calculate the pension based on these factors:
Years worked = 30
Benefit factor = 2% (or 0.02 as a decimal)
Average monthly pay = $7,291.67
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Now, let’s do the math step by step:
1. Multiply the years worked by the benefit factor: 30 Ă— 0.02 = 0.6
2. Multiply this result by the average monthly pay: 0.6 Ă— $7,291.67 = $4,375
So, in this scenario, the pensioner will receive $4,375 monthly as their pension.
Calculate for Annual Amount:
Since the pensioner will receive $4,375 per month, we can calculate their annual pension by multiplying their monthly pension by 12 (the number of months in a year):
$4,375 Ă— 12 = $52,500
The teacher would receive approximately $52,500 per year in pension benefits.
 Summing It Up
In this example, a pensioner who worked for 30 years with a benefit factor of 2% and an average monthly pay of $7,291.67 would receive $4,375 per month or $52,500 per year in retirement benefits.
It’s important to know that the numbers such as pension factor and the salary they use to calculate your pension is different based on location and employment.
Congratulations, now you know how to calculate your pension! The next essential part of your retirement planning is how much you will receive from Social Security. Our article next week will discuss how to calculate your social security income.
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*Need some additional help with your pension calculation? Click here to set an appointment with a pension expert who can answer your questions.
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