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A defined benefit (DB) pension pays a guaranteed monthly income in retirement, calculated from your salary, years of service, and an accrual rate set by your employer. Unlike 401(k) plans, the investment risk is borne by the employer, not the employee.
Trin-for-trin guide
- 1Annual pension = Final salary × Years of service × Accrual rate
- 2Example: $80,000 salary × 25 years × 1.5% = $30,000/year
- 3Monthly pension = Annual pension / 12
- 4Replacement rate = Annual pension / Pre-retirement salary
- 5Most advisors recommend replacing 70–80% of pre-retirement income
Løste eksempler
Input
$80,000 salary, 30 years, 2% accrual
Resultat
$48,000/year ($4,000/month)
100% replacement if salary unchanged
Input
$60,000 salary, 20 years, 1.5% accrual
Resultat
$18,000/year ($1,500/month)
30% replacement rate — supplement needed