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Present Value (Lump Sum)

Present value answers: "What is my pension worth right now as a single sum?" It is calculated by discounting each future monthly payment back to today using interest rates (IRS segment rates for private plans) and adjusting for the probability of being alive to receive each payment (mortality tables). The present value is what you would receive if your plan offers a lump sum distribution option. It is NOT the total of all payments you'd receive; it accounts for the time value of money.

Example

A $4,000/month pension starting at age 62 with 25 years of expected payments has a present value of roughly $600,000-$700,000 at current 2026 segment rates (5-6%). If rates were lower (e.g., 3% as in 2021), the same pension would have a present value of $800,000+.

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Pension Benefit Estimation

A defined benefit pension pays a guaranteed monthly income for life, calculated as: Years of Service × Final Average Salary × Benefit Multiplier. A typical 2% multiplier over 30 years replaces 60% of your final salary. Only 14% of private sector workers still have access to a pension (2025), but 86% of public sector workers do.