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The Pension Benefit Formula

Have you ever wondered how we calculate pension benefits? There is sometimes the mistaken belief that it may have something to do with your account balance, when in fact it's all about salary and how many years you work. The ASRS uses the following fairly simple formula to calculate the Straight Life Annuity, which is the baseline monthly benefit from which all our other annuity options are derived:

Average Monthly Compensation x Total Service Credit x Graded Multiplier = Monthly Pension

Let's take a look at each part of the equation separately to get a better understanding of how the timing of your retirement affects your pension benefit.

Average Monthly Compensation

To start calculating your pension, the ASRS looks at the last ten years of your contribution history. For people who became a member on 7/1/2011 or later, we'll then take the average of your highest consecutive 60 months within those 10 years. For those who were members before that (but after 1/1/1984), it's your highest consecutive 36 months within those ten years. You can read more about AMC on our Retirement Eligibility page.

Total Service Credit

In short, the more service credit you have accrued, the higher your monthly pension benefit will be. That said, your age also becomes a factor when looking at how many years of service you may need to reach normal retirement. A great way to evaluate your options is to play with the personalized benefit estimator in your secure myASRS account. Note that members who retire early will receive a reduced benefit for their lifetime based on their age and total credited service at retirement.

One important note as you start to narrow in on your retirement date: although your years of service are updated with each contribution applied to your account, the ASRS cannot guarantee your total years of service until a detailed audit is performed on your account, triggered by the processing of your retirement application. We suggest members consider working an additional month past their target retirement date to build a cushion and cover any needed adjustments that could be found during the audit.

Graded Multiplier

Wondering what that "graded multiplier" is? The graded multiplier is one of the major factors used to determine how your pension is calculated. Therefore, it is an important piece in deciding when to retire. The graded multiplier is tiered based on your total years of service. As you accrue more service, you qualify for a higher multiplier of your final average monthly compensation, which increases your benefit. When selecting your retirement date, looking at your service and reviewing if you are close to the next graded multiplier threshold is important. If you are, it could be worth it to work longer to reach the next graded multiplier and increase your benefit for your lifetime.

Graded Multiplier Table

Personalized Estimates

The ASRS provides a personalized benefit estimate tool in your secure myASRS account. This tool is one of the best ways for you to determine when the best time for you to retire may be. You can see general estimates for your first point of normal retirement, or you can customize the estimate based on a date you select. Log into your secure account and click ‘Retirement’ under ‘Your Benefit Estimates’ to check and customize your own personalized estimate.


by Katie Daigneault, Strategic Planning

Originally published 9/2019, Updated 3/2024 

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