Calculating Your Pension Benefit

Financial Planning

As university professors embark on their academic journey, shaping young minds and contributing to research, it's essential to plan for the future and ensure a comfortable retirement. Knowing how to calculate retirement benefits is a vital step in this process, but understanding how to maximize the benefit can move retirement from surviving the thriving. This blog will serve as a comprehensive guide, walking you through the key factors and steps involved in determining your retirement benefits as a university professor. Armed with this knowledge, you can make informed decisions about your financial future and look forward to a rewarding retirement after a fulfilling career in academia.

How do You Calculate Your Monthly Benefit?

To the right is the breakdown of how a university professor in the state of Idaho can calculate their monthly retirement benefit.

Let’s define some of the terms here:

Average Monthly Salary (AMS): This will be your highest 42 months of consecutive service averaged out. Your last month will be the last month you contribute (the date you stop working) into PERSI.

Months of Credited Service: For a month to qualify, the employee must work at least 15 days in the month for a minimum of 20 hours.

Multiplier: This is set to a permanent 2%.

Simply follow the equation to get to your annual benefit, divided by 12 is your monthly benefit.

Let’s see an example:

Jack has worked at Idaho State University since August 2001, for a total of 264 months. Jack plans to work another 5 years, or 60 months. 

Over the next 5 years, Jack expects his average monthly take home to be $4,000.

$4,000 (AMS) x 2.0% (multiplier) = 80 x 324 (Months of Credited Service) = $25,920 / 12 = $2,160 per month of retirement income.

Please note, you cannot receive more than your highest 42-month average salary.

Is Your Monthly Benefit Enough?

Retirement costs more than it did 10 years ago due to several factors that have significantly impacted the financial landscape. 

  1. Inflation gradually erodes the purchasing power of your money.
  2. Healthcare expenses have surged, outpacing inflation, making medical costs a significant burden for retirees.
  3. Life expectancy has increased, leading to longer retirement periods that require more substantial financial planning.

Alongside these factors, the rising cost of housing and education has put additional strain on retirement budgets. As a result, retirees today face the challenge of saving more and managing their finances diligently to ensure a secure and comfortable retirement that can withstand the higher costs of living.

No longer can a professor rely on Social Security and their pension to sustain them through retirement. PERSI has Optional Retirement Plans (ORP) to bridge the gap between their guaranteed income and their living expenses. 

The three ORPs are:

Choice 401(k) – Read this article to see how this account works.

403(b) - Read this article to see how this account works.

457(b) - Read this article to see how this account works.

How Much Extra Money do I Need to Save?

Step one: know exactly how much you spend a month on average, and how much you’ll spend when retired. The simplest way is this; subtract your monthly take home from how much you already save. 

Here’s an example: Jack brings home $4,000 a month. Each month he puts $100 into a savings account and $300 a month into a 457(b) account. His monthly living expenses are $4,000 - $400 = $3,600. If you cannot tell me exactly where you saved it, then you’re spending it. Money is like water, unless you catch it, it vanishes.

Following this example, say Jack hired a great financial planner and together have determined that Jack will receive $1,000 a month from Social Security (SS) and $2,000 a month from his pension. To see how short each month he is, take $3,600 - $1,000 (SS) - $2,000 (pension) = $600 shortfall. Now that Jack and his financial planner know how short Jack each month will be, they can devise a plan to save enough money each paycheck to make up the $600. 

Based off how much you will need a month in retirement will determine how much you need to save a month while working. In our example with Jack, when he retires in 5 years he will need an extra $215,000 to have an extra $600 a month for the next 30 years in retirement. In order to save this much Jack would need to save an extra $400 a month.

How Can I Increase my Monthly Benefit?

In our equation above there are two inputs that you have control over, Average Monthly Salary and Months of Credited Service. Basically, either work longer or make more. I have heard of professors teaching summer courses to increase their average salary or taking on lower stress positions and working longer. Knowing how much more to work or how much longer to work can require a professional’s advice to achieve the income your retirement requires. Asking co-workers is a great place to start on how to increase your annual income.


Calculating retirement benefits can seem complex, but with a clear understanding of your retirement plan's components and formula, university professors can take charge of their financial future. By identifying your Final Average Salary, determining your Service Credit, and factoring in any optional benefits, you can gain a clearer picture of your retirement income. Additionally, supplementing your university's retirement plan with personal savings can provide added peace of mind during your well-deserved retirement years. Remember, early planning and informed decisions are the keys to a financially stable and enjoyable retirement as a university professor.