Lockheed Martin froze pension accruals for salaried employees on January 1, 2016. Benefits earned through the freeze date are preserved. For long-tenured Lockheed engineers and program managers, those benefits are significant, often $2,800 to $7,500 per month. If you're sitting on a Lockheed pension, understanding what it's worth as a lump sum before any election window arrives is one of the highest-value uses of an hour you'll spend on retirement planning.
The Lockheed Martin Salaried Employee Retirement Program
The SERP is the primary defined benefit plan for non-union Lockheed Martin salaried employees. The plan covers benefits accrued through December 31, 2015. Accruals stopped at the freeze; benefits that existed at that date are preserved and remain Lockheed's obligation.
Lockheed increased its 401(k) matching contributions as a partial offset when it froze the pension. Current salaried employees accumulate retirement benefits entirely through the 401(k). But former and longer-tenured employees who were with the company before and through the freeze carry preserved defined benefit rights that don't expire. They sit waiting until the employee reaches retirement age or an election window opens.
How Lockheed calculates your lump sum
The SERP uses the IRS 417(e) formula. For 2026, the applicable segment rates (November 2025) are:
- Segment 1 (years 1-5): 5.03%
- Segment 2 (years 6-20): 5.35%
- Segment 3 (years 21+): 5.57%
Lockheed's actuaries apply these rates to your projected monthly benefit, weighted by IRS mortality probabilities, to produce a present value. At $5,500 per month for a 65-year-old, the 2026 calculation produces a lump sum in the range of $735,000 to $785,000.
Before any election window, run the calculator using your accrued monthly benefit. You can find your current accrued benefit on your benefit statement through Lockheed's Hewitt/Aon benefits administration portal. If you've left Lockheed and no longer have active portal access, you can request a benefit statement directly from Aon.
Lump sum election history
Lockheed has offered lump sum elections to deferred vested and retired participants in several windows. The most significant was a 2015 pre-freeze window. Lockheed gave eligible terminated vested employees a final opportunity to elect a lump sum before the accrual freeze took effect. That window came at moderately low rates, producing reasonably attractive values.
Lockheed's approach has been targeted rather than company-wide: specific participant cohorts by age or vesting status are offered windows, not all participants simultaneously. If you've been a deferred vested participant since leaving Lockheed, watch for election window notices from Aon, which typically arrive 60 days before the deadline with a clear stated election amount.
Aerospace and defense pension context
Lockheed Martin operates alongside Boeing, RTX/Raytheon, and Northrop Grumman as major defense contractors with large frozen pension obligations. None of these companies wants to carry large pension liabilities permanently on its balance sheet. Defense contract cost accounting, credit ratings, and ERISA funding requirements all create pressure to reduce or transfer pension obligations over time.
This means Lockheed is more likely, not less, to offer pension risk transfers to insurance companies or additional lump sum windows in the next 3-7 years. The corporate incentive is clear. Your job is to know what your benefit is worth before the offer arrives, so you can evaluate it clearly rather than under a 90-day deadline.
When the annuity beats the lump sum for Lockheed retirees
Lockheed's benefits are large enough that the annuity income meaningfully reduces longevity risk. A $6,000 monthly Lockheed annuity, combined with Social Security, produces a retirement income that covers most expenses without touching invested assets. That's a strong position that a lump sum can replicate but requires disciplined management to match over 25+ years.
The annuity wins if you're healthy, if you have limited investment management experience, or if the certainty of a monthly check outweighs the appeal of a large balance. It loses if you're in poor health, if you have specific estate goals, or if you're a sophisticated investor confident in generating consistent returns on the lump sum over time.
At current rates, the break-even for a Lockheed 65-year-old retiree typically falls between ages 81 and 84. If you expect to live to 90, the annuity delivers $50,000 to $100,000 more in cumulative value over that period than the lump sum invested at conservative rates.
See the Lockheed Martin pension page for full SERP details, buyout history, and plan status information.