Question

Your employer offers a defined-benefit plan with the following formula: 1.20 percent of final salary for each of the first 15 years of service, 1.75 percent of final salary for each of the next 15 years of service, and 2.45 percent of salary for each of the next 20 years of service. What is your retirement benefit if you worked 45 years and your ending salary was 125000?

Answer 1

Ending Salary = Final Salary = 125000

No of years of service = 45

Retirement benefit on basis of first 15 years of service = 1.20% of final salary for each of first 15 years of service = 1.20% x 15 x 125000 = 22500

Retirement benefit on the basis of next 15 years of service = 1.75% of final salary for each of next 15 years of service = 1.75% x 15 x 125000 = 32812.50

Retirement benefit on the basis of last 15 years of service = 2.45% of final salary for each of last 15 years of service = 2.45% x 12 x 125000 = 45937.50

Total retirement benefit = Retirement benefit on basis of first 15 years + Retirement benefit on basis of next 15 years + Retirement benefit on basis of last 15 years = 22500 + 32812.50 + 45937.50 = 101250

Total retirement benefit for 45 years of service = 101250