Tom, a government employee, has a defined benefit pension.He has worked for his employer for 35 years before retiring at age 65.His final salary was $85,000
Calculate how much of his final preretirement income a standard defined benefit pension plan would replace.
Using the formula given in the chapter, Tom's pension would equal:
0.02 × 35 × $85,000 = $59,500.
This would replace $59,500/$85,000 = 0.70 or 70 percent of his preretirement income.
A-head: INVESTMENT ACCOUNTS
Concept: Retirement savings plans
Economics
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