Question

You have been hired as a benefit consultant by Jean Honore, the owner of Cheyenne Angels. She wants to establish a retirement plan for herself and her three employees. Jean has provided the following information. The retirement plan is to be based upon annual salary for the last year before retirement and is to provide 50% of Jean’s last-year annual salary and 40% of the last-year annual salary for each employee. The plan will make annual payments at the beginning of each year for 20 years from the date of retirement. Jean wishes to fund the plan by making 15 annual deposits beginning January 1, 2020. Invested funds will earn 10% compounded annually. Information about plan participants as of January 1, 2020, is as follows. Jean Honore, owner: Current annual salary of $48,880; estimated retirement date January 1, 2045. Colin Davis, flower arranger: Current annual salary of $38,230; estimated retirement date January 1, 2050. Anita Baker, sales clerk: Current annual salary of $20,730; estimated retirement date January 1, 2040. Gavin Bryars, part-time bookkeeper: Current annual salary of $17,660; estimated retirement date January 1, 2035. In the past, Jean has given herself and each employee a year-end salary increase of 4%. Jean plans to continue this policy in the future.

(a) Click here to view factor tables Based upon the above information, what will be the annual retirement benefit for each plan participant? (Hint: Jean will receive raises for 24 years.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Annual Retirement Benefit Jean Honore $ Colin Davis $ Anita Baker $ Gavin Bryars $

Answer 1

Annual Retirement Benefits :

Jean Honore:

	$
current salary (a)	48880
Future value of 1,24 periods,4% (b)	2.5633
Annual salary (c)=a*b	125294.10
Retirement benefit	50%
ANNUAL RETIREMENT BENEFIT	62647

Colin:

	$
current salary	38230
future value of 1,29 periods,4%	3.11865
annual salary	119225.99
retirement benefit	40%
ANNUAL RETIREMENT BENEFITS	47690

Anita:

	$
current salary (a)	20730
future value of 1,19 periods 4% (b)	2.10685
annual salary during last year (a*b=c)	43675.00
retirement benefit	40%
ANNUAL RETIREMENT BENEFITS	17470

Gavin:

	$
current salary	17660
future value of 1,14 periods 4%	1.73168
annual salary during last year	30581.47
retirement benefit	40%
annual retirement benefits	12233