Question

Mary's employer has a defined benefits retirement plan, which pay 3.2% of her last year's salary for each year of employment. Mary estimates her final salary will be $96,000, and she will have worked for 28 years. What's her expected retirement benefits?

Answer 1

In a defined benefit retirement plan, as the name suggests, employers make a definite amount as payment when employee retires.

In this case, Mary will get 3.2% of her last year's salary, which is $96,000 * 3.2% = $3,072. Now, employee rule is that she will be paid for each year of salary i.e. 28 years, therefore her expected retirement benefit - No of year * $3,072

= 28 * $3072 = $86,016