A friend of yours is starting a new job January 2022. Your friend can choose between one of two retirement plans offered by the employer.

A defined benefit plan that will pay your friend $35,000 a year, starting with retirement and for the rest of her life. (Assume payments are made once annually at the end of the year, a simplification.)

A defined contribution plan, in which the employer will match 40% of the employee's contribution. Assume the contributions (employee and employer) are made at the end of each year, so the first contribution would be made at the end of 2022.

Your friend is planning to work for 20 years, then retire (December 2041). Retirement benefits will begin December of 2042 (again, a simplification, don't worry about what your friend will do during that year with no benefits and no income).

Assume a reasonable discount rate and return on investments is 5%. Also assume that your friend will live 35 years after retirement. Your friend asks you these questions:

1. How much will I need to contribute annually to ensure I have enough invested to withdraw $35,000 a year for the rest of my life?

2. Which plan should I choose? The defined benefit or the defined contribution plan? Why?