Currently you have some upcoming unfunded pension liabilities for your 100 employee firm. Pension payouts are annual and will last 25 years. based on age and retirement schedules you anticipate the following pension obligations

years expected cash payments

6-10 $25000

11-20 $65000

21-25 $45000

you have allocated $500,000 in investments toward. You want to fully fund the upcoming liabilities toward the pension fund in the next 5 years.

a) assuming a conservative rate of return of 5% annually, how much do you have to set aside each year for the next 5 years to be able to fund the liability?

b) suppose after 2 years of investing into the pension fund, the fund balance (with initial investment) is only $750,000. How much should you be setting aside now for the remaining 3 years?