The XYZ corporation pension plan provides a lifetime annual income to its employees upon retirement at age 65. The plan provides 2% for each year of service of the employee's salary upon retirement. Moreover, those retiring after 65 have their benefit increased by 1.1% for each year beyond 65 that they work.

Caitlin retires at age 68 with 19 years of service. If her salary upon retirement is $62,912, what is her annual pension benefit?

Round your answer to the nearest dollar.

6Hint:

To solve this problem, pay attention to the second sentence and the second paragraph in which describes the formula for computing the pension. In this case, it would be (percent provided)(years of service)(average of earnings). However, there is a bonus for those retiring after 65, which should be computed upon their benefit.

Your employer offers a 401(k) plan with a 36% match, and you set a goal of retiring in 33 years with $874,913 in your account. If the account earns an annual interest rate of 5.5%, how much should you contribute each month?

Round your answer to the nearest dollar.

7Hint:

This is a future value annuity problem. To solve it we will use the future value annuity equations FV = (PMT)(sn|i) and sn|i = [(1+i)n -1]/i). Then remember that the PMT = your contribution + your employers contribution, and that your employer's contribution is equal to (your contribution).(percent match).