You are 20 and plan to work for 45 years until you retire at 65. You expect to live until you are 90.

You will collect a pension. Your annual pension payment will be equal to your final salary times a 3% crediting rate times the number of years that you work.

Your starting salary (paid at the end of the year) is $40,000. You expect to get a 4% annual raise.

Your discount rate is 5%.

Draw a timeline and

Identify:

Annual salary payment

Time of retirement

Annual pension payment

Value of pension at retirement

• Value of pension today