Your employer uses a career average formula to determine retirement payments to its employees. You have 20 years of service at the company and are considering retirement some time in the next 10 years. Your average salary over the 20 years has been $50,000 and you expect this to increase at a rate of 1 percent per year. Your employer uses a career average formula by which you receive an annual benefit payment of 5 percent of your career average salary times the number of years of service. Calculate the annual benefit if you retire now, in 2 years, 5years, 8 years and 10 years. (LG18-2)

Avg. Salary

The payment will be

Now

$50,000.00

50,000*.005*20=50,000

In 2 years

$51,005.00

51,005*0.05*22=56,105

In 5 years

$52,551.00

52,551*0.05*25=65,688

In 8years

$54,143.00

54,143*0.05*28=78,800

In 10 years

$55,231.00

55231*0.05*30=82,847