Pam retires after 28 years of service with her employer. She is 66 years old and has

Question:

Pam retires after 28 years of service with her employer. She is 66 years old and has contributed $42,000 to her employer’s qualified pension fund. She elects to receive her retirement benefits as an annuity of $3,000 per month for the remainder of her life.

a. Assume that Pam retires in June 2017 and collects six annuity payments this year. What is her gross income from the annuity payments in the first year?

b. Assume that Pam lives 25 years after retiring. What is her gross income from the annuity payments in the twenty-fourth year?

c. Assume that Pam dies after collecting 160 payments. She collected eight payments in the year of her death. What are Pam’s gross income and deductions from the annuity contract in the year of her death?

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...