eric works for a company with a defined contribution benefit

eric works for a company with a defined contribution benefit pension plan. he will retire in ten years (at age 67) and expects his salary to be $85,000 in his last year of work. Social Security should pay him $1,500 per month at that time. If he needs 80 % of his income to maintain his standard of living upon retirement, how much annual income to maintain his standard of living upon retirement, how much annual income will he need from his employer\'s plan and from his own planning when he retires?

Solution

His salary at retirement =67,000

He needs 80% of his income at retirement meaning needs an annual income of 0.8*67,000 = 53,600

He gets 1,500 per month in social security

So, annually he gets 1,500*12 = 18,000 from social securoty

Annual Income needed from employer\'s pension plan = 53,600 - 18,000 = $35,600