Question

Using a Spreadsheet to Calculate Pension Benefit Payments: 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 sometime 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, 5 years, 8 years, and 10 years.

Retire	Average Salary  =>	The Payment Will Be
Now	$50,000	50,000 × 0.05 × 20 = $50,000
In 2 years	51,005	51,005 × 0.05 × 22 = $56,105
In 5 years	52,551	52,551 × 0.05 × 25 = $65,688
In 8 years	54,143	54,143 × 0.05 × 28 = $78,800
In 10 years	55,231	55,231 × 0.05 × 30 = $82,847

Answer 1

Solution:- Considering the 20 years of service have been completed and the retirement would be due per column A and corresponding annual benefit is calculated at column E Working Note:- Years Salary The No. Of Years Of Service - [C] Current Retirement Term(In Years)- Average Salary (Increasing @1% annually) Refer [A] working note - [B] Now (20 Years elapsed) 50,000.00 2 $ 51,005.00 5 $ 52,550.00 8 $ 54,143.00 10 $ 55,231.00 Percentage determined for payout- [D] 20 5.00% 225.00% 255.00% 28 5.00% 30 5.00% Annual Benefit Payment- [E=B*C*D] 50,000.00 56,106.00 65,688.00 75,800.00 82,847.00 $50,000.00 $50,500.00 $ 51,005.00 $ 51,515.00 $ 52,030.00 $ 52,550.00 $ 53,076.00 $ 53,607.00 $ 54,143.00 $ 54,684.00 $ 55,231.00