Find the ratio of the pension income for retirement

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Reference no: EM131001708

A DB plan provides for an annual pension of a certain percentage of the final 5 years average salary times the number of years of service upon retirement. Retirement is based on the 80 factor which means that an employee can retire at any time that the sum of age plus years of service is greater than or equal to 80. An employee age 55 who began work at age 25, is comparing their income for retirement now, to that which they would receive if they stay for another year. They can expect a 5% increase in salary for the following year, which is the same that they received in each of the last 4 years. Find the ratio of the pension income for retirement in 1 year to that for retirement now.

Reference no: EM131001708

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