/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Problem 7 Office Industries uses a final a... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 9: Problem 7

Office Industries uses a final average formula to calculate employees鈥� pension benefits. The calculations use the salary average of the final four years of employment. The retiree will receive an annual benefit that is equivalent to 1.4% of the final average for each year of employment. Charlotte and Krista are both retiring at the end of this year. Calculate their annual retirement pensions. a. Krista鈥檚 years of employment: 18 Final four annual salaries: \(\$ 72,000, \$ 74,780, \$ 74,780, \$ 76,000\) b. Charlotte's years of employment: 23 Final four annual salaries: \(\$ 81,000, \$ 81,000, \$ 81,400, \$ 81,900\)

Short Answer

Expert verified
The annual retirement pension for Krista and Charlotte, according to the provided calculations, will be available after using Krista and Charlotte's respective average salaries from the last four years and the total years they were employed.

Step by step solution

01

Calculate Krista's average salary

To find Krista's average salary from her final four years of employment, add all four final salaries together and divide by four. The salaries are \$72,000, \$74,780, \$74,780, and \$76,000. The formula would look like this: \(\frac{\$72,000 + \$74,780 + \$74,780 + \$76,000}{4}\)
02

Calculate Krista's annual retirement pension

Next, calculate Krista's annual retirement pension by multiplying her average salary with 0.014 (equivalent to 1.4%) and the total years of employment (18 years). So the formula would look like this: \((Average Salary * 0.014) * 18\)
03

Calculate Charlotte's average salary

To find Charlotte's average salary from her final four years of employment, add all four final salaries together and divide by four. The salaries are \$81,000, \$81,000, \$81,400, and \$81,900. The formula would look like this: \(\frac{\$81,000 + \$81,000 + \$81,400 + \$81,900}{4}\)
04

Calculate Charlotte's annual retirement pension

Finally, calculate Charlotte's annual retirement pension by multiplying her average salary with 0.014 and the total years of employment (23 years). So the formula would look like this: \((Average Salary * 0.014) * 23\)

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Average Salary Calculation
When calculating pensions, understanding the average salary is crucial. For Charlotte and Krista, the task involves computing the final average salary of their last four years of employment. Here's how we do it:
  • Step 1: Add up the four salaries. For example, Krista鈥檚 salaries of \(\\(72,000, \\)74,780, \\(74,780,\) and \(\\)76,000\) sum up to \(\\(297,560\).

  • Step 2: Divide the total by four. Hence, Krista's average salary is \(\frac{\\)297,560}{4} = \$74,390\).

The simple operation of addition and division helps determine what is called the "final average salary." This number plays a key role in pension calculations, serving as the baseline for determining annual benefits. When performing this calculation:
  • Ensure all figures you use are consistent and current for the final years of employment.

  • The result provides a fair representation of an employee's typical income during their last years of service.
Retirement Planning
Retirement planning is not just about saving money鈥攊t's about making informed decisions to secure a comfortable post-work life. Calculating pensions like Charlotte and Krista's is a component of this planning.
  • The first step in effective retirement planning is to understand how much income you will need in retirement.

  • Pension plans are crucial as they provide a steady income stream based on your years of service and salary.

  • Consider diversifying your retirement portfolio with savings accounts, investments, and social security benefits.
Effective retirement planning requires assessing your anticipated expenses and income sources. Understanding how your pension fits within this framework can help:
  • Estimate future financial needs more accurately.

  • Prevent unexpected shortfalls, ensuring a sustainable lifestyle after retirement.
The ultimate goal is to maintain financial independence during retirement, protecting against changes such as inflation or health-care costs.
Pension Formulas
Pension formulas like the one used by Office Industries are mathematical processes to calculate retirement benefits based on an employee's tenure and salary history. For our example, the formula is:\[(\text{Average Salary} * 0.014) * \text{Years of Employment}\]
This formula considers:
  • Average Salary: The final average of salaries during the last four years of employment.

  • Percentage Rate: The company鈥檚 rate of 1.4% or 0.014, indicating the portion of your salary that counts towards the pension.

  • Years of Employment: Number of years the employee has been with the company. More years typically mean a higher pension.
This formula helps both employees and employers in planning and predicting retirement benefits, playing a critical role in financial planning. Employees can use such formulas to:
  • Forecast their potential pension income.

  • Make informed decisions about when to retire or increase savings to meet post-retirement goals.

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Fiona opened a retirement account that has an annual yield of 6\(\% .\) She is planning on retiring in 20 years. How much must she deposit into that account each year so that she can have a total of \(\$ 600,000\) by the time she retires?

Use the following information to answer Exercises 14鈥�17. The Merrick Oaks School District offers their employees the following annual pension benefit. $$\begin{array}{|l|}{\text { First } 15 \text { Years of Service }} \\ {2.12 \% \text { multiplier }} \\ {\text { Years of service up to } 15} \\ {\text { Average of final } 3 \text { annual salaries }}\end{array} \begin{array}{l}{\text { Service in Excess of } 15 \text { Years }} \\ {2.25 \% \text { multiplier }} \\ {\text { Years of service in excess of } 15} \\\ {\text { Average of final } 3 \text { annual salaries }}\end{array}$$ Carmen is a teacher in the district who began working there in 1995 and will retire in 2010 after 15 years of service. In the \(2007-08\) school year, she made \(\$ 60,000 .\) She received a 2\(\%\) cost of living pay increase to her salary for each of the last two years before she retired. Determine her monthly pension.

Laura has been contributing to a retirement account that pays 4\(\%\) interest with pretax dollars. This account compounds interest monthly. She has put \(\$ 500\) per month into the account. At the end of 10 years, she needed to pay some medical bills and had to withdraw 15\(\%\) of the money that was in the account. a. Rounded to the nearest dollar, how much did she withdraw? b. Laura pays 23\(\%\) of her income in taxes. What was her tax on the amount of the withdrawal (rounded to the nearest dollar)? c. She had to pay a 10\(\%\) early withdrawal penalty. How much was she required to pay, rounded to the nearest dollar?

This year Frank pays \(m\) dollars for Medicare Part B coverage. He reads that this cost will go up 12.3\(\%\) next year. Express next year's cost algebraically.

If George pays x dollars monthly for Medicare Part B coverage, express his annual cost for Part B coverage algebraically.
See all solutions

Recommended explanations on Math Textbooks

Mechanics Maths

Read Explanation

Statistics

Read Explanation

Discrete Mathematics

Read Explanation

Geometry

Read Explanation

Applied Mathematics

Read Explanation

Logic and Functions

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.