Eric Works for a Company with a Defined Contribution Benefit

question 138

Essay

Eric works for a company with a defined contribution benefit pension plan.He will retire in ten years (at age 65)and expects his salary to be $100,000 in his last year of work.Social Security should pay him $1,325 per month at that time.If he needs 80 percent of his 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?

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Definitions:

Debt-to-Total-Assets Ratios

A measure that indicates what proportion of a company's assets is financed through debt.

Equity Ratios

Equity ratios measure a company's financial leverage and are calculated by dividing total equity by total assets.

Debt-to-Equity Ratios

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

Capital Structures

The particular combination of debt and equity used by firms to finance their overall operations and growth.