Explore BrainMass

Savings Plan decisions for your Pension

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

1) You work for a company that provides a pension plan to which the company contributes 50 percent of the amount you contribute. For example, if you specify that $1000 of your annual salary is to go into the plan, the company will add $500 to make the total contribution $1500 per year. The plan guarantees an annual rate of return of 6%. If you believe you can safely earn 8% per year by investing money yourself, is it worthwhile belonging to the company plan in order to get the company's $500 contribution each year? Assume that you expect to retire in 30 years and that you will set aside $1000 per year at the end of each of the next 30 years regardless of the plan you choose.

2) A lottery offers the winner the choice between $150,000 cash prize or month-end payments of $1000 for 12 ½ years, increasing to $1500 per month for the next 12 ½ years. Which alternative would you choose if money can earn 8.25% compounded monthly over the 25-year period?

Please help me out!

© BrainMass Inc. brainmass.com October 25, 2018, 9:18 am ad1c9bdddf

Solution Summary

The solution to the two problems is in an excel sheet where I have used excel built-in formulae in my calculations

See Also This Related BrainMass Solution

Social Security Systems and Retirement Plans

1) Explain why workers who reached retirement age in the early years of the Social Security system are perceived to have received a better deal than workers about to retire and those who will retire in the future.
2) Various proposals have been made to improve the Social Security system's finances and to reform the pension system or increase the tax rates. Explain one or more of the proposals.
3) Discuss how you would improve the Social Security system and why your approach is sound. Please use outside sources to help justify your position. Given what you've learned about the future of Social Security, what savings and retirement planning decisions might you or your children make in the future? Why?

View Full Posting Details