1-Christian wants to retire in 15 years when he turns 65. Christian wants to hav
ID: 2660314 • Letter: 1
Question
1-Christian wants to retire in 15 years when he turns 65.
Christian wants to have enough money to replace 75% of his current income less what he expects to receive from Social Security at the beginning of each year. He expects to receive
$18,000 per year from Social Security in today's dollars.
Christian is aggressive and wants to assume an 8% annual investment rate of return and that inflation will be 3% per year. Based on his family history, Christian expects that he will live to be 95 years old. If Christian currently earns
$80,000 per year and he expects his raises to equal the inflation rate, how much does he need at retirement to fulfill his retirement goals?
(a) $1,022,807.
(b) $1,072,458.
(c) $1,559,131.
(d) $1,583,152.
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2. A company's defined benefit pension plan utilizes a funding formula that considers years of service and average compensation to determine the pension benefit payable to the plan participants. If Kim is a participant in this defined benefit pension plan and she has 30 years of service with the company and average compensation of $75,000, what is the maximum pension benefit that can be payable to Kim at her retirement?
(a) $15,500.
(b) $46,000.
(c) $75,000.
(d) $185,000.
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3. Which of the following employees is a key employee for 2013?
1. Matt, an officer of the company, who earns $100,000 per year and owns 2% of the company.
2. Missy, who earns $37,000 per year and owns 5% of the
company.
3. Tara, an officer of the company who earns $175,000.
4. Julie, a 10% owner of the company who earns $24,000 per
year as a secretary.
(A) 4 only.
(B) 3 and 4
(C) 2 and 3
(D) 1, 3, and 4.
Explanation / Answer
1. b
2. c
3. c
4 d
5. b
6 a
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