Eliza, 40, is a member of a Defined Benefit (DB) pension plan. Her plan formula is 2% * years of service * average best 5 years' salary. She currently earns $70,000 and has 10 years of service. Her average best 5 years' salary has been $65,000. If she retires at 60 with an average best 5 years' salary of $80,000, assuming 30 years of service, what will be her annual pension benefit?

Question: Eliza, 40, is a member of a Defined Benefit (DB) pension plan. Her plan formula is 2% * years of service * average best 5 years' salary. She currently earns $70,000 and has 10 years of service. Her average best 5 years' salary has been $65,000. If she retires at 60 with an average best 5 years' salary of $80,000, assuming 30 years of service, what will be her annual pension benefit?

Answer options:

• $39,000
• $42,000 ✅ $48,000
• $52,000

Correct answer: $48,000

Explanation: Her annual pension benefit will be 2% * 30 years of service * $80,000 (average best 5 years' salary at retirement) = $48,000 per year. The current salary and average best 5 years' salary are irrelevant for the calculation of the future benefit at retirement.