Paul Kirsanovs employer offers a qualified defined benefits plan that provides annual retirement benefits equal to 60% of final salary.
Based upon his current salary of $400,000, Paul has been anticipating a retirement income of at least $240,000 per year. He believes that $240,000 per year will provide him with a comfortable retirement.
However, Paul has recently learned that IRS limitations will reduce his annual benefit under the qualified plan to $120,000 (60% of $200,000). Paul is upset that his qualified retirement plan will provide him with only 30% of his final salary–compared to 60% for most other employees.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 11, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.