We'll assume the "Defined Benefit" is 100% of pay, payable at age 65. The 100% is reduced for years of service (or some times, participation) 1/25th for each year less than 25. The figures below assume assets earn 6% per year until retirement age.
(1) (2) (3) Monthly Lump Normal % of Age Service Pay Benefit Sum Cost Pay Owner 55 10 100000 6667 922722 66042 66.04% Employee 1 40 5 50000 4167 576701 9916 19.83% Employee 2 30 1 30000 2500 346021 2929 9.76%
(1) 100% of pay, reduced 1/25 for projected service less than 25 years (2) Amount assumed needed at age 65 to pay monthly benefit for life (3) Assumed equal installment payment, which with interest grows to the Lump Sum.
As can be seen, there is quite a large contribution and deduction relative to the amount of pay.
Keep in mind, the Lump-Sum is the target you're aiming for. If assets grow 10% per year (the example assumes 6%), subsequent contributions will be smaller. If they grow more slowly, contributions rise.
Contributions will also be influenced by rising or falling pay. Since the lump-sum is derived from the benefit, which in turn is derived from pay, rising pay creates the need for a larger lump-sum, and there are fewer years left to fund.
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