Chapter 15, Problem 3DC2

Summary Introduction

To determine:

Will T & M choose the lump sum payment or annuity offered in the defined contribution plan and disadvantage associated with the recommendation.

Introduction:

Annuity is the mode of payment made at continuous interval to the individual or spouse during the life of the individual. The annuity amount is remaining same at every payment it does not change with the change in inflation rate.

Lump sum payment

in this an individual receive the amount of retirement in one single payment. In nutshell, the person who is spending amount at the time of employment for the retirement benefit, receives a single amount at the time of retirement instead of annuity payment.