What is the percentage of career average earnings offered by Ted's defined-benefit pension plan?

The percentage of career average earnings offered by Ted's defined-benefit pension plan is 1.5%. In a defined-benefit pension plan, the retirement benefits are calculated based on a formula that typically considers factors like the employee's years of service and average salary during their career.

In this case, the 1.5% represents the portion of Ted's average earnings that will be credited to him for each year of service. For example, if Ted has a career average salary of $50,000 and he works for 30 years, his pension benefit at retirement would be calculated as a function of those earnings times the 1.5% multiplied by the number of years of service. Hence, a 1.5% of career average earnings provides a steady and predictable pension benefit, which is a characteristic feature of defined-benefit plans.

This understanding is critical for financial planning, as it provides insights into the level of income one can anticipate from such retirement plans, significantly influencing retirement strategies.