Retirement question

[ATLien247]

Hypothetically speaking...

A person's current salary is $60K/year, and that person's current employer contributes an equivalent of 15.7% of the person's annual salary towards a retirement fund.

A different, potential employer contributes an equivalent of 13% of the person's annual salary towards a retirement fund. What salary is required from that potential employer for the person to have the same amount of money in the retirement fund come retirement?

Assume that there would be 25 years until retirement for both employers, all else remaining constant.

 

[TallBill]

What kind of return are you getting from this "fund"?

 

[vi edit]

Depends really on the funds and the management fees of the funds.

You can't really give a number unless all other things are exactly equal.

 

[dullard]

So you are saying that company X pays $60,000 * .157 = $9420 per year.

You want company Y to pay $9420 per year too. Thus, $9420 / .13 = $72,462.

Now that we have that simple math out of the way, where do you find these wonderful employers that contribute that much!

 

[bennylong]

I had interviews with some companies that contribute or match 15%.

 

[vi edit]

Some municipalities and non-profit groups will match 15%. It's basically a subsidy for paying lower wages.

 

[ATLien247]

TallBill: Most of that contribution is going into a pension, if you will, and I don't know the return on it or if it's even pertinent. A percentage (about 10%) of the contribution goes into a 401k, and the return on that fund has been right around 5% for the last five years.

vi_edit: All else is equal. Same retirement system, different employer.

dullard: That's what I was looking for. Thanks! These employers would be state and local governments... hypothetically speaking, of course!

 

[dabuddha]

fed only matches 5% :/

 

[mugs]

The thing is, you should be saving money for retirement on your own too. If you went from making $60k a year to $72k a year, I'd put a good portion of that $12k away for retirement. If you're not already contributing the max/year to an IRA, do it.