Question

(Retirement Savings Plans MC)

An employee is considering two job offers.
First offer: $57,000 yearly salary with an 8% matching 401k
Second offer: $63,000 yearly salary with a 4% matching 401k
The employee plans to stay at either job for at least 4 years, assumes there are no salary
increases, and will make 401k contributions at the same rate the company matches. After 4
years, the total value of the first offer, including gross income and total 401k contributions,
is $264,480.
Which job has the better overall pay structure, and by how much?
O The second job offer is better by $6,780.
O The first job offer is better by $6,780.
The second job offer is better by $7,680.
1
The first job offer is better by $7,680.

Answer 1

The second job offer has the better overall pay structure by $7,680.

Step-by-step explanation:

In order to determine which job offer has the better overall pay structure, we need to calculate the total value of each offer after 4 years. Let's start with the first offer:

1. Yearly salary: $57,000
2. 401k contribution: 8% of $57,000 = $4,560
3. Matching contribution: 8% of $57,000 = $4,560
4. Total value after 4 years: $57,000 + $4,560 + $4,560 = $66,120

Now let's calculate the total value of the second offer:

1. Yearly salary: $63,000
2. 401k contribution: 4% of $63,000 = $2,520
3. Matching contribution: 4% of $63,000 = $2,520
4. Total value after 4 years: $63,000 + $2,520 + $2,520 = $68,040

Therefore, the second job offer has the better overall pay structure by $7,680 ($68,040 - $66,120).