Question

An employee is considering two job offers . First offer : $ 57,000 yearly salary with a 6 % matching 401k Second offer : $ 63,000 yearly salary with a 5 % 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 $ 255,360 . Which job has the better overall pay structure , and by how much ?

Answer 1

To compare the two job offers, we need to calculate the total value of each offer after four years. Let's start with the first offer:

- Yearly salary: $57,000

- 401k matching: 6% of salary, so $3,420 per year

- Total yearly income: $57,000 + $3,420 = $60,420

- Total 401k contribution after 4 years: $3,420 x 4 = $13,680

- Total gross income after 4 years: $60,420 x 4 = $241,680

- Total value after 4 years (including 401k contributions): $241,680 + $13,680 = $255,360

Now let's do the same calculation for the second offer:

- Yearly salary: $63,000

- 401k matching: 5% of salary, so $3,150 per year

- Total yearly income: $63,000 + $3,150 = $66,150

- Total 401k contribution after 4 years: $3,150 x 4 = $12,600

- Total gross income after 4 years: $66,150 x 4 = $264,600

- Total value after 4 years (including 401k contributions): $264,600 + $12,600 = $277,200

Therefore, the second job offer has a better overall pay structure by $21,840 ($277,200 - $255,360).