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 tot
401k contributions, is $264,480.
Which job has the better overay structure, and by how much?
The second job offer
y $6,780.
O The first job offer is better by $6,780.
O The second job offer is better by $7,680.
O The first job offer is better by $7,680.

Answer 1

The first job offer has a better overall structure, by $7,680.

Here's the calculation:

First job offer:

Annual salary: $57,000

401k contribution: 8%

401k contribution per year: $57,000 * 0.08 = $4,560

Total value of the offer after 4 years: $57,000 * 4 + $4,560 * 4 = $264,480

Second job offer:

Annual salary: $63,000

401k contribution: 4%

401k contribution per year: $63,000 * 0.04 = $2,520

Total value of the offer after 4 years: $63,000 * 4 + $2,520 * 4 = $256,960

The difference between the two offers is $264,480 - $256,960 = $7,680.

Therefore, the first job offer has a better overall structure, by $7,680. (Last one)