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Why a 401(k) Will Yield You More Money Than a Pension
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<blockquote data-quote="ThePackageDeli" data-source="post: 5614070" data-attributes="member: 77514"><p>Hypothetical example:</p><p></p><p>John begins UPS on Jan 1, 2020 and retires on Jan 1, 2055, at age 65.</p><p></p><p>Under the current pension plan, John's 35 years of service entitle him to roughly $70,000/yr (- taxes) beginning at age 65.</p><p></p><p>If John lives to be 85, he will have earned roughly $1.4 million(- taxes) in pension income during his lifetime.</p><p></p><p>-vs.-</p><p></p><p>If John fully invests his 401(k) from 2020 to 2055, he will have contributed roughly $787,500.</p><p>If John's investment grows at 5% for 35 years, his 401(k) account value at age 65 will be roughly $2,130,000 (that's nearly $1.4 million in earnings)</p><p></p><p><u>The real question you want to ask yourself is this:</u></p><p></p><p>Would I rather earn $1.4 million in taxable income by age <u>85</u>, or would I rather have $1.4 million of taxable income in my account by age <u>65</u>?</p><p></p><p>This is why I would rather have a 401(k) match over a pension.</p><p></p><p>These numbers get even sweeter when you factor in a company match for 35 years, holy <img src="/community/styles/default/xenforo/smilies/group1/censored2.gif" class="smilie" loading="lazy" alt=":censored2:" title="Censored2 :censored2:" data-shortname=":censored2:" />.</p><p></p><p>The pension is a freaking scam you guys. It's corporate welfare for dummies with no financial discipline.</p></blockquote><p></p>
[QUOTE="ThePackageDeli, post: 5614070, member: 77514"] Hypothetical example: John begins UPS on Jan 1, 2020 and retires on Jan 1, 2055, at age 65. Under the current pension plan, John's 35 years of service entitle him to roughly $70,000/yr (- taxes) beginning at age 65. If John lives to be 85, he will have earned roughly $1.4 million(- taxes) in pension income during his lifetime. -vs.- If John fully invests his 401(k) from 2020 to 2055, he will have contributed roughly $787,500. If John's investment grows at 5% for 35 years, his 401(k) account value at age 65 will be roughly $2,130,000 (that's nearly $1.4 million in earnings) [U]The real question you want to ask yourself is this:[/U] Would I rather earn $1.4 million in taxable income by age [U]85[/U], or would I rather have $1.4 million of taxable income in my account by age [U]65[/U]? This is why I would rather have a 401(k) match over a pension. These numbers get even sweeter when you factor in a company match for 35 years, holy :censored:. The pension is a freaking scam you guys. It's corporate welfare for dummies with no financial discipline. [/QUOTE]
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