How to Analyze Pension versus 401k Match for two jobs

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alaskantraveler
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Joined: Wed May 11, 2016 12:26 pm

How to Analyze Pension versus 401k Match for two jobs

Post by alaskantraveler »

I work a government job that is part of a pension plan. I have a job offer from another company that offers a 5% 401k match. I have having a hard time comparing the two.

The pension pays 2% per year of your average annual salary beginning at age 60. I am 38 years old. I pay 6.75% of my salary for this benefit which comes to $6392 per year. For this analysis I am using a $90k salary average thus every year worked will result in an $1800/year increase in my pension. I am using a NPV Formula with year 1 being -$6,392, then $0 for years until age 60, then $1800 for years 22-50. I am estimating life expectancy to 88 years old. So a 50 year time frame. I have been using a rate of 2% to discount for inflation. The NPV for this is approx. $19,675. The 5% 401k match is $5,750 for the job offer. How would you compare the two options.
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