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)
The real question you want to ask yourself is this:
Would I rather earn $1.4 million in taxable income by age
85, or would I rather have $1.4 million of taxable income in my account by age
65?
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
.
The pension is a freaking scam you guys. It's corporate welfare for dummies with no financial discipline.than one in eight of today’s 20-year-olds will die before reaching age 67.”