Question

An employee is considering two job offers.

First offer: $74,000 yearly salary with a 6% matching 401k
Second offer: $75,000 yearly salary with a 5% matching 401k
The employee plans to stay at either job for at least 5 years, assumes there are no salary increases, and will make 401k contributions at the same rate the company matches.
After 5 years, the total value of the first offer, including gross income and total 401k contributions, is $414,400.
Which job has the better overall pay structure, and by how much?
O The second job offer is better by $1,900.
O The first job offer is better by $1,900.
O The second job offer is better by $13,000.
O The first job offer is better by $13,000.

Answer 1

B. The first job offer is better by $1,900.

Explanation:

As explained in the lesson you calculate the total value of the offer by following these steps:

1. Find the annual contribution amount
   $74,000 * 0.06 = $4,440
2. Multiply by 2 (if matching)
   $4,440 * 2 = $8,880
3. Add annual income
   $8,880 + $74,000 = $82,880
4. Multiply by number of years worked
   $82,880 * 5 = $414,400

You can follow the same steps for the other offer. You'll find that its annual contributions come out to be $1,900 less than the first offer.

`414,400 - 412,500=1900`