Is $200k the new $100k?

[hnzw_rui]

I don't think we are disagreeing on any points. Maybe my wording has been clumsy. And certainly the people are aware of the impending yearly value of the pension in retirement and its retention effect also. My only point was they are shocked at how much money out of pocket they would have to pay to receive the same yearly income in an annuity in place of that pension. They understand "I need to stay 5 more years so I can get my X amount pension", but they did know the "X" cost for an immediate annuity of that value. And they certainly didn't know the whole successful mechanism behind it all being 70% of the pension comes from the investment returns not just the contributions.
But then again, my acquaintances aren't math people either.
Also, in review my original comments were directed from an earlier poster who commented on how lower paying workers wished they had that other persons higher salary. Not realizing the higher income person has to self finance their retirement to a greater degree.

Agreed. Yes, future pensioners value their future pension and it certainly does have a positive effect on employee retention.

However, I don't actually know of any of my co-workers who puts a present/cash value on that future pension. They think more in terms of working 5 more years means I get an extra $5,000-10,000 annual pension not in terms of $5,000-10,000 in extra pension will cost me $125,000-250,000 (based on 4% SWR).

Some of my mom's co-workers are even worse. They don't save anything and likely won't be able to retire if not for the pension.

 

[Mulligan]

Agreed. Yes, future pensioners value their future pension and it certainly does have a positive effect on employee retention.

However, I don't actually know of any of my co-workers who puts a present/cash value on that future pension. They think more in terms of working 5 more years means I get an extra $5,000-10,000 annual pension not in terms of $5,000-10,000 in extra pension will cost me $125,000-250,000 (based on 4% SWR).

Some of my mom's co-workers are even worse. They don't save anything and likely won't be able to retire if not for the pension.

ARGHH! I cant proof read any better than I can type. The word "NOT" did not get put in my key thought. And I will edit it....
Therefore we agree 100%!


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[Shanky]

Now, you have made it when your federal tax bill averages 100k.

 

[Walt34]

I reckon there are plenty of beautiful but much less expensive places to retire when your choice of location is no longer limited by how long it takes to commute to work. In those locations, $100K might actually feel like $100K again.

That was a large part of why we moved to WV. It's not all Appalachia and coal mines! The house we're in now would be in the "many many millions" range where we used to live. We wrote a check for it, and it wasn't anywhere near seven figures.

 

[Independent]

I don't know when you started working...that's even a bigger factor than where you live.

The answer is "no" ($200K is not the new $100K) if you started working after 1994, and is "yes" if equal to or less than 1994. That is, if you think gauging the answer based on Medicare withholding salary limits is a valid assumption.

I considered the number of days where I got an end of year "raise" because I surpassed the Medicare salary limit a "big deal", but not until later in my career.

Through the magic of Exel I'll paste my justification.

+1

If you started working in 1994, you'll find that average wages have about doubled since you started working, so $200k is about as far above average today as $100k was above average in 1994.

Or, if you use the CPI, it took a little longer to double. So $200k buys about as much today as $100k did in 1988. (before taxes, ignoring differential inflation rates on different baskets of goods)

There's a little more to it than that. The skewed bell curve that depicts wages as stretched out a little, so the top 1% is somewhat further from the mean than it used to be. Getting into the top _% requires that you get a little further from the middle.

But, I think a lot of the perception that $__ isn't as much as it used to be is where you're standing. Age 75 doesn't sound nearly as old to me today as it did 40 years ago. Yes, longevity has increased slightly, but my perception mostly reflects my own change in age.

Similarly, when I started working as a teacher, 2x a teacher's salary sounded like a ton of money. After I had spent a couple decades working as a financial analyst, 2x a teacher's salary would have been a significant wage cut. It took one more zero to impress me.

(edit: note that the "Medicare" in the quoted post should be "Social Security")