Example 2 Of Pensionable Pay Calculations Required: Fill & Download for Free

Americans in general are mathematically illiterate and are unable to estimate even basic economic facts. I think we fail to understand how bad it really is.For example, in a survey of American adults, only 18% were able to calculate the price of carpet given the price/square yard and the dimensions of the room:http://nces.ed.gov/NAAL/PrintItem.asp?ItemView=134&NextItem=0&PrintAll=z&PrintIt=falseSo a survey asking Americans any question that requires mathematical thinking is worth little. Think of what facts they would need to know before they could make an informed estimate of wealth distribution:How are we defining wealth? Liquid assets only? Business value? Home equity? Retirement funds? Present value of pension and social security payments?Who are we including? Households? Individuals? Adults only? If a family of four has a 401(k) in the husband's name, is he top 20% and the wife and kids bottom 20%?Once you figure out the first two questions then you can ask, what wealth level is at the 80th percentile?Then, what is the sum of wealth at or above the 80th percentile?What is the sum of total wealth in America?Repeat for each of the other 4 quintiles.Since few are able to estimate these quantities, the respondents are either making wild guesses not backed by any actual knowledge, or anchoring to some other distrbution they were presented to. For example, if they were asked to estimate the "ideal" distribution first, they would tend to predict an actual that was closer to that. This is a well-known cognitive bias.In a similar way, if you did a survey and asked about actual and ideal distribution of income tax payments, I doubt many would know that 10% of tax payers pay 70% of all income taxes collected.

Gross salary numbers cannot be compared as-is; getting 30 000 EUR in Lyon might be a better deal than 45 000 GBP in London or 100 000 USD in San Francisco.As a french software engineer working in the UK, that’s a topic I spent some time thinking about, so here’s some points that might help you :Exchange rate and reference pointThe exchange rate can change a lot faster than salaries, so converting everything into dollars is not always helpful. Moreover, depending on your goal your comparison points are going to differ wildly (sending money back home? compare monthly saving in your home country currency… living in a new country? compare local purchasing power… planning on retiring someday ? compare pensions… and so on)Job differencesAnother point to keep in mind is that all job titles are not equivalent in all countries. The responsibilities and requirements, can be very different. For example, in France, in the UK and in the US, the term “Engineer” has a very different meaning, that sometimes get lost in translation, so while you might think you are comparing similar jobs, in reality they might be quite different.Also, the progression can be different, with unequal speeds and levels. For example, entry-level engineering jobs offer a lower pay in Brazil than France, but advancement is a lot stronger, so Brazilian engineers can expect to make more (in USD) than their french counterpart by mid-career.City / company differencesI believe the salaries you have mentioned are across a wide range of cities/companies. For example, a “top firm” in Paris might pay 50 000 EUR for a new highly performing new graduate, while another company might have an average pay of 30 000 EUR for new grads in Lyon… (30k€ for a software engineer graduate in Paris isn’t good).Taxes and employment costThat one is a bit harder, but you should be mindful of the taxation system in place, as base pay might include none/some/all taxes, which follow different rates and rules in each country.One metric that can be useful when comparing offers in different countries is to compare how much you cost for your employer (your salary + employer taxes + stock + benefits + office etc…). This gives you a better idea of how your employer values your role.Cost of living, quality of life and benefitsThis is where most of the difference comes from… Countries providing some services (like education, healthcare, retirement pay, unemployment… but also funding for infrastructure, businesses or research…) to citizens tend to have lower base pay, as these services are paid by taxes (both personal and corporate). Depending on your reliance on these services, you might be getting more out of a lower salary…Finally, getting access to the same services and quality of life in different places can have different prices, or be completely impossible, and that should be taken into account.To compare roughly equivalent salaries :- Paris : 36k EUR (40k USD) for an entry level engineer job would cost your employer about 55k EUR (60k USD), while you get about 24k EUR (26k USD) after income tax.- Edinburgh : 30k GBP (38k USD) would cost your employer 33k GBP (42k USD) while you would take home 23k GBP (30k USD) after tax- Palo Alto : 80k USD is about 50k USD take home pay after tax, and I don’t think the employer has to pay taxes on top of that (but I’m not 100% sure).So France would get you the lowest salary (even lower if you go outside of Paris), but would include health care, retirement and up to 2 years of unemployment pay.The UK would pay between slightly more (in Edinburgh) to much more (in London), with access to public healthcare included, but unemployment/retirement has to be paid on top (usually both by the employer and you)The US would provide the highest (almost twice as high as in Paris!) base pay, but depending on your situation, you might have to pay more to get access to insurance/healthcare, education, retirement…Some tools :For France :Simulateur de coût d'embaucheSimuler votre calcul d’impôt sur le revenuFor the UK :How to manually check your payroll calculationsIncome Tax Calculator, Take Home Pay Calculator, Wage CalculatorFor the US :Salary Paycheck CalculatorComparison tools :Job offers at Gitlab they have a tool to determine the pay according to the country and city you’re going to be based in (they’re a remote-only company)Smart Expatriation : 1st online tool to calculate expat salaries - Smart Expatriation

It is difficult to understand what you are actually getting at. There are only a few ways in which pensions are made. In most cases, the pension is either a minute (1–2%) of salary for each year of payment into the pension plan, or some kind of savings account where the ultimate pension is paid from contributions plus accumulated interest.Sometimes, to get a rise out of people, journalists report the value of the pension for someone. This usually ends up making it look like some schmuck is getting a half million or ten million in pension. If that is what you were thinking of, I will try to explain. I am using a very simplified explanation. There are all kinds of things that would complicate the actual numbers. This is just an example.Step 1 The Monthly Pension for a Defined Benefit PensionLet's say I earn $50,000 per year and I have 10 years where I paid into my pension. The pension is 1% of salary for paid service, reduced by 3% per year of early retirement.$50,000 X 0.01 X 25 = $12,500 per year (which this person would get IF 65) or $1,040 pmReduced by 30% for retiring at 55 is $12,500 X .70 = $8,750 per year (or $730 per month)So from $4,170 pm ($50,000 pa) to $730 pm doesn't seem out of hand.Step 2 To Commute the value of a Defined Benefit PensionIf the pension was going to be converted to a single payment—usually if there is a death or to report the "value" of the pension, the first step is to calculate the pension, as in Step 1. The next is to ask yourself how much money you would need to bank today to be able to pay that same pension over time. So, you calculate the pension and use complicated formula that includes the interest the money would earn over time while the monthly payments are dribbling out. The formula would take into account the life expectancy at the time the payout is made.For example only, as the methods for actually calculating a commuted value of a pension would require information from actuaries and plan rates, let's pretend the "value" of the pension in Step 1 is $20,000. The idea being that if that 55 year old put the $20K in the bank today, they could start taking $730 per month from that account for the next 25 years.REPORTING PENSION AMOUNTSPensions are complicated. And kind of boring, except to pension wonks like me. If you have gotten this far, you might be a pension wonk, too.Complicated and boring pension info does not sell papers or get people to click on online news. Big numbers do. The bigger the better. Journalists would rarely say someone's pension is $X per month. That is boring. But they often will do simple arithmetic, which will show a vastly inflated number. Let's use the same 55 year old who was earning $50,000 per year, now going to earn $8,750 per year.$8,750 times life expectancy of 85 (30 years) = $262,500.Now that is the kind of number you want on your political meme or headline.Hope pe this helps you understand why I don't think pensions for anyone are getting out of hand. People should pay into some kind of pension plan so they can get some kind of pension. Governments should have strict regulations to ensure the pension funds are protected, safely invested, and protected from creditors. People who pay into pension plans are putting money away that they could have used to feed their kids or improve their lives.