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What is the best way to compare net income from a salary vs a pension?
Let's say your salary is $100,000 but your pension will be 75% of your salary which is $75,000. But out of your $100,000 salary you only get 65% take home pay but out of your pension you will be getting 90% of your salary.
So if you compare gross pay then it's like comparing apples to oranges. Would it be correct to say something like "even though my pension will only be $75,000 it will be the same as making $100,000 while working because there won't be as many deductions?".
The pension payments will only have a Federal Tax deduction...no state tax, no FICa and no medicare. And of course no insurance or other optional deductions.
My state has no state income tax.
5 Answers
- SumDudeLv 74 months agoFavourite answer
Maybe. Also try "100,000 x 65% versus $75,000 x 90%" and you will have your answer (based on your numerical assumptions).
- Ron AkiaLv 74 months ago
You will still have some deductions taken out although you won't pay social security. Health insurances could vary depending on coverage and, whether you will be on Medicare upon retirement. Additionally, being retired often results in a somewhat lower cost of living as you won't be commuting.
- STEVEN FLv 74 months ago
If your second update it true, the first is irrelevant. Salary and a pension are EXACTLY THE SAME for tax purposes.
- Wayne ZLv 74 months ago
For income tax purposes, pension income and wage income are taxed the same.
The only difference is that you do not have to pay Social Security and Medicare on pension which saves you 7.65%.
If you are taking home 90% of you pension because you only having 10% withheld, you are going to owe money at tax time.
