What is the best way to compare net income from a salary vs a pension?

Question

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?".

? · Accepted 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 Akia · Answer

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 F · Answer

If your second update it true, the first is irrelevant. Salary and a pension are EXACTLY THE SAME for tax purposes.

Wayne Z · Answer

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.

Elaine M · Answer

Will you owe taxes on your pension payments?

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What is the best way to compare net income from a salary vs a pension?

5 Answers