Huge Difference
The differences in plans from one company to another can add up to hundreds of thousands of dollars over the course of a career. Bloomberg assumed that an employee with a starting salary of $50,000 at age 25, who was granted annual pay increases of 3 percent, reached a final salary of $163,102 at age 65. He made the average contribution for his age of between 6 percent and 9 percent annually and the portfolio generated an annual return of 5 percent.
Under those conditions, the individual would have $1.6 million if he worked at ConocoPhillips, according to Jack VanDerhei, research director of the nonprofit Employee Benefit Research Institute in Washington. That doesn’t count the substantial savings from the company’s additional contributions in a cash account of between 6 percent and 9 percent a year.
The same person would have ended up with less than half, or $730,340, in his 401(k) if he worked at Whole Foods.
Breeding Loyalty
ConocoPhillips’ retirement plan breeds loyalty in employees like Baker, a senior analyst in the treasury department. When he joined the company after graduating from Oklahoma State University, he had a child and was struggling to cover his family’s living expenses.
Yet by saving just 1 percent of his salary to generate the company’s 9 percent match, he started amassing a hefty 401(k) balance. As his income has risen, he has increased his own contributions.
“Now I tell interns, don’t just think about salary, think about the benefits you’ll get,” he said.