ChatGPT says
I’m not a FedEx pilot, but it’s been interesting for me to get up to speed on Market Based Cash Balance Plans. I started wondering if someone starting a 25 year career, retire at 60, will get close to the existing A plan amount. I used different questions to play with the numbers in different ways. The one below was to compare MBCBP with 11% contribution earning 5% to a pension paying $169k… what annual income would that individual need over 25 years to have the same result.
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If the employee contributes nothing to the market-based cash balance plan, and the employer contributes 11% of the employee's annual income, we can calculate the required annual income for a 25-year career to achieve the desired accumulated balance at age 60.
Let's denote the annual income of the employee as E. The employer's contribution would be 11% of E, which is 0.11E.
We can set up an equation based on the desired accumulated balance at age 60, considering the employer's contributions and the assumed 5% return over 25 years:
0.11E * 25 * 1.05 = Required accumulated balance at age 60
From the previous calculation, we know that the required accumulated balance is approximately $1,949,750.
0.11E * 25 * 1.05 = $1,949,750
Simplifying the equation:
0.1155E = $1,949,750
E = $1,949,750 / 0.1155
E ≈ $16,883,041
In this scenario, for the employer's 11% contribution to accumulate to the desired balance, the employee would need an annual income of approximately $16,883,041 over their 25-year career.
Please note that this calculation assumes a consistent 11% employer contribution and a 5% return on investments. Individual circumstances and specific plan details may vary, so it's always advisable to consult with a financial advisor for a more accurate assessment based on your specific situation.“