Will earns $70,000 per year, receives 10 days PTO, 6% retirement matching, and receives 60% employer-subsidized health insurance which totals $10,000. Calculate the benefit rate. Round to the nearest percentage point.
Answer (2)
Will's benefit rate is calculated by summing his health insurance, retirement matching, and PTO benefits, then dividing that total by his salary. The total benefits amount to $12,892.31, resulting in a benefit rate of about 18%. This percentage reflects the value of the benefits compared to his salary.
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Calculate the health insurance benefit: 0.60 × $10 , 000 = $6 , 000 .
Calculate the retirement matching benefit: 0.06 × $70 , 000 = $4 , 200 .
Calculate the PTO benefit: 260 10 × $70 , 000 = $2 , 692.31 .
Calculate the benefit rate: $70 , 000 $6 , 000 + $4 , 200 + $2 , 692.31 × 100 ≈ 18% . The benefit rate is 18% .
Explanation
Calculate Health Insurance Benefit First, we need to determine the value of each benefit. We are given that the health insurance benefit is 60% of $10,000.
Health Insurance Calculation The health insurance benefit is calculated as: 0.60 × $10 , 000 = $6 , 000 .
Calculate Retirement Matching Benefit Next, we calculate the retirement matching benefit, which is 6% of Will's annual salary of $70,000.
Retirement Matching Calculation The retirement matching benefit is calculated as: 0.06 × $70 , 000 = $4 , 200 .
Calculate PTO Benefit Now, we need to calculate the value of the PTO (Paid Time Off). Will receives 10 days of PTO. We'll assume there are 260 working days in a year to calculate the daily rate.
PTO Calculation The value of the PTO is calculated as: 260 days 10 days × $70 , 000 = $2 , 692.31 (rounded to the nearest cent).
Calculate Total Benefits Now, we sum up all the benefits to find the total value of benefits.
Total Benefits Calculation The total value of benefits is: $6 , 000 + $4 , 200 + $2 , 692.31 = $12 , 892.31 .
Calculate Benefit Rate Next, we calculate the benefit rate by dividing the total value of benefits by Will's annual salary.
Benefit Rate Calculation The benefit rate is calculated as: $70 , 000 $12 , 892.31 = 0.18417585714 .
Convert to Percentage To express the benefit rate as a percentage, we multiply by 100: 0.18417585714 × 100 = 18.417585714% .
Round to Nearest Percentage Point Finally, we round the benefit rate to the nearest percentage point: 18.417585714% ≈ 18% .
Final Answer Therefore, the benefit rate is approximately 18%.
Examples
Understanding benefit rates is crucial in personal finance and compensation analysis. For example, when evaluating job offers, knowing the benefit rate helps you compare the total compensation package, not just the salary. A higher benefit rate means a larger portion of your total compensation comes from benefits like health insurance, retirement matching, and paid time off, which can significantly impact your financial well-being. This calculation provides a clearer picture of the overall value of an employment package.
