I am giving a webinar to residents about private practice (my practice model) and comparing various aspects of private vs. employed models. I am hoping someone here can help me put a $ value (in 30 years) on the Kaiser pension as it would apply to a new hire today. I'm not looking for a discussion of whether the pension is under funded and whether it will exist in 30 years....

Specifically: An example private practice doctor can max out a 401K profit share at $56k/year, and assuming a 7% return for 30 years it will be valued somewhere around $5.6m. Take a 4% safe withdrawal rate and that gives you $224k/yr. Easy. (Ignore assumptions about rate of return and increasing 401k limits over time)

Kaiser's plan earns 2% of salary x 20 years, then 1% thereafter. So after 30 years, the pension would be 50% of salary per year. Comparing apples to apples, would mean the private practice "equivalent" would be a $448k salary + $56k contributed annually to 401k for a total of $504k. So in effect, $448k at Kaiser is comparable to $504k in private practice. Hopefully you're following (and hopefully I'm not way off). (again, ignoring annual salary increases)

The question: How do you value Kaiser's pension at the moment of retirement? In the case above, the private 401K has a clear value of $5.6m. But for Kaiser, it's a promise of $224k/yr..... but for how long? And what happens if you die at 68... or at 102? Does your spouse/kids inherit the payments? And if so, for how long? Do you have the option to take a lump-sum payment at retirement? If so, how much is it as a % of annual salary? Also, is the pension income taxed the same as the 401k would be?

Hopefully this isn't too confusing. Can anyone help answer these questions so I can provide a balanced presentation? And if I'm thinking about this all wrong, please guide me in the right direction.

Thanks in advance!

Specifically: An example private practice doctor can max out a 401K profit share at $56k/year, and assuming a 7% return for 30 years it will be valued somewhere around $5.6m. Take a 4% safe withdrawal rate and that gives you $224k/yr. Easy. (Ignore assumptions about rate of return and increasing 401k limits over time)

Kaiser's plan earns 2% of salary x 20 years, then 1% thereafter. So after 30 years, the pension would be 50% of salary per year. Comparing apples to apples, would mean the private practice "equivalent" would be a $448k salary + $56k contributed annually to 401k for a total of $504k. So in effect, $448k at Kaiser is comparable to $504k in private practice. Hopefully you're following (and hopefully I'm not way off). (again, ignoring annual salary increases)

The question: How do you value Kaiser's pension at the moment of retirement? In the case above, the private 401K has a clear value of $5.6m. But for Kaiser, it's a promise of $224k/yr..... but for how long? And what happens if you die at 68... or at 102? Does your spouse/kids inherit the payments? And if so, for how long? Do you have the option to take a lump-sum payment at retirement? If so, how much is it as a % of annual salary? Also, is the pension income taxed the same as the 401k would be?

Hopefully this isn't too confusing. Can anyone help answer these questions so I can provide a balanced presentation? And if I'm thinking about this all wrong, please guide me in the right direction.

Thanks in advance!

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