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Message
Job Change Decision Based Only On Retirement Benefits and Annual Salary
Posted on 8/15/13 at 6:52 pm
Posted on 8/15/13 at 6:52 pm
Using retirement and annual salary as the only decision criteria in the following scenario how much annual salary would it take for me to break even.
Current age: 38
Current Job:
annual salary:75,000
I pay 10% towards a defined benefit pension
I am vested now at 40%, but can't receive pay until age 50
at 30 years (age 52) I will receive 100% benefit (4 year average)
New Job:
If I quit my current job now I would get the 40% of about 60,000. About 24,000/yr until death starting at age 50.
New job has a defined contribution pension paid by the company: 11% of a 5 year average salary times number of years worked. (assume 14 years worked to even out at 52)
New job also has a 401k: 8% match with at least a 2% employee contribution (assume I will max this out)
Big Question
How much annual salary from the new job will it take to make this move worthwhile from a retirement perspective?
Current age: 38
Current Job:
annual salary:75,000
I pay 10% towards a defined benefit pension
I am vested now at 40%, but can't receive pay until age 50
at 30 years (age 52) I will receive 100% benefit (4 year average)
New Job:
If I quit my current job now I would get the 40% of about 60,000. About 24,000/yr until death starting at age 50.
New job has a defined contribution pension paid by the company: 11% of a 5 year average salary times number of years worked. (assume 14 years worked to even out at 52)
New job also has a 401k: 8% match with at least a 2% employee contribution (assume I will max this out)
Big Question
How much annual salary from the new job will it take to make this move worthwhile from a retirement perspective?
2
Posted on 8/15/13 at 7:00 pm to mikie421
Both sound good.
Which job would you enjoy the most?
Which job would you enjoy the most?
Posted on 8/15/13 at 8:47 pm to mikie421
When you say new job has defined contribution, did you mean defined benefit of 0.11 x Years of Service x Pensionable Pay? If its a defined contribution, that money should go into a fund in your account with some specified vesting period.
Also, why the 40% of $60k vs $75k? Is there a termination vs retirement factor? At new job, will you be fully vested at age 52, with only 14 years of service? Or is there a reduction factor?
Also, why the 40% of $60k vs $75k? Is there a termination vs retirement factor? At new job, will you be fully vested at age 52, with only 14 years of service? Or is there a reduction factor?
Posted on 8/15/13 at 9:07 pm to LSUtigerME
quote:
When you say new job has defined contribution, did you mean defined benefit of 0.11 x Years of Service x Pensionable Pay? If its a defined contribution, that money should go into a fund in your account with some specified vesting period.
Right, pensionable pay is the average of the highest five years.
quote:
Also, why the 40% of $60k vs $75k? Is there a termination vs retirement factor? At new job, will you be fully vested at age 52, with only 14 years of service? Or is there a reduction factor?
It would be the average of my best four years, since I have had a few promotions lately the average would be lower than my current pay.
if it matters, my current job is in the public sector and the new job would be in oil and gas.
I'm trying to figure out at what point does the new job's salary become attractive enough to leave my current job.
I am not that unhappy now, but I have reached the top of the organization, the only promotions left would be political appointments that I don't meet the criteria for.
This post was edited on 8/15/13 at 9:08 pm
Posted on 8/15/13 at 9:13 pm to mikie421
quote:
mikie421
Are you vested by 52 in your new company or do you plan on retiring late?
Something to think about if you think that type of job would still be available (maybe just at a different company), is working until full pension then moving to private and double dipping.
A guy in the department I worked at had a retirement elgibility when age + years worked was 75 or something and is age 51 and then he moved into another company that had a similar pension plan and plans on retiring at 65. He is going to have double pension, a small raise + pension all those years at his new job and worked enough to qualify for high levels of SS if it is still around in 15 years
This post was edited on 8/15/13 at 9:14 pm
Posted on 8/15/13 at 9:19 pm to GenesChin
quote:
Are you vested by 52 in your new company or do you plan on retiring late?
I think I would be vested but there are penalties for retiring before 60. I'm trying to keep this apples to apples as much as possible.
quote:
Something to think about if you think that type of job would still be available (maybe just at a different company), is working until full pension then moving to private and double dipping
I have thought about this and would likely keep working past 52 at my current job or retiring and getting a new one.
Posted on 8/15/13 at 9:22 pm to mikie421
Does your new job limit you to 1x your salary in retirement? The 11% x YOS could get to be a pretty large number. From my calcs, you could take a pretty large paycut and be okay in retirement. I'll post them up in a second.
Posted on 8/15/13 at 9:30 pm to LSUtigerME
the new job pension is a lump sum payment. from there they have different annuity options.
Posted on 8/15/13 at 9:42 pm to mikie421
Oh, I missed the lump sum part. That makes a very big difference. I was assuming that was annual payment (which I was about to ask who was offering that!?). Let me change it up.
Posted on 8/15/13 at 9:58 pm to LSUtigerME
Here's what I've come up with. Looks like you'll take a pretty big hit on retirement alone. This of course does not factor in the increase in salary that could be saved and further invested for retirement. I'll look to add that. Basically, there's no way you'd catch it on benefits alone, retiring at same age.
This post was edited on 8/15/13 at 10:11 pm
Posted on 8/15/13 at 10:04 pm to LSUtigerME
awesome!
for more accuracy, I will receive 2% raises at my current job for the next 7 years with no raises after that (state law).
for more accuracy, I will receive 2% raises at my current job for the next 7 years with no raises after that (state law).
Posted on 8/15/13 at 10:14 pm to mikie421
Post Updated.
With all my assumptions and calculations, it looks right around $103,000 is where the pay breaks even for a 25 year retirement.
ETA: With the limited salary, it drops to around $97,000.
With all my assumptions and calculations, it looks right around $103,000 is where the pay breaks even for a 25 year retirement.
ETA: With the limited salary, it drops to around $97,000.
This post was edited on 8/15/13 at 10:17 pm
Posted on 8/15/13 at 10:14 pm to mikie421
quote:
I have thought about this and would likely keep working past 52 at my current job or retiring and getting a new one
Seems like taking in your pension at 52 (especially with you not being eligible for more raises) and then looking into the private sector would be a bargain.
Posted on 8/16/13 at 8:58 am to GenesChin
Thanks for the replies.
What would your opinions be on the following:
I know with certainty that I will receive a 2% raise every year for the next 7 years and will not likely see any other raises. With that being said, how much more potential for salary increases exists in the oil and gas industry?
For instance, could I reasonably expect to see my starting pay of 100K increase to 125K over a 15 year period?
What would your opinions be on the following:
I know with certainty that I will receive a 2% raise every year for the next 7 years and will not likely see any other raises. With that being said, how much more potential for salary increases exists in the oil and gas industry?
For instance, could I reasonably expect to see my starting pay of 100K increase to 125K over a 15 year period?
Posted on 8/16/13 at 10:16 am to mikie421
What field in the industry? Upstream or down?
There's a lot of growth in O&G. A 25% increase over 15 years would be a dismal career IMO. It should be a fair bit higher, but I'm assuming engineering/technical type career.
ETA: also wanted to mention, O&G can be very cyclical. You could easily be out of a job with a downturn in the market, especially working for contract companies and EPCs. Depending on financial strength of the company you're looking at, the pension could disappear before you are fully vested. Just more thoughts to consider.
There's a lot of growth in O&G. A 25% increase over 15 years would be a dismal career IMO. It should be a fair bit higher, but I'm assuming engineering/technical type career.
ETA: also wanted to mention, O&G can be very cyclical. You could easily be out of a job with a downturn in the market, especially working for contract companies and EPCs. Depending on financial strength of the company you're looking at, the pension could disappear before you are fully vested. Just more thoughts to consider.
This post was edited on 8/16/13 at 10:22 am
Posted on 8/16/13 at 10:28 am to LSUtigerME
Job would be upstream HES with a major.
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