Should I Stay or Should I Go?
April 28, 2015 5:32 AM Subscribe
Current company is in transition, but... a new job offer has me thinking about leaving. They aren't offering as great of a retirement package. I'm not sure it is even close! What should I do?
7 years in at a large corporation that offers a great pension benefit package, but there is a lot of uncertainty about the future. I'm in IT, acting as a business analyst/architect. I'm a jack-of-all-trades worker, and I offer a lot of value. Unfortunately, it seems we may be shifting to a new system that is made up mostly of third-party pieces. Right now, much of our workforce in IT is sitting idle... waiting.
I began looking at the market and seeing what was out there. I interview at a few places, and I ran into a solid position offering similar salary with a 15% bonus at years' end. They are a flatter structure than my current job, but then again -- I have no idea what the landscape will look like once we implement this new system at my current job. Not a lot of mobility, but good pay, great bonus, solid benefits.
My concern is retirement. I'm vested in the pension with 7 years of service. I make roughly $80k. By that factor, I am guaranteed $700 a month until I pass once I am at retirement age. Right now, if I continue working here and acquire 30 years of service... I would essentially get a little over 50% of my average monthly pay when I retire. I also have a 401(k) here that I put 10% of my pay into.
My second option is to take a small increase, maybe 90k a year with a 15% bonus at the end of the year. The 401(k) they offer adds 3% of my base salary automatically on a yearly basis, plus up to 6% of my contributions.
I was running numbers last night, and the second option doesn't seem great at all. I would fall pretty short. So, I guess my question is... should I stay or should I go? Obviously, there are other factors at play, but I have thought hard about what my retirement may look like if I leave for the short term payoff of a larger salary. A part of me says... You may die in 10 years, but I'm thinking long-term.
Are there things I'm not thinking of?
7 years in at a large corporation that offers a great pension benefit package, but there is a lot of uncertainty about the future. I'm in IT, acting as a business analyst/architect. I'm a jack-of-all-trades worker, and I offer a lot of value. Unfortunately, it seems we may be shifting to a new system that is made up mostly of third-party pieces. Right now, much of our workforce in IT is sitting idle... waiting.
I began looking at the market and seeing what was out there. I interview at a few places, and I ran into a solid position offering similar salary with a 15% bonus at years' end. They are a flatter structure than my current job, but then again -- I have no idea what the landscape will look like once we implement this new system at my current job. Not a lot of mobility, but good pay, great bonus, solid benefits.
My concern is retirement. I'm vested in the pension with 7 years of service. I make roughly $80k. By that factor, I am guaranteed $700 a month until I pass once I am at retirement age. Right now, if I continue working here and acquire 30 years of service... I would essentially get a little over 50% of my average monthly pay when I retire. I also have a 401(k) here that I put 10% of my pay into.
My second option is to take a small increase, maybe 90k a year with a 15% bonus at the end of the year. The 401(k) they offer adds 3% of my base salary automatically on a yearly basis, plus up to 6% of my contributions.
I was running numbers last night, and the second option doesn't seem great at all. I would fall pretty short. So, I guess my question is... should I stay or should I go? Obviously, there are other factors at play, but I have thought hard about what my retirement may look like if I leave for the short term payoff of a larger salary. A part of me says... You may die in 10 years, but I'm thinking long-term.
Are there things I'm not thinking of?
You aren't in control of the pension, so i wouldn't value it as highly either, just as a nice to have. Many companies have been freezing their pensions, such that you accrue no new benefits, so you can't necessarily count on your pension continuing to go up with longevity of service/pay increases. Or they block new employees from the pension, which concerns me as one of the later people in the system, it may run out of money before i get to collect.
Sitting idle, waiting, doesn't bode well for job security either. If layoffs are looming, how is the severance? then you'll be scrambling for work and willing to take a lower offer.
With the new job there might be more job security, but who knows.
posted by TheAdamist at 6:52 AM on April 28, 2015 [2 favorites]
Sitting idle, waiting, doesn't bode well for job security either. If layoffs are looming, how is the severance? then you'll be scrambling for work and willing to take a lower offer.
With the new job there might be more job security, but who knows.
posted by TheAdamist at 6:52 AM on April 28, 2015 [2 favorites]
A lot of places that have pension plans have been converting them into something that's less costly to the company, transitioning employees over to a 401k plan, etc. Given that you see both the company's future directions and your future with the company as being uncertain, I wouldn't bet too much on your ability and continuing desire to remain employed with them (consider, it's been 7 years and you're slightly fed-up. Do you want to work for them 20 years from now? Do you believe that if they laid you off 10 years from now that your job will keep you current in the market and you'll be able to get another job as easily as you can right now?)
So, just mathematically, one thing that stays the same is that you're putting 10% of your pay into a 401k. Call that 8000 (option A, stay) or 9000 (option B, go). Option B then given you another 3% match, ie $3000, for a total of $4000 more in the 401k at company B.
The pension of company A is currently worth $700/month; this rule of thumb suggests that $700 monthly in retirement is equivalent to $126k savings at retirement age, or back that up by 23 years at 5% return, and that's $42k now, or say that's equivalent to your company giving you $42k/7=$6000 each year.
That's a difference of $2000 in retirement savings between the two. Is that significant? Of course it is! But so is your the $10k raise + $14k bonus. And so is your job satisfaction.
This math is not guaranteed to be correct, but I tried.
posted by aimedwander at 7:25 AM on April 28, 2015 [2 favorites]
So, just mathematically, one thing that stays the same is that you're putting 10% of your pay into a 401k. Call that 8000 (option A, stay) or 9000 (option B, go). Option B then given you another 3% match, ie $3000, for a total of $4000 more in the 401k at company B.
The pension of company A is currently worth $700/month; this rule of thumb suggests that $700 monthly in retirement is equivalent to $126k savings at retirement age, or back that up by 23 years at 5% return, and that's $42k now, or say that's equivalent to your company giving you $42k/7=$6000 each year.
That's a difference of $2000 in retirement savings between the two. Is that significant? Of course it is! But so is your the $10k raise + $14k bonus. And so is your job satisfaction.
This math is not guaranteed to be correct, but I tried.
posted by aimedwander at 7:25 AM on April 28, 2015 [2 favorites]
aimedwanderer's math is an interesting way to look at is but it's actually an additional 9% that the company adds to OP's 401k - 3% free and clear plus 6% match.
So right now 8K per year is going into the 401k, but at the new company $17K would be going into the 401k. If we call the $700/month pension (which you're getting regardless, right?) the equivalent of $6000/yr, as aimedwanderer suggests, you would actually be getting an additional $3K per year towards your retirement at the potential new job, assuming you changed nothing else.
posted by mskyle at 8:00 AM on April 28, 2015 [1 favorite]
So right now 8K per year is going into the 401k, but at the new company $17K would be going into the 401k. If we call the $700/month pension (which you're getting regardless, right?) the equivalent of $6000/yr, as aimedwanderer suggests, you would actually be getting an additional $3K per year towards your retirement at the potential new job, assuming you changed nothing else.
posted by mskyle at 8:00 AM on April 28, 2015 [1 favorite]
Response by poster: If I stay with the pension, however, my amount increases to a potential 55% of my average salary for the final 5 years of my career. So, if I made 120k every year for five years from year 25 to 30, we're talking $5000 a month based on their formula at retirement. $4125 if I made 100k per each of those 5 years. Tack on the possibility of Social Security and my 401k, I'm looking at a large amount monthly.
posted by MMALR at 8:04 AM on April 28, 2015
posted by MMALR at 8:04 AM on April 28, 2015
How close are you to retirement?
posted by deludingmyself at 9:46 AM on April 28, 2015
posted by deludingmyself at 9:46 AM on April 28, 2015
Nthing mskyle and everyone who thinks you are giving too much weight to the potential future value of your pension. It's 2015 and you work in IT, the company is already restructuring and employment trends are only going to continue to change. Not to say you need to jump ship now or anything, but staying at your current company for another 23 years?? seems like a highly unrealistic expectation to be basing your calculations and decisions on.
posted by yeahlikethat at 9:48 AM on April 28, 2015 [6 favorites]
posted by yeahlikethat at 9:48 AM on April 28, 2015 [6 favorites]
I know so, so many people who counted on their pensions which just disappeared when the company went into bankruptcy and they weren't given high priorities on the repayment. Pensions are nice if they happen but they should not be weighted highly compared to actual money you are actually getting.
posted by jeather at 9:59 AM on April 28, 2015 [6 favorites]
posted by jeather at 9:59 AM on April 28, 2015 [6 favorites]
In addition to overvaluing the pension, I think you're undervaluing the compensation package at the potential new job. They're offering you almost a 40% increase in annual compensation ($10K increase in salary, $13.5K bonus, $8K 401k contribution). If you could get that job you would make $110K your first year (admittedly a lot of that would go to your 401k, but it's still your money, and it sounds like you're putting at least that much away anyway), as opposed to maybe making that much 15 years from now, at a company that is already restructuring.
Just looking at the numbers (we have no info on the relative quality of the companies in terms of long-term growth, work life, what your commute is like, etc., which are super important), it makes way more financial sense for you to pursue the new job than it does to stay at your existing job. You can easily fund your own $5000-a-month pension if you can get yourself a 40% raise every seven years.
posted by mskyle at 10:35 AM on April 28, 2015 [3 favorites]
Just looking at the numbers (we have no info on the relative quality of the companies in terms of long-term growth, work life, what your commute is like, etc., which are super important), it makes way more financial sense for you to pursue the new job than it does to stay at your existing job. You can easily fund your own $5000-a-month pension if you can get yourself a 40% raise every seven years.
posted by mskyle at 10:35 AM on April 28, 2015 [3 favorites]
Just want to say that you shouldn't count on that pension being there in 20+ years. If you are in the private sector then the chance that the company will freeze the pension plan or change from a defined benefit (current) to a defined contribution (401k etc) is huge.
posted by saradarlin at 10:36 AM on April 28, 2015 [3 favorites]
posted by saradarlin at 10:36 AM on April 28, 2015 [3 favorites]
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If you took this other job, which pays over $30,000 more per year including bonus and 401(k) match, and invested that $30,000 difference every year and got 4% return on your investment (fairly conservative), you would have 1.2 million dollars 23 years from now.
posted by mskyle at 6:15 AM on April 28, 2015 [7 favorites]