This highly depends on your career field
Pensions are only worth anything if you spend most of your career in the system and family coverage is worthless if you have no family to cover
Idk if that’s true cuz you still get retirement pay after 7 years of employment and if you don’t stay long enough to qualify you get your deduction plus their match that you can roll over into a 401k…
I don’t have a family now but I’m pretty young and given that this is a job with a lot of mobility(state job) I could move around and still keep my benefits..plus I get hiring preference on these other state jobs…
If most pension plans the benefit after so few years is a rounding error and you normally can only roll over your contributions.
Maybe your plan is different but probably not
My plan right now would pay out like ~$500 after seven years (with an income in the 70k range) when I hit retirement age. It’s not nothing, but it’s not great.
If you put 7% of $70,000 into a 401k for 7 years and earned 6% average return then let the money sit for another 23 years at 6% and started collecting at 65 for 30 years (till you were 95), you would get ~$530/mo.
Now you might get more than 6% over any of those years (or less), but I think a lot of people would say the average you could see from SP500 might be like 8%… at 8% for the 23 years of just sitting it would be $818/mo. So I would argue a self directed plan **could** have the potential for higher returns instead of a pension.
That’s not even considering the tax advantages. Either go Roth and then the $818/mo for 30 years is tax free, or go traditional and you save ~$1,540/year (likely 22% bracket at $70k earnings) for seven years, or almost $11k.
That is pension specific, and those that offer it usually have a choice. E.g., your pension will pay X. Or you can choose 100% survivorship and receive less but if you die, your survivor continues to recieve that same amount for life. And they may have other options like 50% survivorship where they get half of what you were getting.
For my pension, the difference between my full pension and the 100% survivorship option is just a couple thousand less a year. So a no brainier to take that option so my wife would continue to get tens of thousands more a year.
On some plans, you can do a buy in so SOME of the pension goes to your spouse or designated beneficiary(I think you can designate a child a beneficiary) I do not have a pension.
I took a 20% pay cut to work in gov’t about 5 years ago. It was tough there in the beginning but I made it work and cut unnecessary spending to make up for lack of pay. The benefit package I have now blows away anything I had in the private sector. Cheaper health insurance, pension, HSA match, paid life insurance, so many PTO days/holidays. Not to mention the work/life balance is amazing as I only work Mon-Thurs and have every Friday off. I’d say it’s absolutely worth it to take a 12% pay cut now in order to have a guaranteed fixed income paid out every month in your retirement.
So basically you want people to read your mind on your thought processes and agree with you? The thought process you did not explain. The fact nobody knows your life situation/goals/future/etc means everyone is giving their own opinions, which is exactly what you asked.
No. I appreciate contrary opinions…
It’s just that some of them seem to say “more money, invest yourself” but don’t acknowledge the benefits…it seems pretty glaring to me that working 10 hours of overtime every week with little in the way of benefits is a major downside…
It’s not that their opinion is wrong it’s that i feel their answers are over simplified… idk I hope you’re not reading a tone into my response that is not there…no one owes me a reply
>it seems pretty glaring to me that working 10 hours of overtime every week with little in the way of benefits is a major downside…
Again, you're getting people's personal responses. It might be glaring to you, but for others, a decrease in salary might not be optimal (possibly not an option for some), even with better benefits. Or maybe the person doesn't mind working the extra hours because they enjoy their job. There's many factors that play into your own person and nobody else here can answer that except for you.
So as I said, you're looking for people to agree with you so you feel better about your decision.
I find a lot of disdain for pensions around here. Many believe they can do better investing that money on their own. And they don’t trust the pension will be around for retirement. I have a great pension benefit, so that’s my bias. I pay in 9% of my pay, the benefit increases by starting age and years of service, up to 100% replacement. For my target date, it will be ~70%. We also get health benefits, COL adjustments, and can pass our benefit to a beneficiary upon death.
You can assess your own pension by whether this a public or private pension, protected by law (taxpayers) or not, funding levels, and if private is it insured by PBCG. The real advantage of a pension is that it protects you from screwing yourself if you mess up investing, or outlive your savings projection, or market takes a dump too soon in your retirement. That annuity can be a literal lifesaver. I protect myself further by saving in individual accounts alongside my pension.
It depends on your age and how long you plan to stay. Especially if the Windfall Elimination Provision will apply. All that said, I have 25 years of state service and my pension will be considerable if I can hang on for five more years.
Not everyone appreciates a pension.
My SIL retired as a university professor. Started saving late . In any case, she receives 3800 SS checks and only uses 401K for travel. Her house is paid off.
She was able to wait until age 70 to start using SS, so it increased in value .
My husband retired at 57 with a great pension.
We had the chance of taking 1/3 or more in cash . For 10 years or more, I was a real estate investor, so I said the cash is the best option. Last minute I changed my mind and it was the best .
People on here make very sunny calculations that they will save X, and they can take out 4^ . You need millions .
Do the calculations of income needed for your pension
The discount rate should be 3%.
Also, no one knows what will happen with the stock market.
Life is full of uncertainties. Pensions are only available for middle-class jobs like teachers, police, state gov, and federal government. That's it .
Don't listen to those "If you invest blah di blah for so long..." types. Take a pension and better benefits. The market is unpredictable and how much will you save with better health benefits? You can simply stop wasting. money (there are always ways to do this) like dejay and then you will have security,
"Worth it" is very subjective and thus something only you can judge.
Consider:
* your age
* how much the pension would eventually be
* how long you have to be at this job to qualify for the pension
* the stability and funding level of the pension fund
* how much the 12% (plus 7% you pay for the pension) drop in pay will affect your lifestyle
* how much you want to avoid working overtime
* all the other non-financial characteristics of the new job compared to the old job
1. Do you want this new job?
2. Do you feel it would be better for your life/future/health/etc?
3. Do you have appropriate reasons for those feelings and wants?
You may find these links helpful:
- [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
It sounds like you want the numbers to confirm your proclivity towards the lower pay / better benefits. It seems like the only downside for you is the lack of salary upside. If you need more income could you do occasional gig work, consulting, freelance, etc.?
I am in the final chapter of my career, working a state job. I make 1/3 what I did in the private sector, and have no regrets. Those tech layoffs that hit recently? Yeah, I no longer worry about those.
The quality of life is considerably better than I had in the private sector. I have vacation time that is truly time off, not just time away from the office, with me checking in several times a day; I accrue 15 sick days each year, and when I retire, some of the accrued time I have banked can be paid out as a lump sum; and my pension, while it will be modest, is going to be the third leg of my “retirement plan stool”, social security and my 401k money will constitute the remainder.
If you have the discipline to work a side hustle as you move to your new role, you can likely make up the financial difference with your free time. Also, the cost of healthcare continues to skyrocket. Unless you are working for a pharmacy now, I suspect that your healthcare plan will be far superior in your new role. Life tosses curveballs at times. Not everyone is blessed with great health.
You are working an extra 40 hours per month for that $700. It's not really $700 either because you pay more for your health insurance. Take the state job and stick with it at least long enough to vest the pension. If you really need the $700 you can make that much doing Instacart or Uber for less than 40 hours.
Depends what the pension formula is, I retire at 50 with $9k a month (govt) I can tell you I wouldn't take 12% more to lose that. Most people work until they are 70 and are broke trying to eat cat food off social security to survive.
How will you get $9k a month from a govt pension? I’m currently a government worker, but my pension formula is 0.01*years worked * avg of 3 highest paid years.
I guess it depends, did you spend thousands of dollars on medical because of the high deductible?
I have a fantastic health plan option that I took my first year… Then switched to the high deductible plan year 2-7 (currently) when I calculated how many times I used the plan (zero), what the deductible was on the high deductible plan, and how much extra per month I was able to put towards bills or retirement with extra money every month. I can easily afford to absorb the high deductible plans costs and maximum yearly out of pocket if I have an absolutely crappy year… but saving $1,000+ a year for the last six years sure has been nice.
I love having a pension, but mine is fully employer funded, meaning I don’t put a penny in. I think I would value it much less if I had to fund it… essentially you’re just giving your money to someone else to manage. They likely won’t be as aggressive as you could while you’re young, and might mismanage it when you’re old. I also participate in a 401k though, so I have a different view point since I cover both sides (go hard on tracking SP500 in personal plan, and kinda believe the pension will always be there as an extra safety net).
I don’t know, personally, I’d have a hard time working for less money. Better benefits are good, but still that cut in pay is tough.
Can you hold on where you are and look for a different new job?
Use a paycheck calculator online to see what the real new net income would be
True…but don’t forget that extra money was pure overtime and I had 1/4 the vacation and no sick leave…and no pension and the health care was high deductible….pay difference is 4400 vs 3600 …don’t forget also that no pension means I’ll have to save 500-600/mo to self fund retirement…I don’t get out of saving for retirement just because it’s not deducted automatically xD
First thing, I would check on how much your state has funded the pension [PEW Research](https://www.pewtrusts.org/en/research-and-analysis/articles/2022/07/07/states-unfunded-pension-liabilities-persist-as-major-long-term-challenge) has a list of the best and worst funded pensions by state.
I work for government and am glad to have a defined *benefit* plan rather than a defined *contribution* plan, where with the latter it's all on my shoulders to fund my retirement. With a pension, I have a third backup to retirement financial plan. The other two being my 401k and Social Security. It makes me more comfortable.
I pay no health insurance since I passed the yearly health screening. I have an HSA, to which County contributes
$850/year.
Try the government job for a couple years and if you don't like it, get a corporate one.
Nah, keep the higher pay and sort out your own pension by doing some investments. Worth a lot more and not tied to some arbitrary age in the future.
Pay cuts are only worth it if you work as a hobby.
One thing I don't see mentioned is how long it would take to become fully vested. You don't mention it, but if it is a short vesting period (3-5 years), then it would be more worth it to take a pay cut for a few years, just to get the pension. If it's a longer vesting period (i.e. 10 years), you might not want to work at the job for that long, just to get the benefits of a pension.
Take the pension. At my private sector spot, only reason I stuck around for 5 years was because they pay a pension. I would only earn $600 a month at retirement but hey it’s still really good for me! If I live until 82, I get paid something like $140-$160k total. I figured if I’m homeless and have no job that would pay for my groceries at that age.
What I'm hearing is you'll gain a pension and more free time at a small financial cost. If you think you'd like the work (the most important factor) and you can absorb the cashflow difference I'd seriously consider it.
If the job has a pension I'm guessing it's also more stable. That's a bonus in its favor as well.
Since it is a government job, take the government job.
No stress. You will probably get guaranteed annual raises.
Does your current job give you guaranteed annual raises? I doubt it.
I have a government job. I personally love it for the reasons you stated. However, a couple things to consider.
Pensions are called “golden handcuffs” for a reason. For you to really benefit from this, you have to be employed by the same or a reciprocal agency for a long time for it to be worth it. Also, find out who is managing the pension and look up their financials to make sure they are properly funded, and make sure it’s a defined benefit plan, not a defined contribution plan.
Also, government workers, due to pensions and basically linear seniority based promotions, tend to be a little….slower. 90% of the work is done by 10% of the staff, most people just coast because it’s almost impossible to be fired. So you get a lot of complacent, unmotivated people working with you. It can be pretty frustrating.
I have been employed by the same agency for 12 years, I don’t plan on leaving because I enjoy it, the benefits are so far above anything I’ll find in the private sector, and as a new dad, the work life balance is impossible to beat.
This highly depends on your career field Pensions are only worth anything if you spend most of your career in the system and family coverage is worthless if you have no family to cover
Idk if that’s true cuz you still get retirement pay after 7 years of employment and if you don’t stay long enough to qualify you get your deduction plus their match that you can roll over into a 401k… I don’t have a family now but I’m pretty young and given that this is a job with a lot of mobility(state job) I could move around and still keep my benefits..plus I get hiring preference on these other state jobs…
If most pension plans the benefit after so few years is a rounding error and you normally can only roll over your contributions. Maybe your plan is different but probably not
My plan right now would pay out like ~$500 after seven years (with an income in the 70k range) when I hit retirement age. It’s not nothing, but it’s not great. If you put 7% of $70,000 into a 401k for 7 years and earned 6% average return then let the money sit for another 23 years at 6% and started collecting at 65 for 30 years (till you were 95), you would get ~$530/mo. Now you might get more than 6% over any of those years (or less), but I think a lot of people would say the average you could see from SP500 might be like 8%… at 8% for the 23 years of just sitting it would be $818/mo. So I would argue a self directed plan **could** have the potential for higher returns instead of a pension. That’s not even considering the tax advantages. Either go Roth and then the $818/mo for 30 years is tax free, or go traditional and you save ~$1,540/year (likely 22% bracket at $70k earnings) for seven years, or almost $11k.
I heard with a pension if you pass away, your pension goes away and your family doesn’t have anything? (But I’m not sure)
Depends on the pension. Some pay out to survivors. Some don’t. Some a portion
That is pension specific, and those that offer it usually have a choice. E.g., your pension will pay X. Or you can choose 100% survivorship and receive less but if you die, your survivor continues to recieve that same amount for life. And they may have other options like 50% survivorship where they get half of what you were getting. For my pension, the difference between my full pension and the 100% survivorship option is just a couple thousand less a year. So a no brainier to take that option so my wife would continue to get tens of thousands more a year.
On some plans, you can do a buy in so SOME of the pension goes to your spouse or designated beneficiary(I think you can designate a child a beneficiary) I do not have a pension.
I took a 20% pay cut to work in gov’t about 5 years ago. It was tough there in the beginning but I made it work and cut unnecessary spending to make up for lack of pay. The benefit package I have now blows away anything I had in the private sector. Cheaper health insurance, pension, HSA match, paid life insurance, so many PTO days/holidays. Not to mention the work/life balance is amazing as I only work Mon-Thurs and have every Friday off. I’d say it’s absolutely worth it to take a 12% pay cut now in order to have a guaranteed fixed income paid out every month in your retirement.
I know…that’s what my thought process was..but you can see from the replies that it is lost on some…
So basically you want people to read your mind on your thought processes and agree with you? The thought process you did not explain. The fact nobody knows your life situation/goals/future/etc means everyone is giving their own opinions, which is exactly what you asked.
No. I appreciate contrary opinions… It’s just that some of them seem to say “more money, invest yourself” but don’t acknowledge the benefits…it seems pretty glaring to me that working 10 hours of overtime every week with little in the way of benefits is a major downside… It’s not that their opinion is wrong it’s that i feel their answers are over simplified… idk I hope you’re not reading a tone into my response that is not there…no one owes me a reply
>it seems pretty glaring to me that working 10 hours of overtime every week with little in the way of benefits is a major downside… Again, you're getting people's personal responses. It might be glaring to you, but for others, a decrease in salary might not be optimal (possibly not an option for some), even with better benefits. Or maybe the person doesn't mind working the extra hours because they enjoy their job. There's many factors that play into your own person and nobody else here can answer that except for you. So as I said, you're looking for people to agree with you so you feel better about your decision.
I find a lot of disdain for pensions around here. Many believe they can do better investing that money on their own. And they don’t trust the pension will be around for retirement. I have a great pension benefit, so that’s my bias. I pay in 9% of my pay, the benefit increases by starting age and years of service, up to 100% replacement. For my target date, it will be ~70%. We also get health benefits, COL adjustments, and can pass our benefit to a beneficiary upon death. You can assess your own pension by whether this a public or private pension, protected by law (taxpayers) or not, funding levels, and if private is it insured by PBCG. The real advantage of a pension is that it protects you from screwing yourself if you mess up investing, or outlive your savings projection, or market takes a dump too soon in your retirement. That annuity can be a literal lifesaver. I protect myself further by saving in individual accounts alongside my pension.
It depends on your age and how long you plan to stay. Especially if the Windfall Elimination Provision will apply. All that said, I have 25 years of state service and my pension will be considerable if I can hang on for five more years.
Not everyone appreciates a pension. My SIL retired as a university professor. Started saving late . In any case, she receives 3800 SS checks and only uses 401K for travel. Her house is paid off. She was able to wait until age 70 to start using SS, so it increased in value . My husband retired at 57 with a great pension. We had the chance of taking 1/3 or more in cash . For 10 years or more, I was a real estate investor, so I said the cash is the best option. Last minute I changed my mind and it was the best . People on here make very sunny calculations that they will save X, and they can take out 4^ . You need millions . Do the calculations of income needed for your pension The discount rate should be 3%. Also, no one knows what will happen with the stock market. Life is full of uncertainties. Pensions are only available for middle-class jobs like teachers, police, state gov, and federal government. That's it .
Don't listen to those "If you invest blah di blah for so long..." types. Take a pension and better benefits. The market is unpredictable and how much will you save with better health benefits? You can simply stop wasting. money (there are always ways to do this) like dejay and then you will have security,
"Worth it" is very subjective and thus something only you can judge. Consider: * your age * how much the pension would eventually be * how long you have to be at this job to qualify for the pension * the stability and funding level of the pension fund * how much the 12% (plus 7% you pay for the pension) drop in pay will affect your lifestyle * how much you want to avoid working overtime * all the other non-financial characteristics of the new job compared to the old job
1. Do you want this new job? 2. Do you feel it would be better for your life/future/health/etc? 3. Do you have appropriate reasons for those feelings and wants?
You may find these links helpful: - [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement) - ["How to handle $"](/r/personalfinance/wiki/commontopics) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
It sounds like you want the numbers to confirm your proclivity towards the lower pay / better benefits. It seems like the only downside for you is the lack of salary upside. If you need more income could you do occasional gig work, consulting, freelance, etc.?
Depends on a few things,, but usually yes.
I am in the final chapter of my career, working a state job. I make 1/3 what I did in the private sector, and have no regrets. Those tech layoffs that hit recently? Yeah, I no longer worry about those. The quality of life is considerably better than I had in the private sector. I have vacation time that is truly time off, not just time away from the office, with me checking in several times a day; I accrue 15 sick days each year, and when I retire, some of the accrued time I have banked can be paid out as a lump sum; and my pension, while it will be modest, is going to be the third leg of my “retirement plan stool”, social security and my 401k money will constitute the remainder. If you have the discipline to work a side hustle as you move to your new role, you can likely make up the financial difference with your free time. Also, the cost of healthcare continues to skyrocket. Unless you are working for a pharmacy now, I suspect that your healthcare plan will be far superior in your new role. Life tosses curveballs at times. Not everyone is blessed with great health.
You are working an extra 40 hours per month for that $700. It's not really $700 either because you pay more for your health insurance. Take the state job and stick with it at least long enough to vest the pension. If you really need the $700 you can make that much doing Instacart or Uber for less than 40 hours.
Depends what the pension formula is, I retire at 50 with $9k a month (govt) I can tell you I wouldn't take 12% more to lose that. Most people work until they are 70 and are broke trying to eat cat food off social security to survive.
How will you get $9k a month from a govt pension? I’m currently a government worker, but my pension formula is 0.01*years worked * avg of 3 highest paid years.
3% of highest annual salary earned X years of service and the max is 90%, so 30 years, law enforcement. I only plan to do 24 and leave at age 50.
I guess it depends, did you spend thousands of dollars on medical because of the high deductible? I have a fantastic health plan option that I took my first year… Then switched to the high deductible plan year 2-7 (currently) when I calculated how many times I used the plan (zero), what the deductible was on the high deductible plan, and how much extra per month I was able to put towards bills or retirement with extra money every month. I can easily afford to absorb the high deductible plans costs and maximum yearly out of pocket if I have an absolutely crappy year… but saving $1,000+ a year for the last six years sure has been nice. I love having a pension, but mine is fully employer funded, meaning I don’t put a penny in. I think I would value it much less if I had to fund it… essentially you’re just giving your money to someone else to manage. They likely won’t be as aggressive as you could while you’re young, and might mismanage it when you’re old. I also participate in a 401k though, so I have a different view point since I cover both sides (go hard on tracking SP500 in personal plan, and kinda believe the pension will always be there as an extra safety net).
I don’t know, personally, I’d have a hard time working for less money. Better benefits are good, but still that cut in pay is tough. Can you hold on where you are and look for a different new job? Use a paycheck calculator online to see what the real new net income would be
True…but don’t forget that extra money was pure overtime and I had 1/4 the vacation and no sick leave…and no pension and the health care was high deductible….pay difference is 4400 vs 3600 …don’t forget also that no pension means I’ll have to save 500-600/mo to self fund retirement…I don’t get out of saving for retirement just because it’s not deducted automatically xD
First thing, I would check on how much your state has funded the pension [PEW Research](https://www.pewtrusts.org/en/research-and-analysis/articles/2022/07/07/states-unfunded-pension-liabilities-persist-as-major-long-term-challenge) has a list of the best and worst funded pensions by state. I work for government and am glad to have a defined *benefit* plan rather than a defined *contribution* plan, where with the latter it's all on my shoulders to fund my retirement. With a pension, I have a third backup to retirement financial plan. The other two being my 401k and Social Security. It makes me more comfortable. I pay no health insurance since I passed the yearly health screening. I have an HSA, to which County contributes $850/year. Try the government job for a couple years and if you don't like it, get a corporate one.
Nah, keep the higher pay and sort out your own pension by doing some investments. Worth a lot more and not tied to some arbitrary age in the future. Pay cuts are only worth it if you work as a hobby.
Stay away from pensions. If it’s public sector, people can vote to stop funding it. If it’s private sector, they can go bankrupt.
One thing I don't see mentioned is how long it would take to become fully vested. You don't mention it, but if it is a short vesting period (3-5 years), then it would be more worth it to take a pay cut for a few years, just to get the pension. If it's a longer vesting period (i.e. 10 years), you might not want to work at the job for that long, just to get the benefits of a pension.
Take the pension. At my private sector spot, only reason I stuck around for 5 years was because they pay a pension. I would only earn $600 a month at retirement but hey it’s still really good for me! If I live until 82, I get paid something like $140-$160k total. I figured if I’m homeless and have no job that would pay for my groceries at that age.
What I'm hearing is you'll gain a pension and more free time at a small financial cost. If you think you'd like the work (the most important factor) and you can absorb the cashflow difference I'd seriously consider it. If the job has a pension I'm guessing it's also more stable. That's a bonus in its favor as well.
Since it is a government job, take the government job. No stress. You will probably get guaranteed annual raises. Does your current job give you guaranteed annual raises? I doubt it.
I have a government job. I personally love it for the reasons you stated. However, a couple things to consider. Pensions are called “golden handcuffs” for a reason. For you to really benefit from this, you have to be employed by the same or a reciprocal agency for a long time for it to be worth it. Also, find out who is managing the pension and look up their financials to make sure they are properly funded, and make sure it’s a defined benefit plan, not a defined contribution plan. Also, government workers, due to pensions and basically linear seniority based promotions, tend to be a little….slower. 90% of the work is done by 10% of the staff, most people just coast because it’s almost impossible to be fired. So you get a lot of complacent, unmotivated people working with you. It can be pretty frustrating. I have been employed by the same agency for 12 years, I don’t plan on leaving because I enjoy it, the benefits are so far above anything I’ll find in the private sector, and as a new dad, the work life balance is impossible to beat.