Author Topic: Advice Regarding Career Change  (Read 1988 times)

AngusBoom

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Advice Regarding Career Change
« on: January 04, 2016, 08:04:30 AM »
Been a while since I posted here.  I have a dilemma regarding a possible opportunity to make a career change. I currently work at a major food company as a salesperson and make 55-65k depending on commissions. 

Last year I took a civil service test to work for NYC and I earned a perfect score and if all goes well I could be called for the job as early as this summer.  The problem is the job has a low starting pay that would be roughly a 15-20k pay cut for the first four years on the job. After 5 years the job gets much better and the average salary will range between 80-100k a year.

Besides the higher salary after 5 years, the job offers a 50% pension after 22 years of service as well as free health care while on the job and post retirement.  I currently have roughly 130k saved in my 401k with my current employer and my current employer doesn't offer a pension.

I'm just wary of the pay cut.  I am 35 married with two kids and a third on the way.  My wife works and does well making roughly 65k a year.  Which move is more mustachian?  Stay at my current employer making more in the short term or make the move for the long term raise?  I would love to retire much earlier than 58 but this city job will guarantee my retirement at that age while staying where I am will not.  i think I could manage the initial pay cut ok and the pay cut might help me live a more mustachian lifestyle as well.  Any thought?  Thanks in advance.

ooeei

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Re: Advice Regarding Career Change
« Reply #1 on: January 04, 2016, 08:36:17 AM »
Well for some quick "napkin math", with a savings rate of 31% for 22 years compounding at 5%, you'll hit the point where the 4% rule gives you 50% of your pay.  This assumes your salary stays constant the whole time. 

Basically a 50% pension is the equivalent of saving 31% of your pay for 22 years. 

Now, if you factor in the significant raise, that number may increase significantly.  The obvious downside is you'll be stuck at the same job for 22 years, or 1/4 of your life.  The other thing to consider is the possible risks of a pension.  Is that really a sustainable model for them?  Is it possible it'll be reduced somewhere down the line?  Is it possible you'll want to quit or get laid off earlier, if so what happens to the pension?  Will your boss change and require you to work extra hours and change the job significantly?  Will there be a political change where public pensions or job duties are overhauled? 

Maybe it's because I'm only 27 years old, but basing your future on committing to a job for 22 years seems crazy to me.  If you're 35, you've probably been in the working world for a total of maybe 15 years.  You're talking about committing more than that to a single job.  On the flip side, if you try it and don't like it after a year you can probably go back to the private sector without many issues. It's once you hit 10-15 years that you'll probably start feeling those golden handcuffs pulling.

Axecleaver

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Re: Advice Regarding Career Change
« Reply #2 on: January 04, 2016, 09:05:45 AM »
You really have to look at the value of ALL of the benefits. I'm not intimately familiar with NYC packages, but typically civil servants get platinum-plated benefits to make up for the lower salaries. Guaranteed low-hour work week, paid overtime or comp time, 11 paid holidays, pensions, free healthcare with no deductibles and great copays, and best of all you get both 401k and 457 tax deferred savings plans. Your calculation really has to consider the value of every benefit you get, then consider the lifestyle changes. Probably lower hours and all holidays off, more vacation, etc.

As far as failing pensions go, 401k's replacing defined benefit plans largely fixes the problem. NYC did that years ago. But even for cities that still have defined benefit plans, what happens in public service is that newer employees get the shaft, and they give great benefits to the older generations. Then the city raises taxes to cover whatever shortfalls there are. This goes on for years and years until the pension fails. If this becomes unsustainable (see: Detroit) the city just cries to the feds and gets a bailout, while the taxpayer funded handouts get cut back to egregiously generous rather than absurdly ridiculously generous. Then they post news stories about how pensioners got these huge cuts to their plans, which actually work out to something like reducing the COLA increases to match inflation.

So whatever plan you get when you sign up, you can pretty much count on that being available for you forever.

AngusBoom

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Re: Advice Regarding Career Change
« Reply #3 on: January 04, 2016, 10:30:40 AM »
The city job does offer great benefits.  Free healthcare for life being one of them.  They also offer pension and 401k as well.  Paid holidays, vacations and overtime after 40hours .  My current employer expects a 52 hour workweek in comparison. I could have opportunities at the city job to advance or to change duties with a lateral move. The pension and benefits would be locked in for me as any changes to pension and salaries would affect future employees.

Believe me I don't want to work 12 more years let alone 22, but I'm afraid that I came late to the 'stache party and wasted my 20s simply not saving money like I should have.

A more in depth look at my finances
Mortgage of 346k
Car loan of 7k
No credit card debt
130k 401k
13k IRA
24k liquid savings
My wife also has roughly 40k in 401b

Am I on the right track?  I'm sorry to derail my own thread but you guys are very informative and I appreciate all the advice.
« Last Edit: January 04, 2016, 10:37:14 AM by AngusBoom »

Mother Fussbudget

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Re: Advice Regarding Career Change
« Reply #4 on: January 04, 2016, 01:39:06 PM »
Looks like you ARE on the right track - simply asking these questions is the best sign of all.
Q:  do you live within commute distance of NYC today or would this require relocation?

You have to look at the broad spectrum of topics to consider making a career change like this - especially if it means moving from a lower COL area to an extremely HIGH COL area.  Taxes, health care costs, etc.   Having health care PAID 100% sounds like a perk you shouldn't pass up, IMHO.

Previous comments have mentioned that defined pension plans are becoming a thing of the past - consider that.
There have been attempts to revise the NYC Pension fund management (to get their 52 annual meetings down to 4; to suggest divestment in "merchants-of-death-industry-du-jour"; etc) are you researching those discussions? 
What's your monthly budget?  What's your FI number (i.e. 25x monthly budget)

Suggest you play some spreadsheet 'what if' scenarios - what if you run your current numbers including:
1) current job adding >31% to retirement funds monthly.
2) NYC job estimated start 7/1.
3) Different new job in current area / different company with higher salary.

Consider creating a case-study to get better feedback from folks with expertise in taxes, retirement accounts, cost savings idea, etc.

AngusBoom

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Re: Advice Regarding Career Change
« Reply #5 on: January 04, 2016, 02:23:35 PM »
Thank you for the kind words, those are great points to consider.  I really appreciate all of the feedback.  I have time to make my decision and I will do my research.  Thank you all for your help again.
« Last Edit: January 04, 2016, 02:32:40 PM by AngusBoom »