The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Chrissy on November 24, 2019, 07:21:56 AM
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My employer is a non-profit with a lot of unusual perks. Published in our handbook is a defined separation package. The handbook lists how to qualify and the way the payout is calculated: [wage] x 40% x years of service. I've seen them actually pay this out to two colleagues just in my small department in the last 10 years, and I haven't seen them play any dirty tricks to try to get out of it.
I meet the requirements. Should I count this money in my worth?
If I left today, it would be a whopping $7k. However, the years and the percentage of wage scale up with time. By the time I'm 54, it would be $37k.
Thoughts?
*edited the equation for clarity.
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I wouldn't. It's not your money. And just because they have paid it out doesn't mean they will continue doing so. All they need to do is get a new ED or Board member and that could be gone.
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No, I don't count anything that's not in my control. They could always change the policy. Do you really get it if you quit voluntarily anyway? Also, even $37k isn't very much money. If it was more significant I guess I might count it only to the extent of saying "if I left right now, would this push me over the edge to FIRE." That way you're not worried about policy changes, only whether the severance would push you over the line if you left right then and took the payment.
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I wouldn't. It's not your money. And just because they have paid it out doesn't mean they will continue doing so. All they need to do is get a new ED or Board member and that could be gone.
Good point. If they were doing away with the package, they would probably discontinue it just for new hires, but... no guarantee!
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Do you really get it if you quit voluntarily anyway?
Yes! It was put into place when the company was young and couldn't afford pension/403b, and everyone was YEARS away from being able to qualify. Then, we grew up, started offering the more usual retirement plans, and wanted to do away with this benefit. BUT, by then, a bunch of people had qualified, and they felt like this made up for the years the company contributed nothing, so, it was kept.
I came aboard about 10 years later, and predicted they'd sunset it before I qualified, but that didn't happen and doesn't seem to be in the works, either.
Also, even $37k isn't very much money. If it was more significant I guess I might count it only to the extent of saying "if I left right now, would this push me over the edge to FIRE." That way you're not worried about policy changes, only whether the severance would push you over the line if you left right then and took the payment.
Right now, I keep it in my spreadsheet, but it doesn't contribute to the total. Guess I'll keep it like that.
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I counted unused vacation toward my net worth, as there's a legal obligation to pay that out upon leaving the company. This thing is probably a little bit less guaranteed, but I'd probably still count it. If they rescind the policy before you're ready to quit, you'll have to count it as a negative change to your net worth, which I think is fair. It might make you think about whether you want to accelerate your departure before the policy change goes into effect. That seems like a perfectly rational thing to do in that scenario.
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wage x 40% x years of service.
This seems like it would throw out a number far greater than $7k.
e.g. even if you were only being paid $20k a year and been there for one year, this works out to be $8k.
Are you sure the maths is right?
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I counted unused vacation toward my net worth, as there's a legal obligation to pay that out upon leaving the company. This thing is probably a little bit less guaranteed, but I'd probably still count it. If they rescind the policy before you're ready to quit, you'll have to count it as a negative change to your net worth, which I think is fair. It might make you think about whether you want to accelerate your departure before the policy change goes into effect. That seems like a perfectly rational thing to do in that scenario.
Right. If I left today, I'd get $7k for sure, so why not count it? If they take it away, I'd just take it out of the spreadsheet, and my total would go down by x amount, the same way it does when stocks fall.
Gonna have to discuss this with Husband.
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wage x 40% x years of service.
This seems like it would throw out a number far greater than $7k.
e.g. even if you were only being paid $20k a year and been there for one year, this works out to be $8k.
Are you sure the maths is right?
In the equation, wage is not equal to Yearly Salary.
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My personal inclination would be to count it.