See 2nd Post in regards to new thread title and poll.
I work for a State DOT with a great pension plan and just got a offer to a federal position. State pension plan is 28 years and you get to retire, great by normal standards but pretty slow for people of this forum. And though I admit I do not aspire for to FIRE asap to near the extent of most here but I really dig MMM's blog and philosophy and most of the people in these forums. I just posted this over at bogleheads but figured I would get this community's input as well.
How do you convert participation in a pension plan into current value to compare to a job offer? Check out my method and please advise.
I just received a job offer and am having trouble comparing the total compensation for the 2 career paths. The issue is that I have 7 years into the DOT pension plan that is vastly superior to the fed's (employee contribution: State=6%, Fed=4.4%; Multiplier x yrs of service x high 3 avg: State=2.2%, FED=1%). I will try to explain my method to calculate and compare the 2 possible career paths. Please provide constructive criticism to my method. Afterwards I'll explain my more subjective pros and cons if anyone cares to read and give me some advice. Please let me know if there is a fairly easy and secure way to share a spreadsheet on this forum as that might be more informative.
Basically because of the grade and step setup of government salary scales I can predict career growth with some confidence. I except to make ~15% ~6% more with my federal salary. So I set up a spreadsheet with each years predicted annual salary for each employer and took the difference (plus the 5% match from TSP) and assuming I invest it all and get a optimistic return of 7% (also not factoring in taxes or inflation to keep things simple) after working X number of years I see what my State Pension value will be compared to my federal pension value plus .04 x the hypothetical portfolio (4% SWR). With those calculations (favoring federal compensation: no taxes and 7% growth assuming no state raises other than promotions, but counting on maxing out the steps in the fed) the state pension value is greater than the fed pension plus 4% SWR out to 20 years. Which is when I would be eligible for full retirement at the state. I was surprised by the results, which leads me to doubt the method, and I am not sure how to calculate the current compensation value of a pension plan so that was the best method I could come up with.
Now for more personal and specific information for those that wish to keep reading. I owe you people a :beer
I currently make 81.5K 85.6K (counter offer)and expect to be promoted (waiting on superiors to retire) to 89.7k 94.1K in 5+/- years and then to 94.2k 98.8K in 7+/- years after that.
I was offered GS-12 step 6: 84.2K with high likelihood of being promoted to grade 13 step 3: 91.5K after 1 year.
Question for FEDS how quickly can a competent good employee expect to move up the steps in a grade?
My wife and I have a ~55-60% savings rate of our gross income (meaning I would be fine without the pensions or I could save nothing and live off the pensions). But I have realized this will change if we upgrade the house, move, and or have kids. I might not aspire to the RE part of FIRE near as much as I like living efficiently and managing my finances as optimally as possible. Obviously if FIRE was my main goal I would go with the higher salary and match and just forget the pension parts of the retirement.
Pros of accepting.
I like new jobs and the excitement and growth that comes with them. I have changed jobs/duties 2 times in my career thus far and I enjoy the challenge.
I like the adventure and freedom of cutting ties to the pension plan. I realize financially it is great for peace of mind and comfortable retirement. But right now it seems boring and unambitious to pass opportunities because "If I work another 20 years I will receive my pension" The freedom and mobility of taking a 401k with you is appealing.
Possibility of relocation. I would like to try living in other states, a position with the feds makes that possible without even switching employers.
More opportunities for growth.
Cons
Apprehensive about being more a regulator than a doer. I currently design, manage construction, and get my hands dirty. If I accept the position I will be more reviewing and pushing DC's agenda. I think job satisfaction could drop off and some engineering skills will probably suffer.
FEDs seem like they are more likely to be negatively effected by the politics. Government waste seems to be a growing political focal point and it seems like FEDs are more vulnerable to things such as: government shut downs, calls for salary freezes and etc.
If I do not FIRE it will be considerably longer before I can collect a pension. If I stay I can get a pension check at 52, which is still retiring relatively young and gives me the option to stay employed while I raise kids if the wife and I do decide to have some.
I currently work with great people have a good work life balance. On occasion I am called out on travel for unpredictable crises but that can be interesting along with the obvious downsides.
Sorry for the long rambling but wasn't sure how to cut it down. Thanks again!
Edited to show new details of counter offer