401k vs government pension

[Guest lieu910]

Hello,

I would appreciate some opinions/advice on the following scenario.

I am 38 and have 13-1/2 years in as an officer on a fire department. I am currently vested to receive 24% at age 60. I presently earn approx. $74k a year with annual 3% raises. If I stay 20 years, I will receive 50% collectable at age 50. Big difference.

I have an offer from a global 50 organaization, which will pay me 20k-30k more than my current salry by year 2. They offer a 401k match dollar for dollar up to 6%, plus a cash savings retirement plan at no cost.

From a retirement/security standpoint - would this be a bad move?

Thank you

[JanetM]

A few quesions first. Does the FD or the company offer any sort of retiree health benefits? Those are worth big $$. Are happy with your current work? Just because a job will pay 20 to 30K more doesn't mean you will like going to work. (And of course you will be in higher tax bracket that will eat up lots of the increase)

With that said, in 6.5 years you will locked in a pension for life of just over 40K. How long would it take you to save that much in 401k or profit sharing plan? Just as an example using calculators on the web, if you had $250,000 you could draw 40K a year for less than 7 years before you run out of money. (assuming 6% return)

[Guest mjb]

Janet: he already as a vested pension of 20k so the difference in 6.5 yrs is only 20k not 40k. Tax bracket will likely remain at 15% if he is married with two dependents and contributes max to the 401k plan. Next tax bracket is 25%, an increase of only 10%.

Retiree health care is an over rated benefit if not guaranteed under a state statute since it can be curtailed in future years or made contributory., e.g. NYC transit workers will be paying some portion of their raises toward health care. If it is guaranteed the increasing cost of health care will result in lower pay raises for workers in future years.

The major difference between the public sector and the private sector is that govt employees have civil service protection which prevents their being terminated because of a downsizing or reduction in revenue. Private employees are employees at will who can be terminated for any non discriminatory reason or no reason in the discretion of the employer. Also private sector employees pay for their health or other benefits to a larger amount than public employees. You might want to compare health care and disability plans to see which provides better benefits.

The major difference is that you will be earning more money but will give up the job security and non contributory benefits that you currently have.

[Guest lieu910]

A few quesions first. Does the FD or the company offer any sort of retiree health benefits? Those are worth big $$. Are happy with your current work? Just because a job will pay 20 to 30K more doesn't mean you will like going to work. (And of course you will be in higher tax bracket that will eat up lots of the increase)

With that said, in 6.5 years you will locked in a pension for life of just over 40K. How long would it take you to save that much in 401k or profit sharing plan? Just as an example using calculators on the web, if you had $250,000 you could draw 40K a year for less than 7 years before you run out of money. (assuming 6% return)

No health benefits for retiree's.

[JanetM]

I think it comes down to personal choice. Will you like what you would be doing for the new employer? Are you disciplined enough to save on your own?

My view is that if you are unhappy & stressed over your work it affects you and your familiy.