State Job vs Private Sector Job - Which is best for bottom line in this case?

[onlymike]

The pension would be great. I wouldn't give it away if i had it. But I would rather have my options and yearly bonuses. Not to mention 401k matching. But that' s just me. Now throw medical in there and you are talking a different animal I don't know what the break even on that would be. Medical care in retirement can be very valuable?

[ecsdude]

Originally Posted by griffon652

Yeah sorry I meant private. And as for the rest of the benefits you mentioned; those are the reason I have a strong preference for public jobs with pensions over private jobs. However, I was just purely sticking to the numbers. Any decision factored around those benefits will be a personal decision you will have to make.



I'm was just being objective and sticking to what the OP said. I didn't factor in any raises because Op didn't mention them. If he assumes that he will get more raises in the private job then what I stated would still apply but make a stronger case for why its better to take the private job.

I was in a situation where the private sector job probably at best would enable me to see 3% pay increases annually, at best, with the potential for even less.. the only way to really see larger pay increases in my position would be to up-level and apply for a higher-level job. Unfortunately, the company mostly allows lateral moves. The only way then to move up would be through promos (difficult to come by given the atmosphere at the company in recent years), or by leaving the company and getting rehired into a higher grade.

That's why I didn't emphasis any significant movement in salary for the private sector scenario as it existed.

[Tall Traveler]

I have worked both and much prefer private sector. Overall, most people have done better sticking to government jobs as the pay and benefits add up over time. In my case, the private sector difference was great enough that I have done better in the private sector and it's been much less boring and frustrating. If I had stuck it out in the govt sector, I'm sure I would have been fine as well, just bored.

[beaste]

Less volatility, more job security in the State/Government sector.

[hawaiishrimp]

Originally Posted by ecsdude

Given a reduction in CA state job pension benefits 3 years ago (due to PEPRA), some of the incentive of working for the state and getting a pension has gone. For example, here is a scenario:


PUBLIC SECTOR:


-Early 40's
-$58K annual salary (steady 5% increases up to the $76K cap, which would be reached in about 6 yrs)


-if work 20 years, should get 40% of highest salary over last 3 years of career. Let's say that is $86K.
You'd get 40% of that before taxes for the rest of your life if you stay 20 years and retire at 62.
This comes out to about $2866/mo


-if work 10 years, you get only 10% of highest salary over last 3 years of career before taxes for the rest of your life and retire at 52. Let's say that's $86K salary, you'd only get 10% of that. This comes out to about $700/mo before taxes..


-if you work 5 years, you get only 5% of highest salary over last 3 years of career before taxes for rest of your life and retire at 52 (you'd vest in 5 years, and have to wait another 5 to retire and collect).
This comes out to about $350/mo before taxes.. maybe enough to make a car payment or some entertainment money in retirement.


- 401K - no employer match or contribution.
- 457 - similar to 401K and can have both.. again no employer match or contribution.
- no performance bonuses
- no stocks.
- Pay will be approximately $15-20K lower than private sector job at the start, but by year 6 the gap will close.


- conservative life expectancy set to 75. clearly the longer you expect to live, the greater the pension benefit comes out to be.


PRIVATE SECTOR


- $15-20K higher salary
- IT in hospital sector may be more stable; work for a tech company will be more volatile
- performance bonus historically around $4500-$6000 annually before hefty taxes (since this is a bonus
and not salary).
- stock awards of roughly $1500-2000 annually, but they don't vest for a few years.
- 401K employer contrib that maxes out at like 5-6% of salary, maybe around $4K per year.
- pay increases, usually around 2-3% annually, but possible for people to get 0-1% some years.
- conservative life expectancy set to 75.


Which option do you think has you coming out ahead the most?

If I were in your exact situation, I will stay in public sector and work 20 years and get a full pension.

[UntilTheNDofTimE]

The Government/Private sector debate really comes down to how you value stability and job security vs income. Another factor that's been mentioned here is job satisfaction. Most of my co workers seem to be bored with the mudane workload associated with working for the government. It's odd when I see someone doing the same job for 7+ years. I hear people here saying that they could not do the same job for 40 years, I've been with government for five years and have been an executive assistant, a laborer, and worked in HR handling payroll and recruitment. All under the same CalPERS Union. I hope to retire in my mid 40's but should I have to work until I'm 60, I'll get 76% of my high 3 year salary with medical and dental fully covered in retirement. And in that time I'll probably have had 7-10 different jobs.

With all of this said, if I were in your shoes at my age with my goals in mind, I'd probably jump **** to make the 20k more knowing I could easily return to govt employment if I so choose. For me, and I'm sure yours is the same, 20k is more than 20k. You get your 6% match, and you save 6-8% in mandatory pension contributions you make as a govt employee. You may also save on union dues. But you may pay more for health benefits and may pay significantly more in retirement. If I was you I would figure out what I think health benefits will cost in 20 years vs free and use that as a determining factor. There is a well known poster here with a net worth in the millions that talks about how he now pays 14-18k a year in health premiums for their family of 2.

[Burkmere]

Originally Posted by WhyRUMad

Can't you move onto other state jobs as the years go by?


I'm a federal employee. I started at about what you are going to start at but now make a solid six figure salary and still have 22 years to go. I love working for the fed due to the job security and the pension. I'll never make millions, but I'll always have a solid salary and a quality retirement.


I also have side incomes.


It depends on how much risk you are prepared to take. Federal jobs are considered the gold standard and are almost impossible to get. I don't know about state, but it sounds solid to me.


Good luck on whatever you choose.

I certainly wouldn't say Fed jobs are the "gold standard." My public sector pension is more than double the Fed pension and it paid better also.

True, they are probably "cush" jobs, but their benefits (particularly their pension) is less than many public sector pensions.

[ecsdude]

Originally Posted by hawaiishrimp

If I were in your exact situation, I will stay in public sector and work 20 years and get a full pension.

That's by the thing, to get a full pension you need to work like 40 years.. I can work 20 years and retire at 62 with 40%.. If my salary high over my final 3 years is $90k that's a $38k annual pension before taxes. Makes it a harder decision and harder to know if I'd come out ahead significantly overall by staying with state or pursuing private sector opportunities with higher pay.. Several opportunity costs have to be factored in to really properly weigh the options.