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What you give for $386,000? If you were 5 years from retirement, would you move 3 hours away from your home and friends to accept a job that pays about $60,000 more annually? Assume you won’t sell your house but would rent a small one-bedroom or studio that would cost maybe $1000 a month.
So, I tried following the decision-making process of David Gartland (link to Make That Choice) to help me with my decision. First, I stated my priorities: 1) To achieve a secure financial retirement. 2) To make the most of the time I have left and build on the relationships and connections I have where I am.
Pros of taking the new job:
Cons of taking the new job:
Now, what is the worst that could happen with each choice? If I opted for the new job, I could end up with terrible bosses, coworkers and hate the work I am doing. There is a 6-month probation period and if I do not satisfy my new employers and don’t pass probation, I could be out of a job. Whether there would be a position available for me at my old job is unknown.
If I don’t take the new job, I will have less money for retirement and may have to work longer or try to cut down on expenses. And of course, my current job is not perfect but right now I am happy there. I have great bosses and coworkers.
Yes, I am happy at my current job but the lure of a more secure retirement is almost irresistible. Do I trade my current job with less pay for a more secure retirement? This question about more money versus quality of life is not new.
But making this decision at the age of 21 versus 67 is different, isn’t it? Needing money to retire is more acutely felt at the age of 67, but so is strengthening personal connections. Since I plan to retire in 5 years I have no need for networking in my career.
What would you do?
Everyone’s situation is different, and I’m wired towards being change-averse, so I probably wouldn’t do it if the main upside is money and there are so many downsides.
During my career, I considered changing jobs at key junctures. I had opportunities, but for years they didn’t pencil out—it wouldn’t work well for my kids, my husband’s career, etc. I was pretty set on staying at my first university until I retired and was happy enough with that decision, though the financial upside was limited.
Until…I got headhunted for a new position literally in my backyard that checked all the boxes. My family didn’t have to move. I would have new professional challenges I was excited about. And the long-term financial benefits of the change would be substantial. (In the short run, I actually took a slight pay cut for the new job, but I’ve now more than doubled my original salary after 16 years there.) My point is that if you pass on a job that’s not a good fit, you never know if something might fall in your lap that could be much more ideal.
Great points Dana. Thanks for your input!
Kt, Thanks for an intriguing post. Only you can decide on the non-financial aspects. But I thought it worth doing some back of the envelope calculations to see how much the new job at the higher salary would improve your retirement. I’m making some assumptions here, so take my numbers with a grain or two of salt.
1) After taxes, travel and living you likely would be able to save an additional $20K to $25K. I see in a post below you thought you cold double your $24K per year retirement savings. In 5 years that would be $120K, If you invest it at 10% per year you would have about $156K extra retirement savings. Using the 4% rule, you could withdrawal about $6,250 per year.
2) You say your additional pension growth would be 2.5% per year, for 5 years. Just looking at the additional $60K, that would be 0.025*5*60,000 = $7,500 per year. I assume the 2.5% would be applied to all your salary for the 5 years, so the impact would be greater. If the higher 2.5% accumulation rate impacted all your previous years it would be an even bigger impact.
3) It’s likely the additional income would increase your SS benefit. You could run the estimation tool on the MySSA.Gov website estimating your future earnings.
The total improvement to your retirement income would be about $14,000 per year. An increased SS could add a few hundred $$. You could compare this with what your current expected pension and SS are, and see if this is a meaningful improvement to your expected retirement finances.
My head is spinning! My pension growth would be 2.5% as opposed to the 2.3% I am getting now. So is that a 0.02% increase in the calculation of number of years worked*age factor*monthly salary? Is that how you are calculating it?
I would not be paying into social security in the new job so it would hurt my social security pension.
KT sorry for the confusion. I was assuming a certain type of pension that may not be correct. I guess a better way to put it would be to assess how the new job would improve your pension and see if it is meaningful.
Assuming you were straightforward and not trying to bias the reader by the manner you wrote your note, the underlying tone of your note, to me, screams “Don’t take the new job.”
In my three careers, Financial Services Professional, self employed Nationwide Insurance Agency owner, and college professor, I lived in 9 states and owned 10 different homes.
In my first career, I worked for 4 different companies over 28 years. Each time I changed companies it was for more money and greater responsibility. I went from p\art time auto loan collection specialist to the Group VP for the Western US, for the 2nd largest consumer finance organization in the US.
I then ventured into self employment, and built a large Nationwide Agency over a 7 year period, followed by an additional 6 years as a regional management associate in financial services.
I ended my working career with 15 years as a college professor, teach financial services, financial planning and retirement income planning.
I “followed the money” for almost 30 years, until I discover that quality of life and finding a real purpose beats “following the money” every time.
While the additional income MIGHT allow you to save additional dollars for retirement, so would a tightening of your current belt, meaning living expenses, and you would not have all the attendant “cons” about the new job to contend with.
If you are happy at your current job and you are only looking at the new job because of the salary increase, follow Jack Bogle’s advice, “Stay The Course.”
I wish you the best, regardless of your decision.
Busted maybe [looking sheepish]. But maybe not. Of course, leaving the known for the unknown always carries more risk so there will be more cons, right? But I didn’t list the pros and cons of staying in my current job. No job is perfect but overall I like my job.
Stay put. I would hope that if you are 67 or even 62, you are well on your way financially to retire. I don’t see the net gain exceeding the risks.
Thank you, I hope I am on the way. The other thing I consider is that since I do like my job I will be more inclined to stay even past 5 years if I need to. But in my family, money equaled love–at least that’s how my father showed his love.
It’s hard to say, many people would jump at the opportunity to earn 60k more per year, however, it may jump you to a higher tax bracket, did you calculate what the net worth would be after taxes plus the additional cost for your new apartment plus cable, internet etc, assuming you are keeping your old home? There will likely be rent increases yearly or depending on how long you can sign a lease for & they are generally not cheap nowadays. You will also be on probation for 6 months.
It’s also leaving the security of a good situation for the unknown so there is risk. Right now, you are coasting towards retirement in a good job you like, with terrific bosses & co-workers. I only see you coming out with about $100k to $125k more after 5 years, after taxes plus apartment costs but I could be wrong, while it’s a good amount you have to decide if it’s worth it.
If you do decide to make the move, is renting out your current home an option to increase the net worth of taking the new job?
I considered that instead of contributing the maximum of $24,000 to my 457 as I do in my current position, I would be able to contribute twice as much in the new position. That would offset some of the increased taxes. I would try to look for a month-to-month or 6-month lease.
And no, I do not want to rent out my house. I will probably go back home as often as possible. But you bring up excellent points.
if u think you are going to regret not taking it, then maybe you should go for it, go in with a sense of optimism, you seem to have the skills & experience for the job. it seems you may have some kind of nursing background, so if it doesn’t work out, maybe you can still find something.
I am a doctor. A second career for me and I didn’t start saving for retirement seriously until my late 40s. I have to weigh the risk of not liking the new job, being miserable and quitting versus staying at a lesser paying job for 5 years.
It sounds to me like you should stick with your current job. The downsides of the new position will, I fear, make for a miserable five years.
Thank you, Jonathan. Although I have to admit, the money is hard to pass up! But I keep thinking about what I would possibly lose if it didn’t work out. I
I agree. Given the same circumstances, I’d stick with the current job.
Margaret asks some good questions but I wouldn’t even need to go through them, as I know it would take a lot more than $60k to make me think otherwise.
Would you change your mind if you didn’t feel like your retirement was secure?