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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.