Job with pension versus job without - how heavily should it weigh in your decision?

[Anonymous]

I guess this is more or less a math issue, but if you were offered two jobs, one with a pension and one without, how much more should the salary be for you to take the non-pension job over the job with the pension?

Late 40's, so not at the start of career, FWIW, and state, not federal, pension system.

[Anonymous]

Depends. How many years do you need to be there to be vested? How much will the pension be? Are the jobs identical otherwise? There's very few pensions now through the government (schools, etc) that will offer what they used to. You get less, have to work more years to get any of it. If you are talking about teaching, I wouldn't take a job with a pension or without. Not worth it.

[Anonymous]

It depends on the specifics. I worked for a company that loved to talk about their pension, but in reality it was a few peanuts unless you were a very high level. Many other companies offered more in the way of 401K. Pension is nice to have, but often not worth it.

[Anonymous]

Hard to say, because some pensions aren't well funded. Just because it exists now doesn't mean it always will.

[Anonymous]

Anonymous wrote:Hard to say, because some pensions aren't well funded. Just because it exists now doesn't mean it always will.

OP here. Right! This is a big issue.

[Anonymous]

Figure out what your pension likely will be. E.g. if you accrue 1% of your final salary each year and you’re in your late 40s, you’ll get around 15% of your final salary per year at age 65 or whatever. If you expect to end up around $200k that’s $30k/year from 65-85. If the other job pays $30k more per year, obviously that’s a much better deal.

I think you’ll find that pension benefits are overrated unless it’s a job where you can spend 30-40 years.

[Anonymous]

How long does it take for the pension to vest? DH works for the state of MD, and it takes 10 years. And it requires a mandatory 7% contribution. If you leave before year 10, instead of a pension you are paid out your contributions plus a set amount of interest that in no way attempts to keep up with market rate interest had the money been invested in a traditional retirement account. At your age in the MD system, I would deem the pension to be worth very little. Pensions for a full career in the system aren’t worth that much, so the 15 or 20 years you’d get will be an even less significant pension payout.

[Anonymous]

Does the pension affect ability to collect social security? I believe teachers pensions do? In which case, you need to factor that into the math.

[Anonymous]

Anonymous wrote:How long does it take for the pension to vest? DH works for the state of MD, and it takes 10 years. And it requires a mandatory 7% contribution. If you leave before year 10, instead of a pension you are paid out your contributions plus a set amount of interest that in no way attempts to keep up with market rate interest had the money been invested in a traditional retirement account. At your age in the MD system, I would deem the pension to be worth very little. Pensions for a full career in the system aren’t worth that much, so the 15 or 20 years you’d get will be an even less significant pension payout.

+1 the MD pension was actually a deterrent to taking a state job for me. Who tf makes employees wait 10 years to vest into any retirement benefits while keeping 7% of your salary locked away?

[Anonymous]

Anonymous wrote:Does the pension affect ability to collect social security? I believe teachers pensions do? In which case, you need to factor that into the math.

In Maryland I do not believe teacher pensions are integrated with social security so you get both.

If you pay into social security, you'll get benefits. What integrated systems do is adjust your pension benefits based on your social security benefits.

[Anonymous]

Pensions have changed a lot. That said, I accepted a state job with a pension at 44. I took it for the job security. I’ve seen too many friends laid off in their 50s—and if it’s been rocky and stressful for those in two-income households, I definitely do not want to experience that as the sole one responsible for my kids.
5 years vested, mandatory contribution ranging from 3-4% based on salary. Full pension at 20 years is just 35% of highest salary. The math doesn’t really support it—but the security is worth it to me.

[Anonymous]

Anonymous wrote:Pensions have changed a lot. That said, I accepted a state job with a pension at 44. I took it for the job security. I’ve seen too many friends laid off in their 50s—and if it’s been rocky and stressful for those in two-income households, I definitely do not want to experience that as the sole one responsible for my kids.
5 years vested, mandatory contribution ranging from 3-4% based on salary. Full pension at 20 years is just 35% of highest salary. The math doesn’t really support it—but the security is worth it to me.

Forgot to note why the security is important to me: I’ve become risk averse since being suddenly widowed and don’t want that extra worry!

[Anonymous]

Pensions are not well funded.

[Anonymous]

At OP's age, and if working for the state, the pension may not be a substantial benefit, as it takes so many years to see much benefit from a pension.

Anecdote: My DH worked for the federal government from age 27 to 49. He then moved to the private sector. Upon retirement in the future, my understanding is that he'll get $30,000 per year for his pension. (His highest salary as a federal employee was $170,000 as a GS-15.) If DH dies before me, I get some portion of the pension until I die. Then there is nothing left. So if we live long lives, it may be worth it. But if we live short lives, it's not like we can pass it on to our kids.

By contrast, a private sector pension can be pretty sweet. I know someone who's had a career in sales for Hormel Foods. He's a pretty senior leader there now. After 30 years (at age 52), he'll get his full salary as a pension.

[Anonymous]

Anonymous wrote:Figure out what your pension likely will be. E.g. if you accrue 1% of your final salary each year and you’re in your late 40s, you’ll get around 15% of your final salary per year at age 65 or whatever. If you expect to end up around $200k that’s $30k/year from 65-85. If the other job pays $30k more per year, obviously that’s a much better deal.

I think you’ll find that pension benefits are overrated unless it’s a job where you can spend 30-40 years.

Right, everyone raves about the federal pension until you actually sit down and do the math. Especially considering the increased contributions for people who came into federal service from 2017 on.