Help comparing job opportunity pension vs 401k

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Jman14
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Help comparing job opportunity pension vs 401k

Post by Jman14 » Mon Oct 31, 2016 12:08 pm

Hello all, I have an opportunity for a higher paying job with a longer commute. I am an healthcare worker and I am asking bogleheads for advice on which is better. The main differences are: defined benefit pension vs a generous 401k, commute time, and on call time.

Job specifics

Age: 31 years
Experience: 7yrs
Married with 6 month child
Current accumulated 401k: 275k

Job #1 (county hospital)
Salary 159k
No social security tax
Commute time: 37 morning commute and 43 min evening
Pension: employee contribution 10% (pension is 2.2% for every year worked) ~66% of salary after 30yrs
Retirement requirements are 32 years worked at any age or 5 years worked at age 65
Vacation time: 4 weeks plus 1 week for education purposes
Sick time: 15 days
Average hrs/week: 40
Health insurance: PPO plan $330/month
Call Time: 4-6 24hr in house call. I will stay in the hospital for the full day.

Job #2 (private hospital) current job
Salary 141k
Have to pay social security
Profit sharing: 15% of total salary given in 401k
Commute time: 21 min each way
Vacation time: 7 weeks
Sick time: Frowned upon to miss any time at all. If taken it is removed from vacation time.
Average hrs/week 35 not including time being in beeper call
Health insurance: HDHP with HSA 170/month with $1000 given annually. 2600/5200 deductible after which 100% paid for
Call time: 4 days a month where I usually work 12+ hrs one day and get the next off. The one caveat is after finishing the long day of work I carry a pager at home for the rest of the day until 7am the next morning. During the time on pager call I can't drink alcohol or leave house.

Being a boglehead I've crunched the numbers regarding total compensation. It seems to be a $11750 raise off the bat since job 1 doesn't pay social security. Also for the 401k to meet the pension amount (assuming death at 85) the 401k job must add an additional 3000 annually. Also while a 401k is riskier than a pension, can pensions be relied upon long term without reductions?

Jerry

batpot
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Location: Seattle

Re: Help comparing job opportunity pension vs 401k

Post by batpot » Mon Oct 31, 2016 12:16 pm

What does this mean:
15% of total salary given in 401k

That your take home is only ~$120k? Or they add ~$21k to the 401k on top of whatever you elect to add to the 401k?

also not really clear what this means:
Pension: employee contribution 10% (pension is 2.2% for every year worked) ~66% of salary after 30yrs
Retirement requirements are 32 years worked at any age or 5 years worked at age 65

...reads like a 32 year vestment, which doesn't make sense.
Last edited by batpot on Mon Oct 31, 2016 12:19 pm, edited 1 time in total.

Grt2bOutdoors
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Re: Help comparing job opportunity pension vs 401k

Post by Grt2bOutdoors » Mon Oct 31, 2016 12:18 pm

Umm, sorry, no sick time, no workee...... :) Nothing worse than having a sick physician trying to diagnose and take care of other sick folk.

Now, getting back to finances - is the state pension plan well funded today - that is 75% or more? Just because it's well funded today, does not mean that a) they will not become underfunded with time or b) that benefits can not be frozen and/or modified into the future. A 2.2% multiplier is very generous but that is partially to make up for lack of Social Security benefits. Now that's out of the way, I would not say that "not" paying into Social Security is a "raise" per say - as Social Security provides other benefits besides retirement, such as child and spouse death benefits in the case of your demise, therefore you would want to make sure you purchase plenty of life insurance on yourself, along with disability insurance. County seems to pay better, offer better benefits and "sick" time is a major benefit, working for slave drivers is not. Nothing worse than working for someone who is inhuman in a business where compassion matters.

What is meant by 4-6 24hr in house call? You are working 4 to 6 hours a day or working a 12 hour 4 to 6 shift? or a 4 days 6 hour shift? How many days a week?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

batpot
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Location: Seattle

Re: Help comparing job opportunity pension vs 401k

Post by batpot » Mon Oct 31, 2016 12:22 pm

Grt2bOutdoors wrote:"sick" time is a major benefit, working for slave drivers is not. Nothing worse than working for someone who is inhuman in a business where compassion matters.?
I read it as 4 weeks vacation, plus 3 weeks (assuming M-F) sick leave vs 7 weeks PTO. Assuming that sick leave is typically use it or lose it, while PTO can roll over, I'd take the 7 weeks PTO.

Grt2bOutdoors
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Re: Help comparing job opportunity pension vs 401k

Post by Grt2bOutdoors » Mon Oct 31, 2016 12:29 pm

batpot wrote:
Grt2bOutdoors wrote:"sick" time is a major benefit, working for slave drivers is not. Nothing worse than working for someone who is inhuman in a business where compassion matters.?
I read it as 4 weeks vacation, plus 3 weeks (assuming M-F) sick leave vs 7 weeks PTO. Assuming that sick leave is typically use it or lose it, while PTO can roll over, I'd take the 7 weeks PTO.
Sounds reasonable, so long as employer doesn't go bat crazy if one does take sick time and pays for it with PTO.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

KlangFool
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Re: Help comparing job opportunity pension vs 401k

Post by KlangFool » Mon Oct 31, 2016 12:36 pm

OP,

1) What is the minimum amount of time needed in order to qualify for the pension? If the answer is either you qualify for pension and get 100% or you get nothing, it is highly risky to get the county job. For the 401K job, you get something as long as you work there.

2) Not paying for social security is not necessary a good thing. For many people, they get more out of social security versus what they pay in.

KlangFool

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BolderBoy
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Re: Help comparing job opportunity pension vs 401k

Post by BolderBoy » Mon Oct 31, 2016 1:03 pm

Jman14 wrote:Also while a 401k is riskier than a pension, can pensions be relied upon long term without reductions?
Sounds like CRNA arrangements overall.

Unless the pension arrangement is encoded in the state constitution and "can't" be changed, pensions are subject to modifications.

Personally, I'd go with the private practice job. The yearly 15% employer contribution to the 401k + your maxed out yearly employee deferral (considering your age now) could possibly set you up for an early retirement that beats the county pension.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

Jman14
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Re: Help comparing job opportunity pension vs 401k

Post by Jman14 » Mon Oct 31, 2016 2:39 pm

Thank you for the replies

Batpot, sorry for the confusion. My salary is 141k and they add an additional 21k to my 401k for a total compensation of 162k. Regarding the retirement requirements, I meant it takes 32 years of service till I can collect the pension. Being 31 I would have to work till age 63 to be able to qualify to receive the pension. If I were to retire at age 60 I would not able to collect benefits until I was 65 since I didn't meet the 32 yr service requirement. It is either or 32yrs service at any age or age 65 with minimum 5 yrs of service. So I guess I am vested at 5 yrs.

Great2boutdoors, The pension funded ratio is 84% one of the better funded in the country. I would have to take 24hr in-hospital call 4-6 times a year. This is compared to job #2 which I would take 48 home call a year. Home call entails working for 12+ hrs one day then once home be at the beckon of the pager till the next morning at 7am.

bolderboy, you are sorta correct. I am an anesthesia assistant and not a nurse. Basically a physician assistant of anesthesia. I have a premed and not a nursing background FYI. I thought the same thing at first with the private practice job but realized there is risk (2008 financial crisis, tech bubble) with 401k investments. Defined benefit pension seem much less risk which is why public jobs usually pay less than private sector. In this case it seems public sector paying more than private I will need to look if pensions are guaranteed by state law. I swear they have it guaranteed Illinois and that is why their are broke.

Also one of main concerns is the commute time 42 min vs 80 min round trip. Is this a big deal to you guys? Is longer commute time worth the package?

KlangFool
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Re: Help comparing job opportunity pension vs 401k

Post by KlangFool » Mon Oct 31, 2016 2:46 pm

Jman14 wrote:Thank you for the replies

Batpot, sorry for the confusion. My salary is 141k and they add an additional 21k to my 401k for a total compensation of 162k. Regarding the retirement requirements, I meant it takes 32 years of service till I can collect the pension. Being 31 I would have to work till age 63 to be able to qualify to receive the pension. If I were to retire at age 60 I would not able to collect benefits until I was 65 since I didn't meet the 32 yr service requirement. It is either or 32yrs service at any age or age 65 with minimum 5 yrs of service. So I guess I am vested at 5 yrs.
Jman14,

A) So, if you are laid off from the public sector job after 5 years and any time before 65, you have no access to the pension until 65 and you have no social security. Can you contribute to 401K and / or 40X while working at that job?

B) Meanwhile, for the private sector job, you have access to the 401K money at any time and you have social security.

KlangFool

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BolderBoy
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Re: Help comparing job opportunity pension vs 401k

Post by BolderBoy » Mon Oct 31, 2016 9:53 pm

Jman14 wrote:I thought the same thing at first with the private practice job but realized there is risk (2008 financial crisis, tech bubble) with 401k investments. Defined benefit pension seem much less risk which is why public jobs usually pay less than private sector. In this case it seems public sector paying more than private I will need to look if pensions are guaranteed by state law. I swear they have it guaranteed Illinois and that is why their are broke.
I'd still take the private practice position. The future is tough to foretell no matter what, but the 401k is yours to take with you if you decide to leave after vesting; not so with the public pension. You'll do your 401k investing the BH way to minimize your risk and maximize your return.
Also one of main concerns is the commute time 42 min vs 80 min round trip. Is this a big deal to you guys? Is longer commute time worth the package?
I think a long commute sucks (have you fallen asleep at a stop light after a 24-hour shift in which you were beaten up pretty good? I have, more than once, and my commute home was 15 mintues, max.) Another vote in favor of the private practice position.

Few anesthesia folks I know have stayed in one position their entire careers.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

Jman14
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Re: Help comparing job opportunity pension vs 401k

Post by Jman14 » Sat Nov 05, 2016 11:22 pm

KlangFool wrote:
Jman14 wrote:Thank you for the replies

Batpot, sorry for the confusion. My salary is 141k and they add an additional 21k to my 401k for a total compensation of 162k. Regarding the retirement requirements, I meant it takes 32 years of service till I can collect the pension. Being 31 I would have to work till age 63 to be able to qualify to receive the pension. If I were to retire at age 60 I would not able to collect benefits until I was 65 since I didn't meet the 32 yr service requirement. It is either or 32yrs service at any age or age 65 with minimum 5 yrs of service. So I guess I am vested at 5 yrs.
Jman14,

A) So, if you are laid off from the public sector job after 5 years and any time before 65, you have no access to the pension until 65 and you have no social security. Can you contribute to 401K and / or 40X while working at that job?

B) Meanwhile, for the private sector job, you have access to the 401K money at any time and you have social security.

KlangFool
Very true to the above. In my calculations I was assuming social security would be changed greatly. I figured the retirement age to be 70 years old for benefits and benefits greatly reduced according to income. I basically figured 1/2 of max social security benefits.

I am also able to contribute to a 457 plan in which I can put in max amount (18k). I also have a 401k which is added protection. My thought process is it seems a public sector job is more stable than a private sector hospital position. The environment imho is going away from mom and pop private practice groups to more of a corporate hospital environment.

Jman14
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Joined: Tue Jan 21, 2014 10:36 pm

Re: Help comparing job opportunity pension vs 401k

Post by Jman14 » Sat Nov 05, 2016 11:39 pm

BolderBoy wrote:
Jman14 wrote:I thought the same thing at first with the private practice job but realized there is risk (2008 financial crisis, tech bubble) with 401k investments. Defined benefit pension seem much less risk which is why public jobs usually pay less than private sector. In this case it seems public sector paying more than private I will need to look if pensions are guaranteed by state law. I swear they have it guaranteed Illinois and that is why their are broke.
I'd still take the private practice position. The future is tough to foretell no matter what, but the 401k is yours to take with you if you decide to leave after vesting; not so with the public pension. You'll do your 401k investing the BH way to minimize your risk and maximize your return.
Also one of main concerns is the commute time 42 min vs 80 min round trip. Is this a big deal to you guys? Is longer commute time worth the package?
I think a long commute sucks (have you fallen asleep at a stop light after a 24-hour shift in which you were beaten up pretty good? I have, more than once, and my commute home was 15 mintues, max.) Another vote in favor of the private practice position.

Few anesthesia folks I know have stayed in one position their entire careers.
It seems like most people view the private practice job to be superior. I am still on the fence about this. I've always assumed that the private sector pays more than the public sector due to the differences in job stability and lack of pension. In my case it seems that the public sector pays more than the private sector. Assuming 6% returns on investments in the 401k for the next 30 yrs the retirement package still lacks the public job. I would need to contribute an additional 8k in addition to the 21k for my 401k to match the defined benefit package. I am estimating my retirement to be at age 60 (with reduction in benefits of 11% due to needing 2 more yrs of service) and collecting for 25 yrs.

LibertyLover
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Re: Help comparing job opportunity pension vs 401k

Post by LibertyLover » Sun Nov 06, 2016 10:40 am

In evaluating you should consider both the risk and reward sides.

Risk of the public position:

Leaving the job before 5 year vesting period for pension would leave you with no pension (laidoff, dissatisfied, better opportunity etc.).

No social security contributions:

Less ability to change jobs due to pension restraints.

Risk of the private position:

Poor performance of the 401k (less likely over the term of 30 years).

In comparison to other position, the money accumulated in the 401k will be usable regardless of how long you stay. If you desire another opportunity, you would not be locked in to reach your vesting time for the other position.

KlangFool
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Re: Help comparing job opportunity pension vs 401k

Post by KlangFool » Sun Nov 06, 2016 10:59 am

Jman14 wrote:
KlangFool wrote:
Jman14 wrote:Thank you for the replies

Batpot, sorry for the confusion. My salary is 141k and they add an additional 21k to my 401k for a total compensation of 162k. Regarding the retirement requirements, I meant it takes 32 years of service till I can collect the pension. Being 31 I would have to work till age 63 to be able to qualify to receive the pension. If I were to retire at age 60 I would not able to collect benefits until I was 65 since I didn't meet the 32 yr service requirement. It is either or 32yrs service at any age or age 65 with minimum 5 yrs of service. So I guess I am vested at 5 yrs.
Jman14,

A) So, if you are laid off from the public sector job after 5 years and any time before 65, you have no access to the pension until 65 and you have no social security. Can you contribute to 401K and / or 40X while working at that job?

B) Meanwhile, for the private sector job, you have access to the 401K money at any time and you have social security.

KlangFool
Very true to the above. In my calculations I was assuming social security would be changed greatly. I figured the retirement age to be 70 years old for benefits and benefits greatly reduced according to income. I basically figured 1/2 of max social security benefits.

I am also able to contribute to a 457 plan in which I can put in max amount (18k). I also have a 401k which is added protection. My thought process is it seems a public sector job is more stable than a private sector hospital position. The environment imho is going away from mom and pop private practice groups to more of a corporate hospital environment.
Jman14,

Social security is the largest public pension program. So, if you assume that could happen to social security, you should assume that the same could happen to your public pension at this hospital too. Or else, how could your assumptions be consistent?

KlangFool

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