Public vs Private Sector Employment

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Old Sage(brush)
Posts: 232
Joined: Sat Dec 08, 2018 8:27 am

Re: Public vs Private Sector Employment

Post by Old Sage(brush) »

I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
Topic Author
Mulleg123
Posts: 24
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Re: Public vs Private Sector Employment

Post by Mulleg123 »

Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
Old Sage(brush)
Posts: 232
Joined: Sat Dec 08, 2018 8:27 am

Re: Public vs Private Sector Employment

Post by Old Sage(brush) »

You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
OP, sorry, I don't have a good suggestion about how to evaluate it. My point is just that at your age, and likely number of continued years of employment, it is a long time and a lot can change. And, we already know that pensions have for the most part gone away in the private sector. Just my opinion, but I would not plan a 30 year career from here with the assumption that the pension that you currently have won't change, or get taken away. In terms of research, if you really want to go down that path to try to analyze it, you could look at what laws and regulations might reduce the likelihood or at least soften the blow, like for example check if vested pension benefits can't be taken away, and then consider how many years to go to vest when you will have some certainty as to at least some of the benefit. Perhaps you can get more comfortable with it knowing your specific employer, although I agree with the comment above that federal employment would seem likely to be the most secure in this regard. Good luck!
Last edited by Old Sage(brush) on Mon Dec 14, 2020 11:12 am, edited 1 time in total.
Firemenot
Posts: 475
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Re: Public vs Private Sector Employment

Post by Firemenot »

Mulleg123 wrote: Mon Dec 14, 2020 10:50 am
Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
Seems like fed pensions you can count on almost 100 percent in full. Non-fed public it seems prudent to apply some discount factor. I doubt public pensions would ever go to zero or anything anywhere near zero, but in places like CA and IL with dramatically underfunded pension systems, at some point voters may balk at the additional revenue needed to keep at 100 percent. Even then though the cuts would likely be fairly modest. More likely any dramatic changes would be in form of reform for new hires entering the system. And I don’t mean this at all as a political commentary, merely math and human nature, and cautious financial planning.
Jags4186
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Re: Public vs Private Sector Employment

Post by Jags4186 »

Firemenot wrote: Mon Dec 14, 2020 11:12 am
Mulleg123 wrote: Mon Dec 14, 2020 10:50 am
Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
Seems like fed pensions you can count on almost 100 percent in full. Non-fed public it seems prudent to apply some discount factor. I doubt public pensions would ever go to zero or anything anywhere near zero, but in places like CA and IL with dramatically underfunded pension systems, at some point voters may balk at the additional revenue needed to keep at 100 percent. Even then though the cuts would likely be fairly modest. More likely any dramatic changes would be in form of reform for new hires entering the system. And I don’t mean this at all as a political commentary, merely math and human nature, and cautious financial planning.
Agreed. The risk to public pensions is low for people already entrenched. New hires are the ones getting the shaft. I’d expect medical cost share to continue to shift towards the employee in the public sector, but you haven’t seen what some of us in the private sector pay.
Topic Author
Mulleg123
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Re: Public vs Private Sector Employment

Post by Mulleg123 »

Jags4186 wrote: Mon Dec 14, 2020 11:16 am
Firemenot wrote: Mon Dec 14, 2020 11:12 am
Mulleg123 wrote: Mon Dec 14, 2020 10:50 am
Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
Seems like fed pensions you can count on almost 100 percent in full. Non-fed public it seems prudent to apply some discount factor. I doubt public pensions would ever go to zero or anything anywhere near zero, but in places like CA and IL with dramatically underfunded pension systems, at some point voters may balk at the additional revenue needed to keep at 100 percent. Even then though the cuts would likely be fairly modest. More likely any dramatic changes would be in form of reform for new hires entering the system. And I don’t mean this at all as a political commentary, merely math and human nature, and cautious financial planning.
Agreed. The risk to public pensions is low for people already entrenched. New hires are the ones getting the shaft. I’d expect medical cost share to continue to shift towards the employee in the public sector, but you haven’t seen what some of us in the private sector pay.
This so far has been the case. They are scaling down the percents for new recipients. I'm definitely not getting as good of a deal as the people that have been here for years. They refer to it as tiers and I'm the latest - tier 5. Some tier 1 I think can earn over 100%, but they're all retiring in the next few years.
oldfort
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Re: Public vs Private Sector Employment

Post by oldfort »

Mulleg123 wrote: Mon Dec 14, 2020 10:50 am
Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
For every public pension, you should be able to find information on the funding ratio of assets to liabilities.
Madbull
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Re: Public vs Private Sector Employment

Post by Madbull »

As is common, many folks give minimal credence to pension plans, in particular public pensions. I personally think there are two underlying reasons many folks are skeptical about them...

1. Previous personal/familial experience with a pension in the private sector being gutted, with deals having to be made to ensure current and/or future retirees even get some semblance of what they were promised decades ago, at a huge cost to the company and their shareholders. Obviously, private sector pensions are extremely rare these days, and it's hard to forget how those industries let their employees down.

2. Pubic pension plans that are not well-funded, to the point of cities going broke, all over the news the last decade or so. I think this is what most people think of when they think of public pension plans.

I may have missed it, but didn't catch whether you were Fed/State/County/City. I personally feel that unless a person is in one of those poorly-funded and crappy public pension plans, in particular that use the 'Highest x years salary" formula, (which is a primary driver of those plans becoming under-funded, since they are paying out more than was put in), then it should be weighted very heavily in any decisions.

I was blessed to have spent just over two decades at the County level. That DC pension plan is consistently in the top rankings for funding percentages of public plans nationwide, (~90%), receives ZERO funds from the State, and all counties that participate in it must true-up and put their contributions in each and every year. Final benefit is also based solely on final account balance from employee and employer, and NOT the "Highest x" formula. This further helps to ensure that they can pay out in the future. ( https://www.tcdrs.org/about-us/ )

Something to consider, depending on how long you have been there, (and obviously your happiness level while there), is to stay long enough to ensure you will have that pension, and then expand your career horizons. I just left gov work, and started a new chapter at 41yo. I can draw my pension as early as 54, with a yearly value just shy of what my final salary was, (~55k). Holding off until 60yo increases that to 79.3k, and at 62yo it's worth 92.1k/yr. Those are the figures with 100% to spouse option after passing as well. I rest easier knowing that whatever I can (or cannot) accomplish with my private industry 401k over the next 20 years, that I have the security of that pension for myself and my spouse.

Never underestimate a well-funded pension. A well-funded pension with a 403/457? That's a gold mine IMO, giving a level of security that is hard to come by in the private sector.
texaspapas
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Re: Public vs Private Sector Employment

Post by texaspapas »

I'd say go and work some in private sector. You'll make more money, but more importantly you'll know how different the two are. If you've got a good working relationship with your current group in government, you'll always have a job back there. And let's be honest, mental health jobs aren't going anywhere anytime soon. Get some private experience, you might love it, and make more money to boot.

For reference I started out in government, have worked worked private sector last 5 years. While I don't love it, there's a lot of nice aspects to it, especially the pay.
vinhodoporto
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Re: Public vs Private Sector Employment

Post by vinhodoporto »

Mulleg123 wrote: Mon Dec 14, 2020 9:47 am
Jags4186 wrote: Mon Dec 14, 2020 8:33 am Don’t be lured by the “upward mobility” line of talk. They say that to everyone. They say it because it helps whet your appetite. It may very well be true, but not for you. Make this move with the eye on the next move.

An $85k pension is like having a $2mm+ retirement account. Will the additional salary allow you to save significantly more than that by the time you retire?
Based of some calculations, and reiterated by some other responders to this thread, I think so. That would certainly make the raise more marginal.
One point on the amount you will need to save to replace the pension. I think you said the pension would be equivalent to $85k today. In 30 years that probably translates to ~$170k in 2050 dollars. To generate that income, you’d need something like $4.25M in 2050 dollars.

You can play with your own assumptions but as an example to get to that number in 30 years you’d need to start saving $40k per year now, increase that each year with inflation, and earn 6% on your money the whole time. This is a simplistic calculation meant to illustrate my point. You may want to play with something like firecalc to get a better sense for different saving and market scenarios.

Would you qualify for a partial pension if you left now? That would reduce the amount you need to save above.

In addition to needing to save more to replace what you’d give up by walking away from the pension, you’ll also need to keep a larger emergency fund because you have a higher risk of getting laid off in the private sector.
oldfort
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Re: Public vs Private Sector Employment

Post by oldfort »

vinhodoporto wrote: Mon Dec 14, 2020 12:45 pm
Mulleg123 wrote: Mon Dec 14, 2020 9:47 am
Jags4186 wrote: Mon Dec 14, 2020 8:33 am Don’t be lured by the “upward mobility” line of talk. They say that to everyone. They say it because it helps whet your appetite. It may very well be true, but not for you. Make this move with the eye on the next move.

An $85k pension is like having a $2mm+ retirement account. Will the additional salary allow you to save significantly more than that by the time you retire?
Based of some calculations, and reiterated by some other responders to this thread, I think so. That would certainly make the raise more marginal.
One point on the amount you will need to save to replace the pension. I think you said the pension would be equivalent to $85k today. In 30 years that probably translates to ~$170k in 2050 dollars. To generate that income, you’d need something like $4.25M in 2050 dollars.

You can play with your own assumptions but as an example to get to that number in 30 years you’d need to start saving $40k per year now, increase that each year with inflation, and earn 6% on your money the whole time. This is a simplistic calculation meant to illustrate my point. You may want to play with something like firecalc to get a better sense for different saving and market scenarios.

Would you qualify for a partial pension if you left now? That would reduce the amount you need to save above.

In addition to needing to save more to replace what you’d give up by walking away from the pension, you’ll also need to keep a larger emergency fund because you have a higher risk of getting laid off in the private sector.
The OP clarified up thread, the pension would replace 65% of high three or high five. Getting to a $85k pension or $130k high three or high five income would be based on some combination of promotions and cost-of-living increases.
vinhodoporto
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Re: Public vs Private Sector Employment

Post by vinhodoporto »

oldfort wrote: Mon Dec 14, 2020 12:53 pm The OP clarified up thread, the pension would replace 65% of high three or high five. Getting to a $85k pension or $130k high three or high five income would be based on some combination of promotions and cost-of-living increases.
I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
oldfort
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Re: Public vs Private Sector Employment

Post by oldfort »

vinhodoporto wrote: Mon Dec 14, 2020 1:52 pm
oldfort wrote: Mon Dec 14, 2020 12:53 pm The OP clarified up thread, the pension would replace 65% of high three or high five. Getting to a $85k pension or $130k high three or high five income would be based on some combination of promotions and cost-of-living increases.
I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
I didn't read the OP as saying his pension would provide $85k in today's purchasing power. I read the OP as expecting a pension somewhere in the range of 63k-75k in today's dollars, which is 65% of 97-115k. The $85k I thought was in nominal 2050 dollars based on the OP's projections of inflation.
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Helo80
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Re: Public vs Private Sector Employment

Post by Helo80 »

Mulleg123 wrote: Sat Dec 12, 2020 12:55 pm I currently work for the government which includes a pension plan and a deferred compensation account. I make about 85k/year right now and am 33 years old. I've made some conservative projections of max salary and pensions compensation, and I'm projecting to work until about 62 and will make about what I do right now - 85k annually while retired. I also contribute heavily to a 403b. I get lots of paid time off and that will continue. I've also been recently strongly encouraged to apply for some upcoming promotional opportunities by senior management. What I do now is fun and I'm not bad at it. I also teach at a university for a night a week for a few extra bucks - 10-11k/year. This university has a 3% match and about half my income from this university job is deferred into the 401k.

However, most of my peers in the private sector make about 50% more than me. In fact, multiple companies have approached me with offers in the 105k-125k range. In particular, one company offered me 125k plus a 4% match. This company's executives have a reputation of being stubborn, aggressive, and generally unpleasant to work for. However, their is great room for upward mobility if I continue to do pretty good work.
If you go private, keep in mind:

A) Are you a profit or cost center? While IT is critical to basically any company that works in the 21st century, using Vanguard as an example... Vanguard likely sees IT as a cost center, as opposed to a profit center.
B) In the private sector, you're being hired because your employer feels as though spending $x dollars for you will give them a ROI. The FAANGs can have ridiculous salaries, but there is heavy pressure on the employees to deliver their ROI.
C) Age discrimination can be real and definitely within IT.
Thank God for Wall Street Bets.
oldfort
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Re: Public vs Private Sector Employment

Post by oldfort »

Helo80 wrote: Mon Dec 14, 2020 2:13 pm
Mulleg123 wrote: Sat Dec 12, 2020 12:55 pm I currently work for the government which includes a pension plan and a deferred compensation account. I make about 85k/year right now and am 33 years old. I've made some conservative projections of max salary and pensions compensation, and I'm projecting to work until about 62 and will make about what I do right now - 85k annually while retired. I also contribute heavily to a 403b. I get lots of paid time off and that will continue. I've also been recently strongly encouraged to apply for some upcoming promotional opportunities by senior management. What I do now is fun and I'm not bad at it. I also teach at a university for a night a week for a few extra bucks - 10-11k/year. This university has a 3% match and about half my income from this university job is deferred into the 401k.

However, most of my peers in the private sector make about 50% more than me. In fact, multiple companies have approached me with offers in the 105k-125k range. In particular, one company offered me 125k plus a 4% match. This company's executives have a reputation of being stubborn, aggressive, and generally unpleasant to work for. However, their is great room for upward mobility if I continue to do pretty good work.
If you go private, keep in mind:

A) Are you a profit or cost center? While IT is critical to basically any company that works in the 21st century, using Vanguard as an example... Vanguard likely sees IT as a cost center, as opposed to a profit center.
B) In the private sector, you're being hired because your employer feels as though spending $x dollars for you will give them a ROI. The FAANGs can have ridiculous salaries, but there is heavy pressure on the employees to deliver their ROI.
C) Age discrimination can be real and definitely within IT.
Where did the OP say they were in IT? I thought the OP was in mental health.
3of10
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Re: Public vs Private Sector Employment

Post by 3of10 »

mkc wrote: Sat Dec 12, 2020 8:44 pm
Mulleg123 wrote: Sat Dec 12, 2020 8:08 pm I appreciate the encouragement here. I am satisfied with my job. My boss let's me work on whatever project I want and it an easy environment. I am quite competitive and my peers making 100k-130k/year bugs me bad. This job that would pay 125k...the execs have a real bad reputation, but my direct boss is a good person and I would work well with him.
Immediate managers can change frequently. I think I had a new one every 18 months. No direct manager can make up for bad execs, especially if they are directed by/put in position by those execs.
+1. There's one thing that young workers need to understand (golden rule). "It's the company that hires you, and it's the manager that fires you". You're gambling more with your job security in the private sector. I have experienced more manager changes than I can count at my megacorp. There were a few of them that were so bad, that I was going to leave, but they ended up being replaced before I went through with it.
"You don't stop playing because you're old. You're old because you've stopped playing"
TallBoy29er
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Re: Public vs Private Sector Employment

Post by TallBoy29er »

Comparison is the thief of joy. You have a good gig. If you like it, stay. If not, leave. But gauging your satisfaction on what your friends make is a losing proposition.

I wonder if your friends ever think about your 40 hr weeks, ample vacation, fantastic benefits, and wonder if they should move to a government job?
THY4373
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Re: Public vs Private Sector Employment

Post by THY4373 »

Jack FFR1846 wrote: Sat Dec 12, 2020 4:20 pm I've only worked for private sector companies. From privately owned to mega tech. In short, private companies can change anything they want on a whim. New senior execs have to prove themselves so they introduce some new demand or idea which is, honestly a stupid idea. I've been pushed out because management figured out I had become older than 50. A new exec in another company decided that all engineers should work an extra hour a day and be at their desk for free because, well, that's what all engineers do, even when their work is done.

Just expect lots of potential dysfunctional behavior.
I have worked both federal public and private sector and dysfunctional behavior is just part of the human condition. It may manifest differently but it is there all the same. At least in some Federal agencies the political appointees between administrations can also come in and change lots of things but this will vary by agency. Personally I have preferred working in the private sector but YMMV.
Topic Author
Mulleg123
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Re: Public vs Private Sector Employment

Post by Mulleg123 »

TallBoy29er wrote: Mon Dec 14, 2020 2:42 pm Comparison is the thief of joy. You have a good gig. If you like it, stay. If not, leave. But gauging your satisfaction on what your friends make is a losing proposition.

I wonder if your friends ever think about your 40 hr weeks, ample vacation, fantastic benefits, and wonder if they should move to a government job?
Good call. My peers do work much more than 40 a week, have sketchy retirement options and plans, and often get PTO denied.
Topic Author
Mulleg123
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Re: Public vs Private Sector Employment

Post by Mulleg123 »

oldfort wrote: Mon Dec 14, 2020 2:20 pm
Helo80 wrote: Mon Dec 14, 2020 2:13 pm
Mulleg123 wrote: Sat Dec 12, 2020 12:55 pm I currently work for the government which includes a pension plan and a deferred compensation account. I make about 85k/year right now and am 33 years old. I've made some conservative projections of max salary and pensions compensation, and I'm projecting to work until about 62 and will make about what I do right now - 85k annually while retired. I also contribute heavily to a 403b. I get lots of paid time off and that will continue. I've also been recently strongly encouraged to apply for some upcoming promotional opportunities by senior management. What I do now is fun and I'm not bad at it. I also teach at a university for a night a week for a few extra bucks - 10-11k/year. This university has a 3% match and about half my income from this university job is deferred into the 401k.

However, most of my peers in the private sector make about 50% more than me. In fact, multiple companies have approached me with offers in the 105k-125k range. In particular, one company offered me 125k plus a 4% match. This company's executives have a reputation of being stubborn, aggressive, and generally unpleasant to work for. However, their is great room for upward mobility if I continue to do pretty good work.
If you go private, keep in mind:

A) Are you a profit or cost center? While IT is critical to basically any company that works in the 21st century, using Vanguard as an example... Vanguard likely sees IT as a cost center, as opposed to a profit center.
B) In the private sector, you're being hired because your employer feels as though spending $x dollars for you will give them a ROI. The FAANGs can have ridiculous salaries, but there is heavy pressure on the employees to deliver their ROI.
C) Age discrimination can be real and definitely within IT.
Where did the OP say they were in IT? I thought the OP was in mental health.
I am, but I think that person was just talking about themself.
Topic Author
Mulleg123
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Re: Public vs Private Sector Employment

Post by Mulleg123 »

oldfort wrote: Mon Dec 14, 2020 2:08 pm
vinhodoporto wrote: Mon Dec 14, 2020 1:52 pm
oldfort wrote: Mon Dec 14, 2020 12:53 pm The OP clarified up thread, the pension would replace 65% of high three or high five. Getting to a $85k pension or $130k high three or high five income would be based on some combination of promotions and cost-of-living increases.
I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
I didn't read the OP as saying his pension would provide $85k in today's purchasing power. I read the OP as expecting a pension somewhere in the range of 63k-75k in today's dollars, which is 65% of 97-115k. The $85k I thought was in nominal 2050 dollars based on the OP's projections of inflation.
You're correct, but I'll append by saying inflation in combination with every 3-5% year salary increases for all employees.
jerrysmith
Posts: 32
Joined: Sat Feb 16, 2019 2:20 pm

Re: Public vs Private Sector Employment

Post by jerrysmith »

Started a U job a few years ago and it would take a HUGE amount for me to leave. Compensation is fair enough but a pension, half price tuition for my kids at a good state school, good match on 403b and a relatively laid back gig make it too sweet to leave. I could easily get 20k more in private but it's just not worth it. It would take 45-50k more PLUS killer benefits and a 5 yr contract for me to even sniff it.
Topic Author
Mulleg123
Posts: 24
Joined: Sat Dec 12, 2020 12:37 pm

Re: Public vs Private Sector Employment

Post by Mulleg123 »

oldfort wrote: Mon Dec 14, 2020 11:50 am
Mulleg123 wrote: Mon Dec 14, 2020 10:50 am
Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
For every public pension, you should be able to find information on the funding ratio of assets to liabilities.
"The ratio of the valuation value of assets to actuarial accrued liabilities increased from 81.5 to 81.7. The value of the market value of assets to the actuarial accrued liability increased from 79.7% to 81.1...."

That what I'm looking for? If so, what do you think?
oldfort
Posts: 2541
Joined: Mon Mar 02, 2020 8:45 pm

Re: Public vs Private Sector Employment

Post by oldfort »

Mulleg123 wrote: Mon Dec 14, 2020 4:39 pm
oldfort wrote: Mon Dec 14, 2020 11:50 am
Mulleg123 wrote: Mon Dec 14, 2020 10:50 am
Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
For every public pension, you should be able to find information on the funding ratio of assets to liabilities.
"The ratio of the valuation value of assets to actuarial accrued liabilities increased from 81.5 to 81.7. The value of the market value of assets to the actuarial accrued liability increased from 79.7% to 81.1...."

That what I'm looking for? If so, what do you think?
81% is great. Pension concerns are more of an issue in places such as New Jersey or Illinois.

https://www.usatoday.com/story/money/20 ... /40302439/
rich126
Posts: 2450
Joined: Thu Mar 01, 2018 4:56 pm

Re: Public vs Private Sector Employment

Post by rich126 »

Mulleg123 wrote: Sat Dec 12, 2020 12:55 pm Hi everyone! New user and looking for career feedback.

I currently work for the government which includes a pension plan and a deferred compensation account. I make about 85k/year right now and am 33 years old. I've made some conservative projections of max salary and pensions compensation, and I'm projecting to work until about 62 and will make about what I do right now - 85k annually while retired. I also contribute heavily to a 403b. I get lots of paid time off and that will continue. I've also been recently strongly encouraged to apply for some upcoming promotional opportunities by senior management. What I do now is fun and I'm not bad at it. I also teach at a university for a night a week for a few extra bucks - 10-11k/year. This university has a 3% match and about half my income from this university job is deferred into the 401k.

However, most of my peers in the private sector make about 50% more than me. In fact, multiple companies have approached me with offers in the 105k-125k range. In particular, one company offered me 125k plus a 4% match. This company's executives have a reputation of being stubborn, aggressive, and generally unpleasant to work for. However, their is great room for upward mobility if I continue to do pretty good work.

A separate company with a profit based bonus system is drafting an offer of around 105k. This company has a good reputation and while they've been talking about upward movement already, nothing is promised.

These private sector companies will allow time off, but I will probably work more than the 40 hours a week like I do with the government. That probably means I'm done teaching at the university with either private sector position.

Question: Do I stay government or go private sector?

I have no idea what to do. I'm a new father just trying to make a good choice for my family.

Thanks!
You'll get varied opinions, some strongly, on this debate.

I have 21+ years in the Federal Government doing technical work. I've left twice and may go back for a 3rd tour. I've seen a lot of people leave, stay, leave and come back, and leave and never would go back. It really varies.

Some people leave and immediately regret leaving. The money is nice but losing leave, extra stress, loss of contracts, etc. can be difficult. Some people go into non-contracting jobs (Ebay, Google, Apple, etc.) and most of those are clearly talented people and usually never return.

Personally I've never been a money obsessed person. I've left mostly because I didn't want to be a government lifer and I wanted to see if I could succeed outside of government and I believe I've done that without being overly stressed or working long hours. I returned once to boost my government pension and qualify for health insurance. I may return again due to a nice opportunity and things changed in my life.

If most people are realistic about their skills and what they want in life they should figure out whether to stay or leave. If you want job security, training options, good hours, etc. then stay in the government and live within your salary. If you want $$$, don't mind more hours, less job security, and know you are good at what you do, then consider leaving.

In my experience working as a government contractor isn't rewarding at all and most contractors, especially the large ones, are about as inefficient and messed up as many parts of the government. Generally they only care about winning contracts and having billable hours. Everything else is mostly lip service even if you work for a good manager (their hands are somewhat tied).

Now if you have the skills and want to do something completely different (FANG or similar companies) that can be a real eye opener as to resources and rewards although it can have some issues as well depending on the company. I've interviewed with a few of them and turned down some technical interviews since they required relocation to areas I wasn't interested in at this point in my life. If I was younger I may have pursued them.

Personally if the only reason you want to leave is money, you'll likely regret leaving. If you have other reasons, then maybe you'll really enjoy it.

Good luck.
vinhodoporto
Posts: 71
Joined: Tue Dec 24, 2019 10:14 am

Re: Public vs Private Sector Employment

Post by vinhodoporto »

Mulleg123 wrote: Mon Dec 14, 2020 4:29 pm
oldfort wrote: Mon Dec 14, 2020 2:08 pm
vinhodoporto wrote: Mon Dec 14, 2020 1:52 pm
oldfort wrote: Mon Dec 14, 2020 12:53 pm The OP clarified up thread, the pension would replace 65% of high three or high five. Getting to a $85k pension or $130k high three or high five income would be based on some combination of promotions and cost-of-living increases.
I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
I didn't read the OP as saying his pension would provide $85k in today's purchasing power. I read the OP as expecting a pension somewhere in the range of 63k-75k in today's dollars, which is 65% of 97-115k. The $85k I thought was in nominal 2050 dollars based on the OP's projections of inflation.
You're correct, but I'll append by saying inflation in combination with every 3-5% year salary increases for all employees.
For a pension of $63-75k in today’s dollars to be worth only $85k in 2050 dollars you’re assuming an inflation rate of 0.4% to 1.0%. That’s highly unlikely. 2-3% is probably more realistic based on historical data.

At a 2% inflation rate the pension would be worth $114-$136k in 2050. At 3% it would be $153-$182k.

The reason this matters is you’d need to save 25x the amounts above (or $2.9M to $4.6M by 2050) to replace the payout from the pension and maintain a 4% safe withdrawal rate.

What are you expecting inflation to be like over the next 30 years? 1%, 2%, 3%?

Will the private sector role increase your pay enough, and will the markets perform well enough, to allow you to save $2.9M - $4.6M over the next 30 years?

I’m not trying to discourage (or encourage) you to make one choice over the other. I just want to make sure you’re valuing the pension appropriately as an input to this decision, because a lot of people in similar situations don’t.
Nuestroro
Posts: 18
Joined: Sun Jun 03, 2018 9:44 pm

Re: Public vs Private Sector Employment

Post by Nuestroro »

:arrow:
Mulleg123 wrote: Sat Dec 12, 2020 8:08 pm I appreciate the encouragement here. I am satisfied with my job. My boss let's me work on whatever project I want and it an easy environment. I am quite competitive and my peers making 100k-130k/year bugs me bad. This job that would pay 125k...the execs have a real bad reputation, but my direct boss is a good person and I would work well with him. I read you recommending me to stay put based on your feedback though.
I understand the competitive drive. My advice is to compare apples to apples. Ideally, you’d compare the present value of each job. That’s not technically possible, but it’s a good framework to use.

First, compare total compensation, not salaries. As a government employee, my total compensation is about 150% of my salary. That includes the present value of my pension, matches to deferred compensation, and health insurance subsidy. Also consider tax savings from FSAs or other cafeteria plans. Big employers have them, smaller ones might not. Annual tax savings can be in the several thousands of dollars.

Second, compare hourly compensation. When I moved from a private firm to government, I took a hefty annual pay cut but my hourly compensation increased because I went from 60-100 hrs/wk to 40. Alternately, as you’ve done, you can compare weekly income from the private gig against the government job plus side jobs.

Third, haircut earnings by the estimated probability of not getting them. I don’t know who you work for, but a municipal government is likely a better credit risk than a private firm. Credit risk is especially important for underfunded pensions.

Fourth, consider income volatility. Private sector compensation is generally more volatile. It tends to pay more in bonuses and commissions; government pays more in salary. Governments are also less likely to cut compensation than a private firm during recessions. You can expect three of those in your career. Ask prospective employees how many jobs they cut during the last few recessions. Ask what they did with compensation.

When I considered these factors, I found government compensation exceeded what I made in the private sector.
e5116
Posts: 673
Joined: Mon Oct 05, 2009 11:22 am

Re: Public vs Private Sector Employment

Post by e5116 »

oldfort wrote: Mon Dec 14, 2020 4:45 pm
Mulleg123 wrote: Mon Dec 14, 2020 4:39 pm
oldfort wrote: Mon Dec 14, 2020 11:50 am
Mulleg123 wrote: Mon Dec 14, 2020 10:50 am
Old Sage(brush) wrote: Mon Dec 14, 2020 10:40 am I agree that the value of a pension and security of the government job would APPEAR to be of huge value. However, trying to predict what is going to happen in public sector employment, or anything for that matter (can we even predict next year?), is impossible and a lot could change. So, while I think it is good to consider the perceived financial value, I would be more inclined to continue with good financial practices and planning (save more than you spend, by as much as you comfortably can, invest smartly, etc.) and otherwise make good decisions for your work happiness and life. That may mean you stay in the government job, but I would not stay in it just because you can count on the pension, since in my view you cannot. We may see pensions go away in public sector, and move to defined contribution plans, just as privates sector has. One other comment: I've been surprised how my peers have done so much better in government jobs, with certain pensions, as compared to those in private sector - so, if you were making this decision 30 years ago, with the benefit of 20/20 hindsight, my response would be different.
You're not the first person to respond to be skeptical of counting on a pension. Do you or anyone else have any recommendations on evaluating that? I'm not federal or state employed, nor am I school district. What type of info or materials would I pull from the pension to shed some light?
For every public pension, you should be able to find information on the funding ratio of assets to liabilities.
"The ratio of the valuation value of assets to actuarial accrued liabilities increased from 81.5 to 81.7. The value of the market value of assets to the actuarial accrued liability increased from 79.7% to 81.1...."

That what I'm looking for? If so, what do you think?
81% is great. Pension concerns are more of an issue in places such as New Jersey or Illinois.

https://www.usatoday.com/story/money/20 ... /40302439/
Not to get sidetracked, but while a state like IL has woefully underfunded pensions, they are very unlikely to reduce already promised benefits due to the strength of unions and political leanings of the state legislature. So yeah funding shows "pension health" but doesn't necessarily show you how likely the state is going to reduce benefits. The IL constitution is really strong in that it says the state cannot reduce benefits (the IL legislature tried once and the IL Supreme Court struck it down). So more likely scenario is for the state simply to increase taxes to try to cover the shortfall. A state like KY on the other hand would take a different approach. IL could change the constitution by putting it up for public vote on the ballot but that would take a significant shift in the state legislature for them to consider wanting to put that on the ballot.

(Note that for the teacher's pension system, as an example, they actually did change the benefits by enacting a new tier in 2011. Anybody who worked before then gets one set of benefits for their entire career, while those who started after 2011 get a much less generous package. They both pay the same amount towards their retirement/pensions so the post 2011 hires are essentially subsidizing the pre-2011 hires.)
Topic Author
Mulleg123
Posts: 24
Joined: Sat Dec 12, 2020 12:37 pm

Re: Public vs Private Sector Employment

Post by Mulleg123 »

vinhodoporto wrote: Mon Dec 14, 2020 6:34 pm
Mulleg123 wrote: Mon Dec 14, 2020 4:29 pm
oldfort wrote: Mon Dec 14, 2020 2:08 pm
vinhodoporto wrote: Mon Dec 14, 2020 1:52 pm
oldfort wrote: Mon Dec 14, 2020 12:53 pm The OP clarified up thread, the pension would replace 65% of high three or high five. Getting to a $85k pension or $130k high three or high five income would be based on some combination of promotions and cost-of-living increases.
I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
I didn't read the OP as saying his pension would provide $85k in today's purchasing power. I read the OP as expecting a pension somewhere in the range of 63k-75k in today's dollars, which is 65% of 97-115k. The $85k I thought was in nominal 2050 dollars based on the OP's projections of inflation.
You're correct, but I'll append by saying inflation in combination with every 3-5% year salary increases for all employees.
For a pension of $63-75k in today’s dollars to be worth only $85k in 2050 dollars you’re assuming an inflation rate of 0.4% to 1.0%. That’s highly unlikely. 2-3% is probably more realistic based on historical data.

At a 2% inflation rate the pension would be worth $114-$136k in 2050. At 3% it would be $153-$182k.

The reason this matters is you’d need to save 25x the amounts above (or $2.9M to $4.6M by 2050) to replace the payout from the pension and maintain a 4% safe withdrawal rate.

What are you expecting inflation to be like over the next 30 years? 1%, 2%, 3%?

Will the private sector role increase your pay enough, and will the markets perform well enough, to allow you to save $2.9M - $4.6M over the next 30 years?

I’m not trying to discourage (or encourage) you to make one choice over the other. I just want to make sure you’re valuing the pension appropriately as an input to this decision, because a lot of people in similar situations don’t.
Y'know I really wanted to project as conservatively as possible. My projections were based on the most recent 10 years of salary increases. If you think I undershot a reasonable estimate, and that's what I'm reading, then that is quite informative. I guess to be clear then...do you see salaries pacing inflation as a reasonable expectation for a county government?
flaccidsteele
Posts: 1339
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Public vs Private Sector Employment

Post by flaccidsteele »

I wouldn’t work in government because I never wanted to sacrifice my Life for money for the decades to get the pension

Private gave me the flexibility to leave once I won the game

It also gave me more capital to win the game sooner

Retired in my 40s
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
tj
Posts: 3966
Joined: Thu Dec 24, 2009 12:10 am

Re: Public vs Private Sector Employment

Post by tj »

rich126 wrote: Mon Dec 14, 2020 4:52 pm
Mulleg123 wrote: Sat Dec 12, 2020 12:55 pm Hi everyone! New user and looking for career feedback.

I currently work for the government which includes a pension plan and a deferred compensation account. I make about 85k/year right now and am 33 years old. I've made some conservative projections of max salary and pensions compensation, and I'm projecting to work until about 62 and will make about what I do right now - 85k annually while retired. I also contribute heavily to a 403b. I get lots of paid time off and that will continue. I've also been recently strongly encouraged to apply for some upcoming promotional opportunities by senior management. What I do now is fun and I'm not bad at it. I also teach at a university for a night a week for a few extra bucks - 10-11k/year. This university has a 3% match and about half my income from this university job is deferred into the 401k.

However, most of my peers in the private sector make about 50% more than me. In fact, multiple companies have approached me with offers in the 105k-125k range. In particular, one company offered me 125k plus a 4% match. This company's executives have a reputation of being stubborn, aggressive, and generally unpleasant to work for. However, their is great room for upward mobility if I continue to do pretty good work.

A separate company with a profit based bonus system is drafting an offer of around 105k. This company has a good reputation and while they've been talking about upward movement already, nothing is promised.

These private sector companies will allow time off, but I will probably work more than the 40 hours a week like I do with the government. That probably means I'm done teaching at the university with either private sector position.

Question: Do I stay government or go private sector?

I have no idea what to do. I'm a new father just trying to make a good choice for my family.

Thanks!
You'll get varied opinions, some strongly, on this debate.

I have 21+ years in the Federal Government doing technical work. I've left twice and may go back for a 3rd tour. I've seen a lot of people leave, stay, leave and come back, and leave and never would go back. It really varies.

Some people leave and immediately regret leaving. The money is nice but losing leave, extra stress, loss of contracts, etc. can be difficult. Some people go into non-contracting jobs (Ebay, Google, Apple, etc.) and most of those are clearly talented people and usually never return.

Personally I've never been a money obsessed person. I've left mostly because I didn't want to be a government lifer and I wanted to see if I could succeed outside of government and I believe I've done that without being overly stressed or working long hours. I returned once to boost my government pension and qualify for health insurance. I may return again due to a nice opportunity and things changed in my life.

If most people are realistic about their skills and what they want in life they should figure out whether to stay or leave. If you want job security, training options, good hours, etc. then stay in the government and live within your salary. If you want $$$, don't mind more hours, less job security, and know you are good at what you do, then consider leaving.

In my experience working as a government contractor isn't rewarding at all and most contractors, especially the large ones, are about as inefficient and messed up as many parts of the government. Generally they only care about winning contracts and having billable hours. Everything else is mostly lip service even if you work for a good manager (their hands are somewhat tied).

Now if you have the skills and want to do something completely different (FANG or similar companies) that can be a real eye opener as to resources and rewards although it can have some issues as well depending on the company. I've interviewed with a few of them and turned down some technical interviews since they required relocation to areas I wasn't interested in at this point in my life. If I was younger I may have pursued them.

Personally if the only reason you want to leave is money, you'll likely regret leaving. If you have other reasons, then maybe you'll really enjoy it.

Good luck.
Can I ask what ages you were when you left and came back? Did you use any sort of hiring authority to get back in other than having the career tenure? Was the "going back" position related to the original ones?
IMO
Posts: 1198
Joined: Fri May 05, 2017 6:01 pm

Re: Public vs Private Sector Employment

Post by IMO »

I think its best to look at your personal career growth and gauge it based on that as a primary factor. Some careers can work great for some occupations in various government organizations, for others private sectors can provide a more fulfilling career.

Our family had experience within both sides of the argument during different parts our careers. I grapple with the thought on the same concern: Should I advise my kid simple strive to find a government career, even if unfullfilling simply because it has a pension? Should I advise my kid to shoot for the stars to maximize his potential be it a private employee or one's own private business? This is nothing different from people advising the OP.

Many on this site are very successful with very lucrative and fulfilling careers outside of government. Many seem to have achieved great FI that pales what many in many government roles achieve. Many have seen private organization frustrations. Many have had fulfilling government careers and great financial success in government, and many have seen the frustrations of government organizations.

I am very respectful of those that raised their hand to serve in our military. However, I would never advise someone to attempt to stay in for "a short 20 yr" career simply because there is a pension involved far down the line.

Whatever route you choose, work hard and do the extra that it takes cause thats what usually opens opportunities in either career mode. Don't look back in life, could of, should of. I dont think taking the easy route necessarily leads to the greatest end of career (and life) satisfaction.

Best of luck.
Topic Author
Mulleg123
Posts: 24
Joined: Sat Dec 12, 2020 12:37 pm

Re: Public vs Private Sector Employment

Post by Mulleg123 »

IMO wrote: Tue Dec 15, 2020 5:06 am I think its best to look at your personal career growth and gauge it based on that as a primary factor. Some careers can work great for some occupations in various government organizations, for others private sectors can provide a more fulfilling career.

Our family had experience within both sides of the argument during different parts our careers. I grapple with the thought on the same concern: Should I advise my kid simple strive to find a government career, even if unfullfilling simply because it has a pension? Should I advise my kid to shoot for the stars to maximize his potential be it a private employee or one's own private business? This is nothing different from people advising the OP.

Many on this site are very successful with very lucrative and fulfilling careers outside of government. Many seem to have achieved great FI that pales what many in many government roles achieve. Many have seen private organization frustrations. Many have had fulfilling government careers and great financial success in government, and many have seen the frustrations of government organizations.

I am very respectful of those that raised their hand to serve in our military. However, I would never advise someone to attempt to stay in for "a short 20 yr" career simply because there is a pension involved far down the line.

Whatever route you choose, work hard and do the extra that it takes cause thats what usually opens opportunities in either career mode. Don't look back in life, could of, should of. I dont think taking the easy route necessarily leads to the greatest end of career (and life) satisfaction.

Best of luck.
Thanks for this. I actually think government will lead to a more challenging career than private. While I'll certainly work more hours in the private sector, securing an executive (not even necessarily top/head role) is more rare and stewards the public's money and trust more broadly than a private company. With the feedback on cash value of pension combined (security is nice - most private sector jobs I'd float into are contingent on contracts), I'm leaning towards government maybe 65 to 35
Keenobserver
Posts: 671
Joined: Thu Aug 13, 2015 1:05 pm

Re: Public vs Private Sector Employment

Post by Keenobserver »

Govs jobs have perks pvt jobs cannot match. Job security, lower stress levels, pension, more time off for yourself and fam. Make sure whatever you are leaving all those perks and relative stability for are worth it.
Keenobserver
Posts: 671
Joined: Thu Aug 13, 2015 1:05 pm

Re: Public vs Private Sector Employment

Post by Keenobserver »

flaccidsteele wrote: Mon Dec 14, 2020 11:54 pm I wouldn’t work in government because I never wanted to sacrifice my Life for money for the decades to get the pension

Private gave me the flexibility to leave once I won the game

It also gave me more capital to win the game sooner

Retired in my 40s
How did you do it? How has it been this far?
flaccidsteele
Posts: 1339
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Public vs Private Sector Employment

Post by flaccidsteele »

Keenobserver wrote: Tue Dec 15, 2020 9:56 am
flaccidsteele wrote: Mon Dec 14, 2020 11:54 pm I wouldn’t work in government because I never wanted to sacrifice my Life for money for the decades to get the pension

Private gave me the flexibility to leave once I won the game

It also gave me more capital to win the game sooner

Retired in my 40s
How did you do it? How has it been this far?
The short answer is 25 years of market timing (it’s more nuanced than that but it’s short) - dot com crash, credit crisis, US housing crash, virus crisis, etc

Failed attempt to retire (ie. got bored with hedonic treadmill 100% leisure; went back to work), learned, next attempt to retire is better so far (ie. contribute + leisure)
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
Firemenot
Posts: 475
Joined: Wed Apr 01, 2020 8:48 pm

Re: Public vs Private Sector Employment

Post by Firemenot »

flaccidsteele wrote: Tue Dec 15, 2020 10:03 am
Keenobserver wrote: Tue Dec 15, 2020 9:56 am
flaccidsteele wrote: Mon Dec 14, 2020 11:54 pm I wouldn’t work in government because I never wanted to sacrifice my Life for money for the decades to get the pension

Private gave me the flexibility to leave once I won the game

It also gave me more capital to win the game sooner

Retired in my 40s
How did you do it? How has it been this far?
The short answer is 25 years of market timing (it’s more nuanced than that but it’s short) - dot com crash, credit crisis, US housing crash, virus crisis, etc

Failed attempt to retire (ie. got bored with hedonic treadmill 100% leisure; went back to work), learned, next attempt to retire is better so far (ie. contribute + leisure)
I don’t think I could retire fully as someone in my mid-40s. I need the engagement of interesting problems. And why not make some money along the way?
oldfatguy
Posts: 775
Joined: Tue Feb 27, 2018 1:38 pm

Re: Public vs Private Sector Employment

Post by oldfatguy »

Keenobserver wrote: Tue Dec 15, 2020 9:54 am Govs jobs have perks pvt jobs cannot match. Job security, lower stress levels, pension, more time off for yourself and fam. Make sure whatever you are leaving all those perks and relative stability for are worth it.
That depends on which government, which agency, what type of position, etc.

There are a lot of overgeneralizations about public vs. private employment in this thread that simply are not true in many cases.
rich126
Posts: 2450
Joined: Thu Mar 01, 2018 4:56 pm

Re: Public vs Private Sector Employment

Post by rich126 »

tj wrote: Tue Dec 15, 2020 12:06 am
rich126 wrote: Mon Dec 14, 2020 4:52 pm
Mulleg123 wrote: Sat Dec 12, 2020 12:55 pm Hi everyone! New user and looking for career feedback.

I currently work for the government which includes a pension plan and a deferred compensation account. I make about 85k/year right now and am 33 years old. I've made some conservative projections of max salary and pensions compensation, and I'm projecting to work until about 62 and will make about what I do right now - 85k annually while retired. I also contribute heavily to a 403b. I get lots of paid time off and that will continue. I've also been recently strongly encouraged to apply for some upcoming promotional opportunities by senior management. What I do now is fun and I'm not bad at it. I also teach at a university for a night a week for a few extra bucks - 10-11k/year. This university has a 3% match and about half my income from this university job is deferred into the 401k.

However, most of my peers in the private sector make about 50% more than me. In fact, multiple companies have approached me with offers in the 105k-125k range. In particular, one company offered me 125k plus a 4% match. This company's executives have a reputation of being stubborn, aggressive, and generally unpleasant to work for. However, their is great room for upward mobility if I continue to do pretty good work.

A separate company with a profit based bonus system is drafting an offer of around 105k. This company has a good reputation and while they've been talking about upward movement already, nothing is promised.

These private sector companies will allow time off, but I will probably work more than the 40 hours a week like I do with the government. That probably means I'm done teaching at the university with either private sector position.

Question: Do I stay government or go private sector?

I have no idea what to do. I'm a new father just trying to make a good choice for my family.

Thanks!
You'll get varied opinions, some strongly, on this debate.

I have 21+ years in the Federal Government doing technical work. I've left twice and may go back for a 3rd tour. I've seen a lot of people leave, stay, leave and come back, and leave and never would go back. It really varies.

Some people leave and immediately regret leaving. The money is nice but losing leave, extra stress, loss of contracts, etc. can be difficult. Some people go into non-contracting jobs (Ebay, Google, Apple, etc.) and most of those are clearly talented people and usually never return.

Personally I've never been a money obsessed person. I've left mostly because I didn't want to be a government lifer and I wanted to see if I could succeed outside of government and I believe I've done that without being overly stressed or working long hours. I returned once to boost my government pension and qualify for health insurance. I may return again due to a nice opportunity and things changed in my life.

If most people are realistic about their skills and what they want in life they should figure out whether to stay or leave. If you want job security, training options, good hours, etc. then stay in the government and live within your salary. If you want $$$, don't mind more hours, less job security, and know you are good at what you do, then consider leaving.

In my experience working as a government contractor isn't rewarding at all and most contractors, especially the large ones, are about as inefficient and messed up as many parts of the government. Generally they only care about winning contracts and having billable hours. Everything else is mostly lip service even if you work for a good manager (their hands are somewhat tied).

Now if you have the skills and want to do something completely different (FANG or similar companies) that can be a real eye opener as to resources and rewards although it can have some issues as well depending on the company. I've interviewed with a few of them and turned down some technical interviews since they required relocation to areas I wasn't interested in at this point in my life. If I was younger I may have pursued them.

Personally if the only reason you want to leave is money, you'll likely regret leaving. If you have other reasons, then maybe you'll really enjoy it.

Good luck.
Can I ask what ages you were when you left and came back? Did you use any sort of hiring authority to get back in other than having the career tenure? Was the "going back" position related to the original ones?
I left at 37, returned at 51, left at 56 and am waiting on a job offer at 58. (HR is notoriously bad and slow so I don't know if this will work out again.)

I'm not someone who uses connections for getting back in so everything I've done has been via web sites, phone screenings and interviews. I don't think I had any "bonus" points in getting back in. In my case security clearances were involved and maybe it helped knowing I had them previously and was likely to get past the screening unlike the average candidate but I have no veteran status, disability, minority, etc. And I never returned to the original job, just to the original agency.

A lot of people tend to back door things with federal jobs which I find somewhat unfair. A family member will contact someone and try to get a manager to pull their relative's resume in order to have a better chance at getting in. I'll tell you what one person told me when I was a contractor, he said the key to getting in is persistence (and it doesn't hurt to be capable at your job) and to apply, apply, apply.
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gr7070
Posts: 1686
Joined: Fri Oct 28, 2011 10:39 am

Re: Public vs Private Sector Employment

Post by gr7070 »

vinhodoporto wrote: Mon Dec 14, 2020 6:34 pm
Mulleg123 wrote: Mon Dec 14, 2020 4:29 pm
oldfort wrote: Mon Dec 14, 2020 2:08 pm
vinhodoporto wrote: Mon Dec 14, 2020 1:52 pm
oldfort wrote: Mon Dec 14, 2020 12:53 pm The OP clarified up thread, the pension would replace 65% of high three or high five. Getting to a $85k pension or $130k high three or high five income would be based on some combination of promotions and cost-of-living increases.
I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
I didn't read the OP as saying his pension would provide $85k in today's purchasing power. I read the OP as expecting a pension somewhere in the range of 63k-75k in today's dollars, which is 65% of 97-115k. The $85k I thought was in nominal 2050 dollars based on the OP's projections of inflation.
You're correct, but I'll append by saying inflation in combination with every 3-5% year salary increases for all employees.
For a pension of $63-75k in today’s dollars to be worth only $85k in 2050 dollars you’re assuming an inflation rate of 0.4% to 1.0%. That’s highly unlikely. 2-3% is probably more realistic based on historical data.

At a 2% inflation rate the pension would be worth $114-$136k in 2050. At 3% it would be $153-$182k.

The reason this matters is you’d need to save 25x the amounts above (or $2.9M to $4.6M by 2050) to replace the payout from the pension and maintain a 4% safe withdrawal rate.

What are you expecting inflation to be like over the next 30 years? 1%, 2%, 3%?

Will the private sector role increase your pay enough, and will the markets perform well enough, to allow you to save $2.9M - $4.6M over the next 30 years?

I’m not trying to discourage (or encourage) you to make one choice over the other. I just want to make sure you’re valuing the pension appropriately as an input to this decision, because a lot of people in similar situations don’t.
This is the wrong view point on the pension value.

OP projects an annual pension benefit of 85k based on their future high 5(?) salaries. Inflating that and using the 4% SWR is double counting their pay raises and for some reason inflation of consumer goods.

That 85k already has "inflation" baked into it simply from salary increases.

They will not be receiving 170k pension income are retirement. They'll receive the stated 85k.

Yes the 85k x25 is a reasonable lump sum estimate of it's value in retirement.

OP you can clear this up by simply stating what the defined benefit is.

Do you have a X.X% times years of service annual amount?
What is that percent?
Is it a high 5 salary?
Is there an age + years of service minimum to retire? Duke of 80?

Do you also have subsidized healthcare in retirement? Is it clearly noted that is potentially retractable?

OP do you and your colleagues really see 3-5% raises consistently? Quite unusual for public sector from what I've seen.

Also, you've mention reaching the end high end of a pay slot which also is nearly impossible as those folks have been there 45 years, and you'd rather be promoted to the next slot than start at one indefinitely.

How long have you been employed by your public entity?

As for your question only you can answer whether the sacrifice of increased salary is worth the benefit of safer (not always safe) public employment and possibly better work:life balance.

I've seen entire swath of jobs removed from public sector - many hundreds forced out of public outsourced into private.

Note there are some private sector jobs with excellent work:life balance. I would suggest they're more rare, but they absolutely exist.

There are plenty of public sector jobs that suck. Maybe have horrific managers. Someone up thread mentioned the human condition exists in all. Very true.

Also note that 50% more salary can buy a ton of "job" security through added savings, a ton.

I did two decades in private; currently one decade in public. I don't necessarily see one a clear favorite over the other with all things considered. I've seen the horrible and great of both sides. They do exist.

I am one of those who could leave for public and easy 50% more. Good chance I will. Still possible I don't???

I like another up thread advice: if you're happy, can afford your lifestyle, have good career growth potential, and the public sector job won't greatly limit your career potential in the private sector a decade+ from now I'd stay - for now. If that changes at any time leave.

A good theme on Bogleheads is to not be beholden to your employer; private or public. That can be taken too far here, but the base premise is appropriate.

Do not "chase" either your pension nor a private salary. I know plenty locked into bad public situations holding on for retirement when they'd be far happier in the "tough world" of private.

Lastly, this is a "daily" decision, not one time. Things change.
WS1
Posts: 351
Joined: Wed Jan 07, 2015 3:45 pm

Re: Public vs Private Sector Employment

Post by WS1 »

gr7070 wrote: Tue Dec 15, 2020 10:32 am
vinhodoporto wrote: Mon Dec 14, 2020 6:34 pm
Mulleg123 wrote: Mon Dec 14, 2020 4:29 pm
oldfort wrote: Mon Dec 14, 2020 2:08 pm
vinhodoporto wrote: Mon Dec 14, 2020 1:52 pm

I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
I didn't read the OP as saying his pension would provide $85k in today's purchasing power. I read the OP as expecting a pension somewhere in the range of 63k-75k in today's dollars, which is 65% of 97-115k. The $85k I thought was in nominal 2050 dollars based on the OP's projections of inflation.
You're correct, but I'll append by saying inflation in combination with every 3-5% year salary increases for all employees.
For a pension of $63-75k in today’s dollars to be worth only $85k in 2050 dollars you’re assuming an inflation rate of 0.4% to 1.0%. That’s highly unlikely. 2-3% is probably more realistic based on historical data.

At a 2% inflation rate the pension would be worth $114-$136k in 2050. At 3% it would be $153-$182k.

The reason this matters is you’d need to save 25x the amounts above (or $2.9M to $4.6M by 2050) to replace the payout from the pension and maintain a 4% safe withdrawal rate.

What are you expecting inflation to be like over the next 30 years? 1%, 2%, 3%?

Will the private sector role increase your pay enough, and will the markets perform well enough, to allow you to save $2.9M - $4.6M over the next 30 years?

I’m not trying to discourage (or encourage) you to make one choice over the other. I just want to make sure you’re valuing the pension appropriately as an input to this decision, because a lot of people in similar situations don’t.
This is the wrong view point on the pension value.

OP projects an annual pension benefit of 85k based on their future high 5(?) salaries. Inflating that and using the 4% SWR is double counting their pay raises and for some reason inflation of consumer goods.

That 85k already has "inflation" baked into it simply from salary increases.

They will not be receiving 170k pension income are retirement. They'll receive the stated 85k.

Yes the 85k x25 is a reasonable lump sum estimate of it's value in retirement.

OP you can clear this up by simply stating what the defined benefit is.

Do you have a X.X% times years of service annual amount?
What is that percent?
Is it a high 5 salary?
Is there an age + years of service minimum to retire? Duke of 80?

Do you also have subsidized healthcare in retirement? Is it clearly noted that is potentially retractable?

OP do you and your colleagues really see 3-5% raises consistently? Quite unusual for public sector from what I've seen.

Also, you've mention reaching the end high end of a pay slot which also is nearly impossible as those folks have been there 45 years, and you'd rather be promoted to the next slot than start at one indefinitely.

How long have you been employed by your public entity?

As for your question only you can answer whether the sacrifice of increased salary is worth the benefit of safer (not always safe) public employment and possibly better work:life balance.

I've seen entire swath of jobs removed from public sector - many hundreds forced out of public outsourced into private.

Note there are some private sector jobs with excellent work:life balance. I would suggest they're more rare, but they absolutely exist.

There are plenty of public sector jobs that suck. Maybe have horrific managers. Someone up thread mentioned the human condition exists in all. Very true.

Also note that 50% more salary can buy a ton of "job" security through added savings, a ton.

I did two decades in private; currently one decade in public. I don't necessarily see one a clear favorite over the other with all things considered. I've seen the horrible and great of both sides. They do exist.

I am one of those who could leave for public and easy 50% more. Good chance I will. Still possible I don't???

I like another up thread advice: if you're happy, can afford your lifestyle, have good career growth potential, and the public sector job won't greatly limit your career potential in the private sector a decade+ from now I'd stay - for now. If that changes at any time leave.

A good theme on Bogleheads is to not be beholden to your employer; private or public. That can be taken too far here, but the base premise is appropriate.

Do not "chase" either your pension nor a private salary. I know plenty locked into bad public situations holding on for retirement when they'd be far happier in the "tough world" of private.

Lastly, this is a "daily" decision, not one time. Things change.

The right way to forecast the pension is to use 2020 dollars. I have a pay chart that shows my salary in my current title for every year until I retire. I assume my contract renewals will only match inflation and go from there.
tj
Posts: 3966
Joined: Thu Dec 24, 2009 12:10 am

Re: Public vs Private Sector Employment

Post by tj »

rich126 wrote: Tue Dec 15, 2020 10:22 am
tj wrote: Tue Dec 15, 2020 12:06 am
rich126 wrote: Mon Dec 14, 2020 4:52 pm
Mulleg123 wrote: Sat Dec 12, 2020 12:55 pm Hi everyone! New user and looking for career feedback.

I currently work for the government which includes a pension plan and a deferred compensation account. I make about 85k/year right now and am 33 years old. I've made some conservative projections of max salary and pensions compensation, and I'm projecting to work until about 62 and will make about what I do right now - 85k annually while retired. I also contribute heavily to a 403b. I get lots of paid time off and that will continue. I've also been recently strongly encouraged to apply for some upcoming promotional opportunities by senior management. What I do now is fun and I'm not bad at it. I also teach at a university for a night a week for a few extra bucks - 10-11k/year. This university has a 3% match and about half my income from this university job is deferred into the 401k.

However, most of my peers in the private sector make about 50% more than me. In fact, multiple companies have approached me with offers in the 105k-125k range. In particular, one company offered me 125k plus a 4% match. This company's executives have a reputation of being stubborn, aggressive, and generally unpleasant to work for. However, their is great room for upward mobility if I continue to do pretty good work.

A separate company with a profit based bonus system is drafting an offer of around 105k. This company has a good reputation and while they've been talking about upward movement already, nothing is promised.

These private sector companies will allow time off, but I will probably work more than the 40 hours a week like I do with the government. That probably means I'm done teaching at the university with either private sector position.

Question: Do I stay government or go private sector?

I have no idea what to do. I'm a new father just trying to make a good choice for my family.

Thanks!
You'll get varied opinions, some strongly, on this debate.

I have 21+ years in the Federal Government doing technical work. I've left twice and may go back for a 3rd tour. I've seen a lot of people leave, stay, leave and come back, and leave and never would go back. It really varies.

Some people leave and immediately regret leaving. The money is nice but losing leave, extra stress, loss of contracts, etc. can be difficult. Some people go into non-contracting jobs (Ebay, Google, Apple, etc.) and most of those are clearly talented people and usually never return.

Personally I've never been a money obsessed person. I've left mostly because I didn't want to be a government lifer and I wanted to see if I could succeed outside of government and I believe I've done that without being overly stressed or working long hours. I returned once to boost my government pension and qualify for health insurance. I may return again due to a nice opportunity and things changed in my life.

If most people are realistic about their skills and what they want in life they should figure out whether to stay or leave. If you want job security, training options, good hours, etc. then stay in the government and live within your salary. If you want $$$, don't mind more hours, less job security, and know you are good at what you do, then consider leaving.

In my experience working as a government contractor isn't rewarding at all and most contractors, especially the large ones, are about as inefficient and messed up as many parts of the government. Generally they only care about winning contracts and having billable hours. Everything else is mostly lip service even if you work for a good manager (their hands are somewhat tied).

Now if you have the skills and want to do something completely different (FANG or similar companies) that can be a real eye opener as to resources and rewards although it can have some issues as well depending on the company. I've interviewed with a few of them and turned down some technical interviews since they required relocation to areas I wasn't interested in at this point in my life. If I was younger I may have pursued them.

Personally if the only reason you want to leave is money, you'll likely regret leaving. If you have other reasons, then maybe you'll really enjoy it.

Good luck.
Can I ask what ages you were when you left and came back? Did you use any sort of hiring authority to get back in other than having the career tenure? Was the "going back" position related to the original ones?
I left at 37, returned at 51, left at 56 and am waiting on a job offer at 58. (HR is notoriously bad and slow so I don't know if this will work out again.)

I'm not someone who uses connections for getting back in so everything I've done has been via web sites, phone screenings and interviews. I don't think I had any "bonus" points in getting back in. In my case security clearances were involved and maybe it helped knowing I had them previously and was likely to get past the screening unlike the average candidate but I have no veteran status, disability, minority, etc. And I never returned to the original job, just to the original agency.

A lot of people tend to back door things with federal jobs which I find somewhat unfair. A family member will contact someone and try to get a manager to pull their relative's resume in order to have a better chance at getting in. I'll tell you what one person told me when I was a contractor, he said the key to getting in is persistence (and it doesn't hurt to be capable at your job) and to apply, apply, apply.
I started my federal career when I was 33.5 and I don't know if I'll be able to stick it out until 57 (I'm currently 35.5), though I don't mind my job, it's still quite early. Just looking in the agency Skype, it's kidn of shocking how many family members there seem to be in less public-facing jobs like HR.

My understanding is that after 3 years in the competitive service (my first 9 months were in excepted service), my tenure status changes from career conditional to career and for life I would be able to apply to vacancies that are open to competitive service rather than just the ones open to the public. if were to leave at say 45 and try to come back at 55, I wasn't sure how difficult that would be with such a huge gap.
Keenobserver
Posts: 671
Joined: Thu Aug 13, 2015 1:05 pm

Re: Public vs Private Sector Employment

Post by Keenobserver »

oldfatguy wrote: Tue Dec 15, 2020 10:14 am
Keenobserver wrote: Tue Dec 15, 2020 9:54 am Govs jobs have perks pvt jobs cannot match. Job security, lower stress levels, pension, more time off for yourself and fam. Make sure whatever you are leaving all those perks and relative stability for are worth it.
That depends on which government, which agency, what type of position, etc.

There are a lot of overgeneralizations about public vs. private employment in this thread that simply are not true in many cases.
Based it on OP question specifically.
deserat
Posts: 59
Joined: Fri Dec 27, 2019 5:08 am

Re: Public vs Private Sector Employment

Post by deserat »

I recommend that OP also look at pension trends over time with governments. The US federal government (not military) changed their pension scheme for payouts and required employee contribution from 1985 or so (CSRS to FERS). If you have been recently hired, you contribute 3.3% of your pay for pension purposes. Before that it was 0.8%. There has also been a continuing shift to incentivizing defined contribution aspects through matching in the TSP. The vesting time is 5 years for the pension.

For the military, it used to be 20 years or nothing. They just instituted the blended retirement system and it begins to mirror the federal civilian system: use of TSP and matching. Most new recruits and officers no longer have the traditional pension option as the transition period is over.

My point with the above is that even those supposedly gold-plated pension benefits can recede or demand more participation/employee contribution over time. Situations and rules can change, especially over several decades.

I would try to obtain several streams of income for retirement. Think of it as an asset allocation for your income. Essentially, you are spreading your risk.

Good luck with your decision-frankly, because you are thinking about it versus just reacting gives you a better probability of success.
Madbull
Posts: 95
Joined: Thu Sep 26, 2013 11:01 am

Re: Public vs Private Sector Employment

Post by Madbull »

deserat wrote: Tue Dec 15, 2020 12:57 pm ....The US federal government (not military) changed their pension scheme for payouts and required employee contribution from 1985 or so (CSRS to FERS). If you have been recently hired, you contribute 3.3% of your pay for pension purposes. Before that it was 0.8%.
Just a clarification for anyone not familiar/affected by it, but it is now up to 4.4%, as of 2014. (The 3.1/3.3 rate only last for the 2013 year prior to the most recent increase). Not that that's a horrible contribution rate at all considering what you get if you put the time in. As mentioned, everyone should have more than one source of retirement income, and with that low of a rate, there's plenty of room to pump contributions into that TSP. :moneybag
IMO
Posts: 1198
Joined: Fri May 05, 2017 6:01 pm

Re: Public vs Private Sector Employment

Post by IMO »

deserat wrote: Tue Dec 15, 2020 12:57 pm I recommend that OP also look at pension trends over time with governments. The US federal government (not military) changed their pension scheme for payouts and required employee contribution from 1985 or so (CSRS to FERS). If you have been recently hired, you contribute 3.3% of your pay for pension purposes. Before that it was 0.8%. There has also been a continuing shift to incentivizing defined contribution aspects through matching in the TSP. The vesting time is 5 years for the pension.

For the military, it used to be 20 years or nothing. They just instituted the blended retirement system and it begins to mirror the federal civilian system: use of TSP and matching. Most new recruits and officers no longer have the traditional pension option as the transition period is over.

My point with the above is that even those supposedly gold-plated pension benefits can recede or demand more participation/employee contribution over time. Situations and rules can change, especially over several decades.

I would try to obtain several streams of income for retirement. Think of it as an asset allocation for your income. Essentially, you are spreading your risk.

Good luck with your decision-frankly, because you are thinking about it versus just reacting gives you a better probability of success.
To also clarify on military, its still a pension, not as much and more emphasis has been put onto consideration that most do not stay and fulfill a career. More TSP matching type of thing. Allows one to have some retirement funds if they left or got kicked out before doing 20 years.

Previously it was for most part "all or none" for retirements. Think about that for 20+ yrs. A TSP (retirement plan) wasnt introduced essentially until 2001. That did not have matching, and one would be very unlikely to put in the maximum unless one had large bonuses such as a military physician. Things have changed in many aspects, probably for better.

Many may be envious of those that served a military career and collect a pension. Ironically, barring limiting health conditions at young ages of enlistment, most of the envious made the choice to not go that route for their prime working years because of the sacrifices required.
happychineseboy
Posts: 4
Joined: Mon Dec 17, 2018 2:49 pm

Re: Public vs Private Sector Employment

Post by happychineseboy »

I am 30 and have worked in the private sector my whole life. It is not nearly as busy as people make it out to be and I have been making a KILLING

I suspect your future workload at private corp will NOT be much more than your current federal position
tj
Posts: 3966
Joined: Thu Dec 24, 2009 12:10 am

Re: Public vs Private Sector Employment

Post by tj »

deserat wrote: Tue Dec 15, 2020 12:57 pm I recommend that OP also look at pension trends over time with governments. The US federal government (not military) changed their pension scheme for payouts and required employee contribution from 1985 or so (CSRS to FERS). If you have been recently hired, you contribute 3.3% of your pay for pension purposes. Before that it was 0.8%. There has also been a continuing shift to incentivizing defined contribution aspects through matching in the TSP. The vesting time is 5 years for the pension.

For the military, it used to be 20 years or nothing. They just instituted the blended retirement system and it begins to mirror the federal civilian system: use of TSP and matching. Most new recruits and officers no longer have the traditional pension option as the transition period is over.

My point with the above is that even those supposedly gold-plated pension benefits can recede or demand more participation/employee contribution over time. Situations and rules can change, especially over several decades.

I would try to obtain several streams of income for retirement. Think of it as an asset allocation for your income. Essentially, you are spreading your risk.

Good luck with your decision-frankly, because you are thinking about it versus just reacting gives you a better probability of success.
If you were hired by the federal government after 01/01/2014, you are paying 4.4% into FERS. Last I checked, the government is paying 15% for those of us who are paying in 4.4%. That sill seems like a shockingly good deal, especially since you can try so many different things in the federal government, and for me personally, once I hit GS-12 (which should happen in 3 years), it will be more than I ever earned in the private sector, though perhaps not after inflation adjustment. Perhaps I will be more employable in the private sector after having had the higher-level government experience, but I don't know.
flaccidsteele
Posts: 1339
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: Public vs Private Sector Employment

Post by flaccidsteele »

Firemenot wrote: Tue Dec 15, 2020 10:13 am
flaccidsteele wrote: Tue Dec 15, 2020 10:03 am
Keenobserver wrote: Tue Dec 15, 2020 9:56 am
flaccidsteele wrote: Mon Dec 14, 2020 11:54 pm I wouldn’t work in government because I never wanted to sacrifice my Life for money for the decades to get the pension

Private gave me the flexibility to leave once I won the game

It also gave me more capital to win the game sooner

Retired in my 40s
How did you do it? How has it been this far?
The short answer is 25 years of market timing (it’s more nuanced than that but it’s short) - dot com crash, credit crisis, US housing crash, virus crisis, etc

Failed attempt to retire (ie. got bored with hedonic treadmill 100% leisure; went back to work), learned, next attempt to retire is better so far (ie. contribute + leisure)
I don’t think I could retire fully as someone in my mid-40s. I need the engagement of interesting problems. And why not make some money along the way?
No job could pay me more than what my investments give me so working gets tiresome quickly

That’s why I own a business. It’s about as simple as investing tbh

I get to contribute, make money, and no politics, admin or need to be some where at some time
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
Topic Author
Mulleg123
Posts: 24
Joined: Sat Dec 12, 2020 12:37 pm

Re: Public vs Private Sector Employment

Post by Mulleg123 »

gr7070 wrote: Tue Dec 15, 2020 10:32 am
vinhodoporto wrote: Mon Dec 14, 2020 6:34 pm
Mulleg123 wrote: Mon Dec 14, 2020 4:29 pm
oldfort wrote: Mon Dec 14, 2020 2:08 pm
vinhodoporto wrote: Mon Dec 14, 2020 1:52 pm

I saw that. My point is the $85k pension the OP described is in current (2020) dollars NOT in future dollars. By the time they retire in 2050 that pension will be something on the order of $170k in 2050 dollars to have the same purchasing power as $85k today. To replace that they’d need over $4M in their portfolio in 2050.

Note: My numbers assume 2.35% annual inflation over the next 30 years. This is a little less than what we saw over the past 30 years
I didn't read the OP as saying his pension would provide $85k in today's purchasing power. I read the OP as expecting a pension somewhere in the range of 63k-75k in today's dollars, which is 65% of 97-115k. The $85k I thought was in nominal 2050 dollars based on the OP's projections of inflation.
You're correct, but I'll append by saying inflation in combination with every 3-5% year salary increases for all employees.
For a pension of $63-75k in today’s dollars to be worth only $85k in 2050 dollars you’re assuming an inflation rate of 0.4% to 1.0%. That’s highly unlikely. 2-3% is probably more realistic based on historical data.

At a 2% inflation rate the pension would be worth $114-$136k in 2050. At 3% it would be $153-$182k.

The reason this matters is you’d need to save 25x the amounts above (or $2.9M to $4.6M by 2050) to replace the payout from the pension and maintain a 4% safe withdrawal rate.

What are you expecting inflation to be like over the next 30 years? 1%, 2%, 3%?

Will the private sector role increase your pay enough, and will the markets perform well enough, to allow you to save $2.9M - $4.6M over the next 30 years?

I’m not trying to discourage (or encourage) you to make one choice over the other. I just want to make sure you’re valuing the pension appropriately as an input to this decision, because a lot of people in similar situations don’t.
This is the wrong view point on the pension value.

OP projects an annual pension benefit of 85k based on their future high 5(?) salaries. Inflating that and using the 4% SWR is double counting their pay raises and for some reason inflation of consumer goods.

That 85k already has "inflation" baked into it simply from salary increases.

They will not be receiving 170k pension income are retirement. They'll receive the stated 85k.

Yes the 85k x25 is a reasonable lump sum estimate of it's value in retirement.

OP you can clear this up by simply stating what the defined benefit is.

Do you have a X.X% times years of service annual amount?
What is that percent?
Is it a high 5 salary?
Is there an age + years of service minimum to retire? Duke of 80?

Do you also have subsidized healthcare in retirement? Is it clearly noted that is potentially retractable?

OP do you and your colleagues really see 3-5% raises consistently? Quite unusual for public sector from what I've seen.

Also, you've mention reaching the end high end of a pay slot which also is nearly impossible as those folks have been there 45 years, and you'd rather be promoted to the next slot than start at one indefinitely.

How long have you been employed by your public entity?

As for your question only you can answer whether the sacrifice of increased salary is worth the benefit of safer (not always safe) public employment and possibly better work:life balance.

I've seen entire swath of jobs removed from public sector - many hundreds forced out of public outsourced into private.

Note there are some private sector jobs with excellent work:life balance. I would suggest they're more rare, but they absolutely exist.

There are plenty of public sector jobs that suck. Maybe have horrific managers. Someone up thread mentioned the human condition exists in all. Very true.

Also note that 50% more salary can buy a ton of "job" security through added savings, a ton.

I did two decades in private; currently one decade in public. I don't necessarily see one a clear favorite over the other with all things considered. I've seen the horrible and great of both sides. They do exist.

I am one of those who could leave for public and easy 50% more. Good chance I will. Still possible I don't???

I like another up thread advice: if you're happy, can afford your lifestyle, have good career growth potential, and the public sector job won't greatly limit your career potential in the private sector a decade+ from now I'd stay - for now. If that changes at any time leave.

A good theme on Bogleheads is to not be beholden to your employer; private or public. That can be taken too far here, but the base premise is appropriate.

Do not "chase" either your pension nor a private salary. I know plenty locked into bad public situations holding on for retirement when they'd be far happier in the "tough world" of private.

Lastly, this is a "daily" decision, not one time. Things change.
This is why I'm posting on here. I have minimal financial competence. Try and be patient. With that being said...here is the info I can pluck out.


Do you have a X.X% times years of service annual amount? 54% at 30 years, 58.9% at 31 years, 64% at 32 years (would be 60, 61, 62 years of age)
What is that percent?
Is it a high 5 salary? Average of high 3
Is there an age + years of service minimum to retire? Duke of 80? Minimum is 52 years of age, 5 years of service which is 5%.

Do you also have subsidized healthcare in retirement? Is it clearly noted that is potentially retractable? Not healthcare benefit

OP do you and your colleagues really see 3-5% raises consistently? Quite unusual for public sector from what I've seen. Raises within my classification/title yes absolutely. I will inch closer to the 97k over time the next few years. Do salaries overall consistently increase? The last ~4 years we have seen that, the prior ~6 years were a bit less.

Also, you've mention reaching the end high end of a pay slot which also is nearly impossible as those folks have been there 45 years, and you'd rather be promoted to the next slot than start at one indefinitely. Based on the current culture, the longer one is here the more likely you are to be promoted. Most individuals that have been here for a while are at the top of their pay scale for their classification/title.

How long have you been employed by your public entity? Only 3 years. I have started paying more attention to my finances lately which is what landed me on this website.
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