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How Many Pay Cuts?
Old 10-05-2013, 10:18 AM   #1
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How Many Pay Cuts?

Reflecting on the "how many layoffs" thread I wondered how many have taken a big pay cut (voluntarily or otherwise) on the way to FIRE?

I took three pay cuts of over 25%, all voluntary in order to downshift, change lanes and maintain work/life balance. Fortunately LBYM enabled me to leave situations when I could see conditions deteriorating. Now I'm in the coasting to an exit lane.

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Old 10-05-2013, 10:51 AM   #2
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Originally Posted by Tekward View Post
Reflecting on the "how many layoffs" thread I wondered how many have taken a big pay cut (voluntarily or otherwise) on the way to FIRE?
Frozen twice, a 5% pay cut masquerading as a pension freeze / 401(k) contribution tradeoff, and an "incentive plan" that greatly reduced compounding of future raises. No volunteering was necessary, and planning FIRE date is a bit elusive yet, HC costs are just too volatile right now - so megacorp still has a few more hands to deal yet.

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Old 10-05-2013, 11:19 AM   #3
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I took a 50% pay cut and still work 40 hours a week. Coworkers looked at me dumbfounded when I told them what I was doing. They still don't get it, but I don't have anymore chest pains and I sleep well. I'll coast to the finish line..18 more months or so.

DW took a 60% pay cut but she only works two days a week now. That has worked out very well. She works 60% less now. She is making the same per hour as she did before, just working less. She likes working 2 days a week to keep her contacts.

Funny thing is, with all the pay cuts, we still manage to save 25% of our income. We used to save 70% or more, but once you have enough, why kill yourself trying to get more? That's the way we look at it.
Retire date sometime in 2017
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Old 10-05-2013, 11:29 AM   #4
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I took a ~20% pay cut when I changed jobs and moved from Boston area back to my native Vermont in 1986. Given difference in cost of living and quality of life I figured I was even or ahead.

I also took a pay cut when I went to part time but I don't really think of it as a pay cut since it was proportional - 50% work for 50% pay.
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Old 10-05-2013, 12:03 PM   #5
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Basically been taking a small one every year for the past 6 years. Megacorp won't give raises and have changed bonus structure to be tighter. Today I make slightly less than in 2008 in real dollars. I don't want to think about it in inflation dollars.

This is all due to the squeeze from overseas competition in software. Meanwhile, all our country's tech leaders are saying there is a shortage in my field. Doubt they could do this successfully if there were.

I could relocate to Kalifornia and change jobs, but any raise would get soaked up in extra costs. So, I'm dealing with the pay cut. Again, close to ER so it isn't worth the bother. Hence, I'm not bitter. But I'm sure as hell not motivated by this turn of events either.
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Old 10-05-2013, 12:09 PM   #6
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I took two pay cuts. The first was back in 2001 when I first switched from working full-time to part-time (20 hours per week). After taxes, the pay cut was about 40%. The second was in 2007 when I reduced my weekly hours worked from 20 to 12.

While I was hopeful that a 12-hour work week would be satisfactory, as my ER plan came into shape I realized I needed to reduce my weekly hours worked from 12 to zero. That happened in late 2008, nearly 5 years ago.
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
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Old 10-05-2013, 03:38 PM   #7
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When I moved from Minneapolis back to North Dakota in 1974 I took a 20% pay cut. But, with the difference in income taxes between the two states I wound up taking home $7 a month more in ND.
"Don't take life so serious, son. It ain't nohow permanent." Pogo Possum (Walt Kelly)
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Old 10-05-2013, 03:48 PM   #8
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I've been lucky to never have taken pay cuts on my way to FIRE. In my late 20's I did turn down a promotion and pay rise because I didn't want to be a manager that young. In the last few years before I retired I turned down a promotion because I didn't want the extra aggro, and for the last 2 years before ER I took a purely engineering job with no one working for me. I fully expected a pay cut but the company was great and kept me at the same salary level.
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Old 10-05-2013, 04:00 PM   #9
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I took a drastic pay cut when I changed careers at my first retirement (age 43). Both in dollar terms, and my military pay included a large chunk that was not taxable. Still, I enjoyed my new civilian career so much that it didn't bother me a bit.

DW voluntarily took nearly a 50% pay cut about four years ago to go from a high stress IT job to a lower stress HR job at the same workplace. It was a great decision and she never regretted it for a minute.
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Old 10-05-2013, 05:10 PM   #10
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I never took pay cuts directly to my base salary. But in the past 10 years or so I did not receive a raise in about half of those years so my base salary did not keep up with inflation. Additionally, during that time my pension was frozen, company contributions to 401k were cut several times, bonus formula was changed nearly every year resulting in smaller and smaller bonuses, we had furloughs several times resulting in less salary, employee share of healthcare costs increased multiple times... Yet I still managed to FIRE this year shortly after turning 55.
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Old 10-05-2013, 06:07 PM   #11
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Never had a paycut to my base salary, but over 34 years the bonus opportunities have caused my income to fluctuate. For example, up over 40% one year, down 35% one year. However, we always treated those bonus as "extra" money and never built them into our "normal" lifestyle (and we LBYM below my base salary).
Current target FIRE date: June 2017 or +50K to the portfolio, whichever comes first
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Old 10-05-2013, 07:16 PM   #12
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My first giant pay cut happened when I left nuclear engineering and went into law. By my calculations, it took me at least 12 years after law school to break even financially. Then, in 2007, I voluntarily took a 75% pay cut to move from private practice into public service. And every year since, I made less than the year before, until just this summer when I finally got a pay raise.
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Old 10-05-2013, 07:34 PM   #13
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Our base income dropped only once. It was in 2005, DW and I made risky career moves but it paid off a few years later.
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Old 10-05-2013, 07:35 PM   #14
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I had a pay freeze many years ago when I was a resident: they stopped paying overtime (which was mandatory and amounted to approximately 40 hours per week). I had a pay cut followed by a freeze about 20 years ago as a young academic physician, but it applied to university money only, so it was not a huge deal. I took a pay cut again to move to my last job. The pay cut was supposed to be less than 20% but it turned out to be more like 30% because certain streams of income did not materialize. Finally I had the great RE pay cut, but at least I am getting more enjoyment out of life for my money!
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Old 10-05-2013, 08:16 PM   #15
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Went to part-time for a while, so that was a pay cut. Lived through a few company wide pay freezes. Company crash at the end of the internet bubble left me unemployed and best job I could find was close to a 40% paycut. Took a couple years and a job change to get that back, but I think I still ended up much better off than coworkers who held out for comparable pay and were years out of work. Companies who laid me off and hired me back always did so with a raise or a bonus, so that generally worked out.
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Old 10-06-2013, 06:48 AM   #16
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I've worked for myself since 1989 as a salesman in the building products industry. I always paid myself a modest salary during the course of the year and then paid myself a bonus at year end based on profitability. Bonuses mostly increased steadily over the years up until the recent near economic meltdown when the housing market collapsed. My income dropped almost 40% overnight and really just started to recover last fall. Then early this year, the product I sell was hit with import duties of 43% and sales dropped significantly again. I ended up having to cut my base salary by 20%. Now, the import duty was just increased to 73% and I'm dead in the water.

I could source new products but that would involve more work than I care to do at this point. Had already planned on semi-retiring and working maybe 10 hours a week just to help stay busy and pad the accounts but now it's just not worth it so I am fully retired.
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Old 10-06-2013, 07:35 AM   #17
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I took a pay cut after being let go from mega... with bonus, close to 30%... but, the new job was easy with a shorter commute....

Still, I would have stayed at mega if given the chance...
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Old 10-06-2013, 09:16 AM   #18
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My pay has been frozen since 2010. Since I was at the GS15 pay cap already, I don't get within-grade increases, let alone promotions. I did get a small (1.5%) performance bonus each year, and a modest cash award for a project which turned out better than expected, but I've already been told I'll get no bonus this year because I'm "learning a new job." This job requires me to work rotating 12-hour shifts, and since my pay is capped, I cannot receive shift pay.

Also, I'm emergency essential, so working twice as hard these days because everyone else is furloughed. For some reason, they didn't furlough our customers!

My only hope is that there will be enough people in HR at the end of this year to take my retirement application, and in OPM to process it.

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Old 10-06-2013, 10:07 AM   #19
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After getting an outsourced notice to suddenly become a contractor instead of a long time employee, I walked and decided to call it a career. I politely said.."Take this job and ..."

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Old 10-06-2013, 10:29 AM   #20
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Our base income had lots of volatility over the years. Devaluation and echange controls were one reason, many job changes (within the same company) were the other, especially moving from jobs that had large components of bonus and commission to mostly fixed salary.

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