Early 30s, work as contracted management in a government employer. Salary ~120k.
So I had 3 years in with previous employer, left before vesting in 401a.
Took a new management job, been here about 4 years. I've renegotiated my contract a couple times and so I'm basically getting:
-25% of compensation contribution to retirement account.
-Participation in DB plan; 2.72 multiplier, age 57 retirement, 5 year compensation average, they bought my 3 years of service from previous employer into the pension, vest after 10 years. If I vest after 10 years I transfer 50% of the 401a contributions to the pension (not the account balance) and then continue receiving the DB benefit and 12.5% contribution.
My old boss at my previous employer has reached out to me and basically wants me to take his job when he retires in about two years. The organization is about three times larger than my own so it would be a good step up resume wise and a total salary of probably ~160. So about a 33% raise for me (compensation doesn't scale well in the public sector; x5 budget, x3 # of employees, 33% raise).
My problem is that with the timeline I won't be vested in my current organization (and the previous 3 years). I'm basically walking out on 9 years or 25% of my income in a DB retirement if I "take this promotion."
Also, the old organization closed their DB plan 10 years ago so they can't buy me out of the previous 9 years and they can't provide a traditional DB going forward (I'm getting a 2.72 DB, and a 12.5% DC now). Even if they gave me a 30% or 40% DC (which would exceed 401/457 contribution limits) I'm not sure it could ever make up for the lost 9 years or the lack of a DB going forward.
In all of my research the only thing I could find for a governmental employer to "account for this" is a top hat 457(f) unqualified defined benefit plan where it would basically simulate a pension but I would be the only one in it. Basically used only for university presidents and top nonprofit execs that are making 400k+ to make up for retirement contribution caps on top earners. The problem is that these things seem complex; requiring post tax contributions, rabbi trusts to protect assets from future management change of heart, actuarial support to calculate value of future income stream of the annuity for tax purposes, etc. If they had to buy out my 9 years day one it would also probably be hundreds of thousands of dollars (I have no idea; annuity calcs put it at 400k+ but that is the cost of buying a product not necessarily the value if the employer simply provided the income stream through the trust). I'd probably need to vest in it over a 5 year period to spread out the cost.
Is there another way to achieve this type of retirement income replacement with the new employer that I'm missing or am I basically golden handcuffed to my current situation?
Am I overvaluing the DB retirement? I don't think so but I may be lacking perspective. I've made spreadsheets using the rule of 25 (multiply income stream by 25 to calculate lump sum equivalent value) compared to 401 contributions yielding 5% ROI. The ROI may seem low but the 401 plan administrator has high expense ratios and fairly limited investment options.
What would you do?
Anything else I should consider or be looking at?
I'm trying not to make a huge mistake that I will regret 20 years from now.
So I had 3 years in with previous employer, left before vesting in 401a.
Took a new management job, been here about 4 years. I've renegotiated my contract a couple times and so I'm basically getting:
-25% of compensation contribution to retirement account.
-Participation in DB plan; 2.72 multiplier, age 57 retirement, 5 year compensation average, they bought my 3 years of service from previous employer into the pension, vest after 10 years. If I vest after 10 years I transfer 50% of the 401a contributions to the pension (not the account balance) and then continue receiving the DB benefit and 12.5% contribution.
My old boss at my previous employer has reached out to me and basically wants me to take his job when he retires in about two years. The organization is about three times larger than my own so it would be a good step up resume wise and a total salary of probably ~160. So about a 33% raise for me (compensation doesn't scale well in the public sector; x5 budget, x3 # of employees, 33% raise).
My problem is that with the timeline I won't be vested in my current organization (and the previous 3 years). I'm basically walking out on 9 years or 25% of my income in a DB retirement if I "take this promotion."
Also, the old organization closed their DB plan 10 years ago so they can't buy me out of the previous 9 years and they can't provide a traditional DB going forward (I'm getting a 2.72 DB, and a 12.5% DC now). Even if they gave me a 30% or 40% DC (which would exceed 401/457 contribution limits) I'm not sure it could ever make up for the lost 9 years or the lack of a DB going forward.
In all of my research the only thing I could find for a governmental employer to "account for this" is a top hat 457(f) unqualified defined benefit plan where it would basically simulate a pension but I would be the only one in it. Basically used only for university presidents and top nonprofit execs that are making 400k+ to make up for retirement contribution caps on top earners. The problem is that these things seem complex; requiring post tax contributions, rabbi trusts to protect assets from future management change of heart, actuarial support to calculate value of future income stream of the annuity for tax purposes, etc. If they had to buy out my 9 years day one it would also probably be hundreds of thousands of dollars (I have no idea; annuity calcs put it at 400k+ but that is the cost of buying a product not necessarily the value if the employer simply provided the income stream through the trust). I'd probably need to vest in it over a 5 year period to spread out the cost.
Is there another way to achieve this type of retirement income replacement with the new employer that I'm missing or am I basically golden handcuffed to my current situation?
Am I overvaluing the DB retirement? I don't think so but I may be lacking perspective. I've made spreadsheets using the rule of 25 (multiply income stream by 25 to calculate lump sum equivalent value) compared to 401 contributions yielding 5% ROI. The ROI may seem low but the 401 plan administrator has high expense ratios and fairly limited investment options.
What would you do?
Anything else I should consider or be looking at?
I'm trying not to make a huge mistake that I will regret 20 years from now.