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houstonhasher

Confused about dryer sheets
Joined
Feb 22, 2004
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Hi-

I am new to this site and thought I'd introduce myself. I'm a 38 yr old geologist in Houston. I was in school a long time (PhD) and have been working 6 years for an energy company. I get a decent salary and great benifits (8% company match). I have my 401(k) maxed out and have a small house with a 15 year mortage at 5.25% interest. However, I have no other savings.

I am considering an offer from another company that would boost my salary about 15% and give me a signing bonus ($20-30,00). How can I tell if it makes sense to jump? If I stay with my current employer I keep my pension. Anyone have a feel on what if it is worth it to give up the pension for a salary increase?

Advice welcome!
 
. . .
I am considering an offer from another company that would boost my salary about 15% and give me a signing bonus ($20-30,00).  How can I tell if it makes sense  to jump?  If I stay with my current employer I keep my pension.  Anyone have a feel on what if it is worth it to give up the pension for a salary increase?

Advice welcome!
Houston,
I'm afraid my crystal ball won't be of much value to you. There are just too many variables.

In 1996, my wife and I faced a similar decision. We both were working for the same company. She had been there 11 years, I for 9. Another company offered us very attractive increases in our salaries, better benefits package, hiring bonus, etc. We looked at it and decided that if we took the offer we would be able to retire in 5 years (after we got vested in the new company's pension program). We would be giving up some with the old company pension, but would be gaining much more.

If you do the math, you'll see that the five year time frame put us in the middle of 2001 when stocks had been plummeting for over a year and were showing no signs of improvement. That made us too nervous to retire, so we decided to hang on a little longer. But the old company approached me at that time and offered still more for me to come back. Since we had decided we didn't want to retire in that environment, I came back and worked 2 more years. But our pensions are significantly less than they would have been had we both just stayed at the original company for 7 more years.

Now the good news . . . I have no idea whether the job choices were good financially and never will. Some of the plans worked out well, other parts did not work as we had hoped. I can calculate what our pensions would have been had we stayed. But the original company layed off 20,000 people during the time I was gone. Even if I hadn't been one of them, it would have been a lousy environment to work in. I made two really good house deals on the move (just lucky timing). My original company paid me really well for the last two years I worked there. That probably wouldn't have happened if I hadn't left. They also payed to move me back to Arizona where I wanted to retire anyway. Those were positives that I never counted on in my original plans.

So my point is, I don't think you can do this by the mathematics of the offer and your current compensation. If you think you are going to be working more than a couple of years longer, the decision probably should be based on career opportunity and your interest in the particular positions.
 
I don't have a pension and I've never worked in a company that offered one, so I'm probably way off base here, but it does seem like some math would be able to help.

How's pension vesting work? They offer to pay something like 3% of your final salary after retirement for every year you slave work there, right?

So, after working there for 6 years, you've got 18% of your salary vested and you have an offer for a 15% increase in salary? Take the new job. Without even doing a present value calculation, it seems pretty clear that the new offer wins.
 
I don't have a pension and I've never worked in a company that offered one, so I'm probably way off base here, but it does seem like some math would be able to help.

How's pension vesting work?  They offer to pay something like 3% of your final salary after retirement for every year you slave work there, right?

So, after working there for 6 years, you've got 18% of your salary vested and you have an offer for a 15% increase in salary?   Take the new job.   Without even doing a present value calculation, it seems pretty clear that the new offer wins.

The problem is that you are assuming that career opportunities, raises and promotions are going to be equivalent. My experience is that this assumption is radically incorrect. Different companies grow at different rates, promote with different cultural biases, etc. And those differences will swamp the effects of initial offer, hiring bonus and pension. I've seen many engineers jump jobs for a 15% raise then get confined to dead end positions and low raises for several years.

By all means do the math. But include a sensitivity analysis of all your assumptions when you finish. My guess is you will be able to get any answer you want.

By the way . . . the two pensions I have comming both involve significantly more complex calculations than you indicate. All of the following go into the calculation:
1) average of highest 5 years of earnings,
2) age at retirement
3) age when benefits are started
4) months of service
5) total social security benefit

Both of the plans I am familiar with begin to pay benefits after 5 years of service, but benefit value accelerates significantly as age+years of service increases. So staying with an old pension plan has greater value than jumping to a new one if all else were equal.

Still, for most cases, I think it's probably more important to seek the best career opportunity rather than the highest instantaneous salary offer. :)
 
Thanks for the advice. I'm still in negotiations and weighing the merits of each case.

I wish I would have found this site a long time ago!
 
HH,

My outspoken grandmother used to say, " Opinions are like !@#holes. Everybody has one."

Your 38 and have lots of savings time no matter what job you take. At some level it probably doesnt matter which job you work. Do what you LIKE doing, where you like doing it. I used to be a sales rep and called on buyers daily. I used to hear this all the time. "I hate this place, but I ONLY have 11 more YEARS til retirement."

I would think 11 more minutes would be too much for me.

Process the in depth analysis. Its the right thing to do. But in the end the heart usually wins over the head.

Do what you like, save, invest, manage debt downward.

BUM
 

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