Q: My dilemma is whether to stay in my current position as a government contractor that pays $140,000, but offers no long-term benefits beyond a 401(k) plan, or pursue a more permanent position in a government or private organization that will pay at least 25 to 33% less, but offers long-term stability through pension, investment opportunities, etc.
Currently, I invest through a commercial firm, but I am contemplating leaving them and going on my own. I have been reading and attempting to educate myself before making this decision.
I am 34 years old and would like to retire by age 60. I’m contemplating relocating to another area of the state, or out of state, to pursue a more permanent position. In this economy, it seems crazy to walk away from the high salary, but as an investor, I realize that there are advantages to working towards stability in the long-term. Any advice or criteria that I should consider in making my decision?
A:You are certainly blessed to be earning $140,000 a year, especially in this economy, with unemployment of 9.4% nationwide.
I think you are going about this decision—mixing your job with your investment strategies—the wrong way. You can invest for your retirement no matter what job you have. Perhaps what you are asking is: Should I stay in my higher-paying job, because I get more money that I can invest?
Or, is your concern more stability, so you have any job to keep investing, even if it means having less to invest? Whether or not you keep investing with a firm or do it on your own doesn’t really have anything to do with your job.
So, I’ll just focus on the job quandary.
When I’m trying to make a decision, I make a list of my choices and the consequences. So, based on the information I have, here’s what I would list:
1. Stay in current job earning a great salary. But, contract work can be unsteady. I need to check the status of the current contract and what the company plans to do going forward.
2. Leave my current position for a new job. But, how many companies are offering traditional pension plans? (Answer: Not many). Will I really be able to just walk into a government job with so many others out of work and the competition so great? (Answer: Start looking around and see what’s available).
1. If I stay at my current job, how much am I paying myself to get the same benefits I would get in the public or private sector? In other words, if I find a more stable position, once benefits are included, is my net pay about the same? Am I really investing as much as I can at this higher salary so that, when I do have to change jobs, I’ve taken advantage of the higher income when I had it?
2. If I move to another position, how secure is that, really? I’ll be the new hire with a greater chance of being laid off or fired if the company downsizes. And, note to self: many governments are furloughing people because of budget deficits. The truth is there are very few jobs today that are secure. Public workers are being laid off. Private employees are being laid off. Even coveted benefits are being sliced. For example, many employers are no longer matching 401(k) contributions.
I know many people who are contractors, and they have had significant longevity in their positions. I also know people who worked for either a private or public entity, and they are out of work right now.
I can’t tell you whether you should stay or go. You have some more thinking and research to do. But, in this economy, if you’ve got a good-paying job and there is stability—even as a contractor—I would take the bird in the hand.