I am currently enrolled in the NYS Employee Retirement System and would get up to 66% of my highest three years as a retirement pension. My current employer also contributes $2800 a year to my private retirement fund.

The new employer will contribute the following: My Contribution: $5700 Matching: $3325 Their Base Contribution: $3800

I will have to pay an additional $3500 for health insurance and the coverage is worse as I will have a 20% co-insurance and a deductible. I currently have a $20/$25/$100 co-insurance cost and no deductible or co-pay.

My current salary is 79000 and the offer is for 95000.

The real question I am struggling with is if the $16K difference is enough to make the move. I know I am down to $12500 just on the increased insurance cost.

I am currently 46 and have 14 years in the retirement system. I need to work another 19 years to get the maximum pension from the defined benefit plan. I will likely work another 20 years.

Any advice would be appreciated. My rough guesstimate is that the defined pension is worth around 1.2 million (assuming I live for 20 years after I retire).

  • 3
    This is easy enough to model out, but will require a few assumptions--or else a little more information that you might be willing to provide. The most important one is, how many years until you retire? If we don't have an idea how long your higher contributions would last for, it's hard to compare a "defined benefit" (pension) plan against a "defined contribution" (retirement) plan.
    – THEAO
    Commented Aug 23, 2013 at 13:57
  • 2
    Its almost certain 99.99% that a DB scheme will beat a DC scheme and you have currently a DB scheme and they also pay into your DC pensions which is staggeringly generous. The only hard to model aspect is the political risk in the NYS scheme an any potential early retirement options in say 10 or 15 years and on the DC side what will happen to the stock market over the 20 year time span. I would not concentrate on the gross sum but look at what income the two schemes will provide and will the DB scheme have inflation uprating. Commented Aug 23, 2013 at 15:39

2 Answers 2


Assuming the numbers work out roughly the same (and you can frankly whip up a spreadsheet to prove that out), a defined benefit scheme that pays out an amount equal to an annuitized return from a 401(k) is better. The reason is not monetary - it is that the same return is being had at less risk. Put another way, if your defined benefit was guaranteed to be $100/month, and your 401(k) had a contribution that eventually gets to a lump sum that, if annuitized for the same life expectancy gave you $100/month, the DB is better because there is less chance that you won't see the money.

Or, put even simpler, which is more likely? That New York goes Bankrupt and is relieved of all pension obligations, or, the stock market underperforms expectations. Neither can be ruled out, but assuming even the same benefit, lower risk is better.

Now, the complication in your scenario is that your new job pays better. As such, it is possible that you might be able to accumulate more savings in your 401(k) than you might in the DB scheme. Then again, even with the opportunity to do so, there is no guarantee that you will. As such, even modelling it out really isn't going to dismiss the key variables.

As such, can I suggest a different approach? Which job is going to make you happier now? Part of that may be money, part of that may be what you are actually doing. But you should focus on that question.

The marginal consideration of retirement is really moot - in theory, an IRA contribution can be made that would equalize your 401(k), negating it from the equation. Grant you, there is very slightly different tax treatment, and the phaseout limits differ, but at the salary ranges you are looking at, you could, in theory, make decisions that would have the same retirement outcome in any event.

The real question is then not, "What is the effect in 20 years?" but rather, which makes you happier now?

  • That is a good question... and one I am working hard to answer. The work is essentially similar; though the higher paying job is for a defense contractor and the lower paying job is a state job.
    – indigo196
    Commented Aug 24, 2013 at 0:09

Without running the numbers, if they are close I prefer a 401K over DB. With a 401K the money is yours, with a DB you are at the mercy of the employer. Two things could happen: You could lose your job or they could just take away or reduce the DB.

In my mind DB is much higher risk than 401K.

  • In this particular case the DB can not be taken away easily since this is a state job. osc.state.ny.us/retire
    – indigo196
    Commented Aug 25, 2013 at 14:15
  • I would doubt that employers in the USA can take away accrued benefit and a quick Google shows that the scheme is at an all time high and returned 10% last year. Commented Aug 25, 2013 at 16:34

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