Should you leap into another job?

If you are a pharmaceutical sales rep, it is highly likely that a competitive pharmaceutical firm has offered you the chance to change jobs within the past six months. These job offers may look attractive on the surface, but even with a $10,000 increase in salary, they may not be as alluring as you think. Remember this old saying: "The grass may look greener on the other side of the fence, but it may be harder to chew."

Before you make a career move, examine your motives for changing jobs. Are you flattered by an offer? Are you having difficulties with a co-worker or your district manager?

In changing jobs, you may have a two-month respite from a stressful situation, but once entrenched in the new company, you may find that the grass at your new company is equally "hard to chew" - or even harder.

Most people do change jobs four or five times before they settle into a final position from which they retire. In order to accrue significant retirement benefits, it is suggested that employees settle in somewhere before age 35.

The purpose of this article is to help you decide whether or not accepting a competitive job offer is really in your best interest. Personal and emotional issues aside, let's discuss some of the financial factors you should consider when evaluating a new job offer.

Pension Benefits

Does the company you are leaving and the company you are considering have defined benefit plans? Under this non-contributory benefit, your pension benefit is typically 1.5%- to 2%-per-year times years of service, times your final average salary. Your age at retirement also figures into the equation. For example: If you are 60 years old with 30 years of service, you receive a pension benefit of 2% per year and your final average five-year salary is $100,000; your defined benefit pension plan would be $60,000, minus a small Social Security reduction factor.

Many companies severely penalize their employees for early retirement, particularly under the age of 55.

In most cases, if you continue to change jobs, you do not build up any significant pension credits anywhere, and the numerous smaller pensions you receive might only be half of what you would have received had you stayed with one company.

The single most common mistake that reps make when leaving one company for another is they don't think about being compensated for accrued benefits under their old pension plan.

If you do decide to change employers, ask for a buy-out on your current pension that is a dollar figure equal to what your pension benefit would have been had you stayed with your current company. Or, ask the new company to credit you for the equivalent number of years of service that you are leaving as your starting point in the new pension plan.

401(k) savings plans

Some companies have only a 401(k) savings plan as its pension plan. When joining a new company, you may have to wait up to a year before you are eligible to begin contributions to its 40l(k) plan, which means you may miss out on the potential of saving an additional $10,000 pre-tax.

The primary question that you should ask any new company is: "What is the company match on the 401(k)?" What investment vehicles does the new company offer in its 401(k)? What are the management fees? What has the performance been in each fund for one-, three- and five-year periods? These are all good questions to ask about 401(k) plans.

Stock Options

Sometimes, smaller, start-up, publicly traded companies offer stock options as an incentive to join. Quite frequently, unless you have insider information, stock options are a gamble and they are certainly not something upon which you want to depend for your retirement nest egg.

Medical Benefits

One consideration younger sales reps do not factor in when changing jobs are the medical benefits offered by the new company, particularly in retirement. In order to receive these benefits, you must typically be age 55 and have 10 years of service with the company when you retire.

Why is post-retirement coverage important? Because if you were to retire from a company without medical benefits, you would not be covered by Medicare until you reached age 65; and even then, chances are that you would want a Medigap policy. When weighing the decision of making a company change, check with a medical insurance carrier as to what it would cost if you had to provide for full medical benefits on your own at age 58, for instance.

Life Insurance

Does the new company you are considering joining offer adequate life insurance coverage as a benefit option? Another question to ask is whether you can continue your insurance benefits at term rates if you ever leave the new company.

Choose wisely

Hopefully, these guidelines will help you make the proper decision regarding any job change. Just make sure that any offer you receive does not sound too good to be true and that you are not just changing jobs for a quick fix. PR

Topper Brick is a Certified Financial Planner and president of Brick & Kyle Associates Inc., a pre-retirement and financial planning company, in Newtown, PA.