Day 103 / 108 Challenge
- New Man
- Apr 21, 2024
- 3 min read
#103
"I bow for those who have fallen into darkness."
During my outings last night, I met lots of new people and one of the people said she was working on her master's program to make a career shift. Her focus seemed to be on the pay, specifically an hourly rate. Few deep conversations after, it reminded me that there are "invisible money" that we overlook.
Not to pick on this lovely girl, but she did not seem to fully understand that she was lucky enough to secure a good stable career option early on. Career in government sector is one of the few career options that offer Defined Benefit Plans in today's age. Most companies now opt into Defined Contribution Plans.
Defined Benefit Plans vs. Defined Contribution Plans
As name suggests, Defined Benefit Plans insures that you have specific benefits for life. Companies who sponsor this plan (the employer) would have to save and invest funds available to support benefit payments to their retirees.
An example would be if company X offers a plan with $2,000 a month if you work 30 years in the company, they will pay you $2,000 a month from the day you retire until you pass away given that you worked for them for 30 years.
Defined Contribution Plans is where the sponsoring companies provides regular payments during the time of our employment. Simply think of it as your employer contributing cash to your retirement fund. You most likely will have option to do so as well, and most companies utilize the matching system where they will match certain percentage of YOUR contribution up to a certain limit. Many sponsors switched from Defined Benefits to Defined Contributions style as life expectancy increased (it is more costly to the sponsors the longer retirees live in Defined Benefits Plan).
An example would be if company Y offers a plan that matched 100% of your contribution up to $10,000 per year, you would have extra $10,000 available in your retirement account every year given that you save/contribute $10,000 per year ($20,000 total).
Other invisible money
It is hard for us to predict when we will die, but the biggest risk of Defined Contribution Plan is that you may outlive your retirement fund. Where Defined Benefit Plan insures that you will have extra income for life as long as the sponsor of the plan does not go bankrupt.
Aside from the direct financial benefits like pension and retirement account funding, you may also make more money by staying in lower paying job.
For example, if you have to travel long to be in a higher paying job, you have to consider the commuting cost when you make a comparison. Does that higher paying job require you to dress nicely? You may have to include dry cleaning cost or clothing cost.
What about flexibility during the day? Can you only go for lunch at specific hours? Do you have to be in a specific time zone? What about your coworkers and office culture? There are a lot more aspects we should consider other than the pay when we choose our career.
Challenge Log
What I am thankful for today
++ I am grateful to have a vehicle that lets us travel in harsh condition.
++ I am grateful to have a friend who I can have intellectual discussion with.
++ I am grateful to have a place to stay when I visit Ottawa.
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