My first post on this board-I am a state employee covered by a pension plan that, under the present plan I am in, will pay me 60% of my highest two years average salary if I work at least 30 years and if i wait to start collecting until I'm 65. I am 41 ys old and have 12 years of service. I should note that I get 2% for every year I work, eg if I stopped working now and waited till I was 65 I would collect 24% of my highest two years average compensation. The state is offering a new plan; you have to make a decision within the next year or so; essentially the plan is this-instead of 2% per year you get 1% per year and you invest a portion of your income (from 5-10%) in a variety of investment options (such as a long-term growth, mid-term growth etc, the contents of which are picked by the state investment board and managed by them); the state is offering a one-time "transfer payment" if you switch, roughly matching the total of all contributions made to date (a percentage of my gross pay is deducted each payday, currently about 2.5%) so I would end up with a cash balance of about 50k. My decision is somewhat colored by the fact that I may be out of a job in a few years (state budgets are not doing very well right now). I realize that if I make the switch I am taking on investment risk-what other factors should I be considering? I need to work 18 more years to get the full pension; if I make it to 59 (30 ys) I can retire with a pension that is reduced by 2% per year less than what I would get at age 65, so roughly 48% of my highest two years average salary (which may or may not be material to the question. Any thoughts?
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