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PBS Frontline : The Retirement Gamble, sorta Must See (1 Viewer)
- Thread starter Smack Tripper
- Start date
NutterButter
Footballguy
ok, but i'm not getting any younger and I'd like to lock in this whole 60% pension/annuity thing while there's still some tread on the tires if you know what i mean.
lol...fed is near that good.Federal employee?I get 60% of the average of my last 3 years salary annually til I die. 16 more years.
i was grandfathered in...they actually changed the pension to something less favorable (but still, it's a pension).
NutterButter
Footballguy
now you tell me. the wife is not going to be happy to hear this tomorrow morning. we talking at least 40%. I'm not sure I can go any less than that.
NajehHejan
Footballguy
Mine matches .25% on the first 4%, so essentially 1% on my 4%. Not anywhere near the best but I know some companies don't match or perhaps even have a plan so can't really complain.
Johnnymac
Footballguy
Hey you take what you can get. I think it's all relative. I have a great 401K plan where I work but my salary is not great (state job). It really is important though that people factor in everything when it comes to employment. Salary is just one factor of many.
So I finally read (well listened to the audiobook) Millionaire Next Door. Agree with what everyone said, this is probably the best book I've read on the subject of personal finance. A lot of the stuff wasn't news to me, but I enjoyed the reaffirming that I was doing the right things and shared a lot of characteristics with millionaires. That being said, my two biggest take aways are the following, and I'm really going to start focusing on:
1. Focusing more on unrealized income, especially to bridge the gap b/w retirement and pension/401k withdrawals. Decent discussion here - http://www.early-retirement.org/forums/f30/realized-vs-unrealized-income-34662.html
2. The need to find a very good tax guy. I need to start looking through LinkedIn and talking to some folks. Anyone have any advice?
1. Focusing more on unrealized income, especially to bridge the gap b/w retirement and pension/401k withdrawals. Decent discussion here - http://www.early-retirement.org/forums/f30/realized-vs-unrealized-income-34662.html
2. The need to find a very good tax guy. I need to start looking through LinkedIn and talking to some folks. Anyone have any advice?
slackjawedyokel
Footballguy
MND is a great read. It does become repetitive in that I think the author could have made the same points successfully with about half of the text. Still, it's a good presentation of otherwise simplistic research data. Another good read is Mr. Money Mustache (blog which reads easy and is good for a laugh now and then).
Grahamburn
Footballguy
If for some reason the company goes bankrupt, etc. or there is mismanagement of funds, that pension may not be there. Not saying that is the case, but it is a potential risk. The company I work for also has a decent pension plan, but I still am close to maxing out my 401K as I like to have the mindset that I will plan to be self-sufficient in preparing for my retirement, and if the pension is there, then that is gravy and I can do a lot more or provide that much more for my family when I die.christ, I'm not sure I'd be saving anything for retirement. At an average of 150k, thats a cool 90k per year. That would do me just fine.I get 60% of the average of my last 3 years salary annually til I die. 16 more years.
I readily admit that the benefits are the primary reason I have not actively tried to find a job with a company closer to my house, as even though I enjoy most of what I do, I currently have an hour plus commute each way that will be increasing to closer to 90 minutes in the not too distant future when my work location is moved, and the areas of the company that are located closer to my house are heading into some serious downsizing right now, so I can't risk looking for a job within the company at this point as it may jut lead to me getting cut 9and I just survived two rounds of cuts in my current department that shed just under 50% of the work force)
Steve Tasker
Footballguy
Ask someone at work whom you trust or ask an attorney whom you trust. The reason I mention someone from work is that the accountant will be familiar with the structure of your income from working with the other person. You mentioned you work in oil & gas; that can be a very complicated field depending on your investments and compensation.
All I can say is be prepared to pay. There are a lot of places to cut costs and skimp, but don't skimp on your professional services. Just my opinion after having been in this business (CPA) for 6 years now. I've seen a lot of people get burned by going with questionable professionals. It ends up costing you more to have someone else do it right.
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mquinnjr
Footballguy
Same boat here. I am saving as if it doesn't exist, which is what I've always been told by people at work to do. Worst case scenario there is that the pension program gets frozen from further accruals. ERISA laws protect you from losing what you've already accrued in private industry up until the point of a pension program freeze, but a private company can stop their pension program at a moment's notice. Meaning you are in not a terrible spot, but not a good one if you ignored contributing into a 401k/IRA/Roth IRA up until that point when the pension program hypothetically gets frozen. Spoke with a guy at a party recently who retired fully at 55 maxing 401k contributions as soon as they came out in the 80's on top of a pension, and he's good for life. You can also take a smaller cut of the pension annuity to allow for life payments for you and your spouse (if you were to pass first) so that the pension annuity stream is guaranteed through your wife's life as well. You are well positioned to take that offer if you did a great job with your 401k on top of a employer sponsored pension.If for some reason the company goes bankrupt, etc. or there is mismanagement of funds, that pension may not be there. Not saying that is the case, but it is a potential risk. The company I work for also has a decent pension plan, but I still am close to maxing out my 401K as I like to have the mindset that I will plan to be self-sufficient in preparing for my retirement, and if the pension is there, then that is gravy and I can do a lot more or provide that much more for my family when I die.christ, I'm not sure I'd be saving anything for retirement. At an average of 150k, thats a cool 90k per year. That would do me just fine.I get 60% of the average of my last 3 years salary annually til I die. 16 more years.
I readily admit that the benefits are the primary reason I have not actively tried to find a job with a company closer to my house, as even though I enjoy most of what I do, I currently have an hour plus commute each way that will be increasing to closer to 90 minutes in the not too distant future when my work location is moved, and the areas of the company that are located closer to my house are heading into some serious downsizing right now, so I can't risk looking for a job within the company at this point as it may jut lead to me getting cut 9and I just survived two rounds of cuts in my current department that shed just under 50% of the work force)
This is my plan at the moment. I believe I can take a 75% payout and get the lifetime payouts so my wife would continue to collect assuming she outlives me.mquinnjr said:Same boat here. I am saving as if it doesn't exist, which is what I've always been told by people at work to do. Worst case scenario there is that the pension program gets frozen from further accruals. ERISA laws protect you from losing what you've already accrued in private industry up until the point of a pension program freeze, but a private company can stop their pension program at a moment's notice. Meaning you are in not a terrible spot, but not a good one if you ignored contributing into a 401k/IRA/Roth IRA up until that point when the pension program hypothetically gets frozen. Spoke with a guy at a party recently who retired fully at 55 maxing 401k contributions as soon as they came out in the 80's on top of a pension, and he's good for life. You can also take a smaller cut of the pension annuity to allow for life payments for you and your spouse (if you were to pass first) so that the pension annuity stream is guaranteed through your wife's life as well. You are well positioned to take that offer if you did a great job with your 401k on top of a employer sponsored pension.acarey50 said:If for some reason the company goes bankrupt, etc. or there is mismanagement of funds, that pension may not be there. Not saying that is the case, but it is a potential risk. The company I work for also has a decent pension plan, but I still am close to maxing out my 401K as I like to have the mindset that I will plan to be self-sufficient in preparing for my retirement, and if the pension is there, then that is gravy and I can do a lot more or provide that much more for my family when I die.christ, I'm not sure I'd be saving anything for retirement. At an average of 150k, thats a cool 90k per year. That would do me just fine.I get 60% of the average of my last 3 years salary annually til I die. 16 more years.
I readily admit that the benefits are the primary reason I have not actively tried to find a job with a company closer to my house, as even though I enjoy most of what I do, I currently have an hour plus commute each way that will be increasing to closer to 90 minutes in the not too distant future when my work location is moved, and the areas of the company that are located closer to my house are heading into some serious downsizing right now, so I can't risk looking for a job within the company at this point as it may jut lead to me getting cut 9and I just survived two rounds of cuts in my current department that shed just under 50% of the work force)
Ideally live off the pension money, and once I hit the point where I have to pull from the 401K, that can go into saving or kick ### vacations for the family.
FUBAR
Footballguy
This is my plan at the moment. I believe I can take a 75% payout and get the lifetime payouts so my wife would continue to collect assuming she outlives me.mquinnjr said:Same boat here. I am saving as if it doesn't exist, which is what I've always been told by people at work to do. Worst case scenario there is that the pension program gets frozen from further accruals. ERISA laws protect you from losing what you've already accrued in private industry up until the point of a pension program freeze, but a private company can stop their pension program at a moment's notice. Meaning you are in not a terrible spot, but not a good one if you ignored contributing into a 401k/IRA/Roth IRA up until that point when the pension program hypothetically gets frozen. Spoke with a guy at a party recently who retired fully at 55 maxing 401k contributions as soon as they came out in the 80's on top of a pension, and he's good for life. You can also take a smaller cut of the pension annuity to allow for life payments for you and your spouse (if you were to pass first) so that the pension annuity stream is guaranteed through your wife's life as well. You are well positioned to take that offer if you did a great job with your 401k on top of a employer sponsored pension.acarey50 said:If for some reason the company goes bankrupt, etc. or there is mismanagement of funds, that pension may not be there. Not saying that is the case, but it is a potential risk. The company I work for also has a decent pension plan, but I still am close to maxing out my 401K as I like to have the mindset that I will plan to be self-sufficient in preparing for my retirement, and if the pension is there, then that is gravy and I can do a lot more or provide that much more for my family when I die.christ, I'm not sure I'd be saving anything for retirement. At an average of 150k, thats a cool 90k per year. That would do me just fine.I get 60% of the average of my last 3 years salary annually til I die. 16 more years.
I readily admit that the benefits are the primary reason I have not actively tried to find a job with a company closer to my house, as even though I enjoy most of what I do, I currently have an hour plus commute each way that will be increasing to closer to 90 minutes in the not too distant future when my work location is moved, and the areas of the company that are located closer to my house are heading into some serious downsizing right now, so I can't risk looking for a job within the company at this point as it may jut lead to me getting cut 9and I just survived two rounds of cuts in my current department that shed just under 50% of the work force)
Ideally live off the pension money, and once I hit the point where I have to pull from the 401K, that can go into saving or kick ### vacations for the family.
we'll be doing both for sure. although the 401k (TSP for us) may pay the mortgage on a vacation home.acarey50 said:If for some reason the company goes bankrupt, etc. or there is mismanagement of funds, that pension may not be there. Not saying that is the case, but it is a potential risk. The company I work for also has a decent pension plan, but I still am close to maxing out my 401K as I like to have the mindset that I will plan to be self-sufficient in preparing for my retirement, and if the pension is there, then that is gravy and I can do a lot more or provide that much more for my family when I die.christ, I'm not sure I'd be saving anything for retirement. At an average of 150k, thats a cool 90k per year. That would do me just fine.I get 60% of the average of my last 3 years salary annually til I die. 16 more years.
I readily admit that the benefits are the primary reason I have not actively tried to find a job with a company closer to my house, as even though I enjoy most of what I do, I currently have an hour plus commute each way that will be increasing to closer to 90 minutes in the not too distant future when my work location is moved, and the areas of the company that are located closer to my house are heading into some serious downsizing right now, so I can't risk looking for a job within the company at this point as it may jut lead to me getting cut 9and I just survived two rounds of cuts in my current department that shed just under 50% of the work force)
I'm managing the risk accordingly
regularguy
Footballguy
I keep thinking about #3 on this list. What about debt <4% interest? If one has to choose between paying off debt at 3% interest early (non-deductible interest) or investing in a Roth IRA, is there a right answer?
NewlyRetired
Footballguy
I can't speak for exactly what Wilked meant but I will guess that he might have been referring to the fact that one should be able to do better than 4% investing and as such it would make more sense to invest rather than pay off low % debt.
This is just a guess.
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regularguy
Footballguy
I figured that was the simple point, but I'm just trying to make sure I'm not missing something. This is the situation I find myself in, and I think I need to convince the wife that we invest instead of paying off the debt early.
FUBAR
Footballguy
it's really just a matter of risk. The worst thing that's likely to happen if you pay off your debt instead of investing - you lose out on the difference between the investment gains and debt. Hypethetically, you paid off debt instead of investing in the S&P 500 last July at $197 / share, it's now at $209. so you lost out on a 6% gain. But as you paid the debt, you "made" 4% - for a total loss of 2%. (the math isn't perfect, but it's illustrative). OTOH, if you had invested in Gold at $125 and it's now at $111, you would have lost not only the 12% loss in the ETF, but also the 4% on your debt - for a loss of 16%.
Then of course you have the emotional benefit of not owing debt if you pay it off.
Personally, while I am not particularly risk averse, I'd rather not have debt.
So, for me, I'd slightly edit Wilked's post to:
1. Contribute to the max to get employer match in 401k
2. Sock away 4-6 months expenses as an emergency fund adjust as you assess your need
3a. Eliminate debt > 4% interest
3b. eliminate all non-mortgage debt
4. If you think your taxes will be higher in retirement, contribute to Roth IRA to the max. If income too high, do a back-door Roth (google as needed)
5. If you think your taxes will be lower in retirement, contribute to the 401K to the max.
6. Pay off your mortgage
Mathematically speaking, that may be the answer. Nothing says you can't do both. Let's say you have an extra $1000 a month. Nothing says that adding that to investing or to paying off debt is an either/or scenario, you can split it 50/50 between the two or any other way you see fit.
Much like diversifying assets, you can diversify the allocation of funds here and do a bit of both, hedging your bets against whether or not you will make more than the amount saved by paying off the debt early.
wilked
Footballguy
kutta
Footballguy
Pay off the debt. The peace of mind is worth much more than the few extra bucks you may or may not earn.
Spin
Footballguy
Quick question, how many exemptions is everyone claiming on your W-4? I did the withholding calculator, and it said I should change it and claim 9 Exemptions/Allowances, and I should expect to get back about $200.
Has anyone used this before? http://apps.irs.gov/app/withholdingcalculator/
How accurate were the results?
Has anyone used this before? http://apps.irs.gov/app/withholdingcalculator/
How accurate were the results?
Everyone's situation will differ based on number of dependents, income made by your spouse, other taxable income, etc.
The best way to go about it is to look at your pay stub and project what your w-2 will look like at year end. Compare it to the prior year and then go from there...
regularguy
Footballguy
Thanks for the feedback, guys.
regularguy
Footballguy
I've done this with fairly accurate results. Be prepared to be questioned by your HR dept. if you claim that many exemptions, but they can't stop you.
Spin
Footballguy
Yah, I was more curious as to how accurate that calculator really is. 9 seems awfully high to me, considering I only have 2 right now.
regularguy
Footballguy
Do you have kids? Is your itemized deduction much larger than the standard? Are you getting a sizable refund most years now?
I have 2 kids, but I claim 10 exemptions on my W4.
FUBAR
Footballguy
I have 4 kids, also claim 10. Because my employer won't allow me to claim more without ### pain.
Grace Under Pressure
Footballguy
Looking for advice. Consider the above direction already taken. That is, no debt besides mortgage, building assets through 401Ks and IRAs, 6 months in a savings account, etc. I'm going to lay it out on the line. Everyone is different, but I would like to know when folks here would look to have one person in a Dual Income situation change jobs to a low stress job until 60. In the scenario, both people are 44. Here are the pertinent facts. No holds barred, let me know if I leave anything out.
Assets:
Total 401k $344,650
IRAccount $100,000
Monthly Income (after taxes, 401K and healthcare):
Person 1: $3,900
Person 2: $5,900
Mortgage: $358,000
Estimated House Value: $495,000
Debt: $0
Monthly Bills:
Mortgage 1 - Biweekly $1515
Mortgage 2 - Biweekly $1515
The Rest $2300
Again, given the above scenario with 2 incomes, etc. the question is when can Person 1 start to cut back say 50% income from the current situation. Use the assumption that Person 2 will keep working. The idea is to have one person cut back with a local job to be more available for kid stuff. Thanks, I'll hang up and listen.
Assets:
Total 401k $344,650
IRAccount $100,000
Monthly Income (after taxes, 401K and healthcare):
Person 1: $3,900
Person 2: $5,900
Mortgage: $358,000
Estimated House Value: $495,000
Debt: $0
Monthly Bills:
Mortgage 1 - Biweekly $1515
Mortgage 2 - Biweekly $1515
The Rest $2300
Again, given the above scenario with 2 incomes, etc. the question is when can Person 1 start to cut back say 50% income from the current situation. Use the assumption that Person 2 will keep working. The idea is to have one person cut back with a local job to be more available for kid stuff. Thanks, I'll hang up and listen.
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wilked
Footballguy
Here's what I would do:
Decide how much you need in retirement. Decide on a SS strategy and set up a spreadsheet with income and expenses. Try and get detailed. You need to start thinking about what your retirement looks like, is it Florida? Are you going on vacations, how many? Country Club membership? Etc
Once you have a good idea of your retirement expenses, project out how much more savings are needed to get there. Be conservative, I would assume 3% real return on your investments. You can use FIRE calculators to be more precise.
If I read correctly, your retirement assets are $350K (401K) plus $100K (IRA) for $450K. That is a pretty good spot to be in at 44, but that depends upon retirement income needed. You should be able to grow that to $1MM by retirement age with reasonable additions (at least $1K per month), which will throw off $40K / year in income. Add in SS and you will likely be sitting fine.
Big variable is college costs. I see some 529 savings, obviously not enough to pay full tuition. What is your expectation for your payment?
Decide how much you need in retirement. Decide on a SS strategy and set up a spreadsheet with income and expenses. Try and get detailed. You need to start thinking about what your retirement looks like, is it Florida? Are you going on vacations, how many? Country Club membership? Etc
Once you have a good idea of your retirement expenses, project out how much more savings are needed to get there. Be conservative, I would assume 3% real return on your investments. You can use FIRE calculators to be more precise.
If I read correctly, your retirement assets are $350K (401K) plus $100K (IRA) for $450K. That is a pretty good spot to be in at 44, but that depends upon retirement income needed. You should be able to grow that to $1MM by retirement age with reasonable additions (at least $1K per month), which will throw off $40K / year in income. Add in SS and you will likely be sitting fine.
Big variable is college costs. I see some 529 savings, obviously not enough to pay full tuition. What is your expectation for your payment?
Dentist
***Official FBG Dentist***
Do you live on a coast? Why such an expensive home and high amount of mortgage left on your home at 44?
I'd like to see your net worth hit at least a million before cutting back and you are hovering around the 700's.
I'd say you could probably make that cut back at 50 or so
I'd like to see your net worth hit at least a million before cutting back and you are hovering around the 700's.
I'd say you could probably make that cut back at 50 or so
FUBAR
Footballguy
Grace Under Pressure
Footballguy
Yes, on Long Island, thus the mortgage costs. One kid, 5. The current 529 balance is 16K. The investment there is 250 per month.
Grace Under Pressure
Footballguy
Thanks wilked, reading your post now. My formatting was terrible in the OP so I updated to read easier.
Grace Under Pressure
Footballguy
Dentist, thanks. You're seeing the picture I'm trying to paint here. Much appreciated on the response.
Grace Under Pressure
Footballguy
Wilked, that makes total sense. I am trying to approach from an expense scenario. I think it was NewlyRetired who stated he preferred when a financial advisor took that approach, as opposed to the asset growth side. 3% is a bit more conservative than I was hoping, but the last 5 days of the market are a good reminder why that's probably a good estimate to use.
Grace Under Pressure
Footballguy
Gotcha. For college, the 5 year old has $16K in a 529 plan with a contribution of $250/month going in.
No more kids, lol. Glad we can be considered young enough still (different discussion entirely).
No more kids, lol. Glad we can be considered young enough still (different discussion entirely).
Chadstroma
Footballguy
Another thing to consider is what kind of costs can you cut now if your goal is to move someone to a less paying job to enjoy life more. Cable bill, cell phone, entertainment, vacations, etc alot of these can be adjusted be negoitation/cutting back. You may be able to cut back some lifestyle changes now that would compensate in all or part the loss of income so you do not have to impact your progress on your retirement. That is all very fluid and very personal in terms of what you value.
Grace Under Pressure
Footballguy
Mortgage rate is 3.875%.
I'm working on cutting back expenses now that we're set up. We just moved twice in two years to get in this house, so it's been pretty crazy trying to get everything sorted out.
I'm working on cutting back expenses now that we're set up. We just moved twice in two years to get in this house, so it's been pretty crazy trying to get everything sorted out.
