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Started By
Message
Should I be contributing to retirement?
Posted on 6/14/18 at 11:25 am
Posted on 6/14/18 at 11:25 am
I recently accepted a government position, with a pension that I will be vested in upon 10 years of service. Based on my assumption of yearly salary rate increases and the pension terms, I have calculated that I will receive roughly $90,000 yearly upon retirement, from the pension. Additionally, I will be an heir to my parents estate and upon their passing I will likely receive 3-5 million.
I'm 27 and married. No kids yet. Right now, we contribute to the 401k every pay period and try to throw some money into a Roth IRA whenever I can. Very modest contributions, as we're pretty tight with cash flow right now. I don't have much in either, around $20,000 combined. As I look to make this career move, I'm trying to decide how much I should worry about contributing to retirement (which would be my Roth IRA going forward). We would like to upgrade our current house, and that would possibly mean nearly scrapping what little retirement savings we currently make, although after a few years I would think we would have more cash flow to start contributing more again.
Is this foolish and short-sighted? Should we lower our housing budget in order to try to contribute more to retirement. On the one hand, my inheritance and pension should be enough to sustain us on their own merits. I would rather enjoy the life we want now, than break our backs to save for retirement that might not be 100% necessary in our situation. On the other hand, I don't want to rely on inheritance. Medical issues could wipe that away, and in general I don't want my parent to have to die for me to retire.
I'm 27 and married. No kids yet. Right now, we contribute to the 401k every pay period and try to throw some money into a Roth IRA whenever I can. Very modest contributions, as we're pretty tight with cash flow right now. I don't have much in either, around $20,000 combined. As I look to make this career move, I'm trying to decide how much I should worry about contributing to retirement (which would be my Roth IRA going forward). We would like to upgrade our current house, and that would possibly mean nearly scrapping what little retirement savings we currently make, although after a few years I would think we would have more cash flow to start contributing more again.
Is this foolish and short-sighted? Should we lower our housing budget in order to try to contribute more to retirement. On the one hand, my inheritance and pension should be enough to sustain us on their own merits. I would rather enjoy the life we want now, than break our backs to save for retirement that might not be 100% necessary in our situation. On the other hand, I don't want to rely on inheritance. Medical issues could wipe that away, and in general I don't want my parent to have to die for me to retire.
18
Posted on 6/14/18 at 11:31 am to Tigerfan56
quote:wouldn't go that far but it's ill advised. Taking potential inheritance into account when planning for retirement does not seem to be a very good idea.
Is this foolish and short-sighted?
This post was edited on 6/14/18 at 12:26 pm
Posted on 6/14/18 at 12:00 pm to Tigerfan56
quote:
Additionally, I will be an heir to my parents estate and upon their passing I will likely receive 3-5 million.
What if, God forbid, one of your parents gets in a car wreck tomorrow and os paralyzed from the waste down? There goes the inheritance to modify their house and vehicles and pay medical bills.
quote:
I have calculated that I will receive roughly $90,000 yearly
quote:
we're pretty tight with cash flow right now
This doesn't make much sense to me.
quote:
We would like to upgrade our current house
Why?
quote:
Is this foolish and short-sighted?
It's not as bad as some others as you have the pension, but it kind of is. Relying on inheritance is never a good idea, but the pension should be solid. You seem to want to satisfy short term wants despite knowing they'll hinder your long time goals.
Posted on 6/14/18 at 12:07 pm to Tigerfan56
quote:
10 years of service
quote:
90,000 yearly
I don’t begrudge you, and am a little jealous; but this is the reason we keep having raise taxes to fund these ridiculous pensions. What the frick.
Posted on 6/14/18 at 12:12 pm to Tigerfan56
quote:
I recently accepted a government position, with a pension that I will be vested in upon 10 years of service. Based on my assumption of yearly salary rate increases and the pension terms, I have calculated that I will receive roughly $90,000 yearly upon retirement, from the pension
Make sure you understand the terms and did the calculation correct. I'm an accountant for a governmental pension office and there are a lot of people that expect large retirement payouts but are shocked when they realize they didn't do their calculation correctly.
Posted on 6/14/18 at 12:27 pm to Styxion
I worked 9 yrs for the federal government, vested after 5. I will get 1% for each creditable year of service calculated on my three highest years of income. That translates to a just under $3600/yr pension. I should've had this guy's job.
Posted on 6/14/18 at 12:28 pm to Tigerfan56
quote:
government position
This could easily be changed or eliminated within one or two election cycles.
You should be maxxing out your Roth IRA every year at a minimum.
Posted on 6/14/18 at 12:30 pm to Tigerfan56
quote:
I recently accepted a government position, with a pension that I will be vested in upon 10 years of service. Based on my assumption of yearly salary rate increases and the pension terms, I have calculated that I will receive roughly $90,000 yearly upon retirement, from the pension.
I assume you're saying you vest a portion of your pension at 10 years, but you would need to continue to work for 25-30 years to receive $90k/yr. Is that correct?
If not, are you hiring??
Posted on 6/14/18 at 12:33 pm to Tigerfan56
quote:
I will be vested in upon 10 years of service
quote:
my assumption of yearly salary rate increases
quote:
upon their passing I will likely receive 3-5 million
quote:
I would think we would have more cash flow to start contributing more again
It seems you're basing this on a lot of assumptions of future events, any of which could change and throw this plan completely off track. You could get laid off before being vested, there could be some significant amendment to the pension affecting your benefits, your pay raises may not pan out they way you expected, a major market downturn affecting your parents' estate, or there could be major medical situation with you, your wife, or your parents. Also, I know you said you don't have kids yet, but if you do one day, what does that look like for them if these plans don't work out just like you hoped? Without knowing anything else about your situation, it seems to me that you may need to at least consider where you can cut back in terms of expenses and try to commit to at least some level of saving for retirement on your own terms.
Posted on 6/14/18 at 12:36 pm to Tigerfan56
quote:
I will be an heir to my parents estate and upon their passing I will likely receive 3-5 million.
You absolutely cannot count on this becoming a reality.
Posted on 6/14/18 at 12:42 pm to Adajax
quote:
I will get 1% for each creditable year of service
Damn, I didn't realize federal was that low.
Posted on 6/14/18 at 12:45 pm to Tigerfan56
quote:
Based on my assumption of yearly salary rate increases and the pension terms, I have calculated that I will receive roughly $90,000 yearly upon retirement, from the pension. Additionally, I will be an heir to my parents estate and upon their passing I will likely receive 3-5 million.
Neither of these are guaranteed.
People are losing their pensions all of the place.
My Dad was lucky that he missed the cut off by 6 months when the city he worked for cut their pension program.
Posted on 6/14/18 at 1:24 pm to Styxion
They also offer a TSP (Thrift Savings Plan) where they match up to 5% I think. I was young and stupid and cashed that out when I was layed off.
Posted on 6/14/18 at 1:46 pm to Styxion
quote:
Make sure you understand the terms and did the calculation correct. I'm an accountant for a governmental pension office and there are a lot of people that expect large retirement payouts but are shocked when they realize they didn't do their calculation correctly.
This... I thought the pension formula was Three year's highest x 2.5% x years served. Less than 20yrs was some kind of actuarial formula.
ETA: I should clarify. That was TRSL. Maybe not a true Gov job; however, I assumed they would be close. I'm probably wrong.
This post was edited on 6/14/18 at 1:47 pm
Posted on 6/14/18 at 2:10 pm to TheWiz
quote:
I thought the pension formula was Three year's highest x 2.5% x years served. Less than 20yrs was some kind of actuarial formula.
ETA: I should clarify. That was TRSL. Maybe not a true Gov job; however, I assumed they would be close. I'm probably wrong
It depends on the pension plan, the rates/% vary plan to plan.
FYI-I am pretty sure TRSL is only 2.5% if you have over 25 years of service. You retire as a teacher with only 20 years and you only get 40% of your salary.
Posted on 6/14/18 at 2:11 pm to southernelite
quote:
I don’t begrudge you, and am a little jealous; but this is the reason we keep having raise taxes to fund these ridiculous pensions. What the frick.
I doubt he will make 90k for the rest of his life after only working 10 years.
Posted on 6/14/18 at 2:21 pm to TheIndulger
quote:
doubt he will make 90k for the rest of his life after only working 10 years.
Correct. 10 years is just until I’m vested into the plan. My contribution is based off a calculation using years of service and the average of my three highest paid years of salary. In coming to my calculation, I figured I would work until 65 with a 2% annual raise. So my calculation is based off 37 years of service and a much higher salary at the end.
I appreciate all of the advice. You’re all right, it is a lot of assumptions that I would probably be better off not relying on.
Posted on 6/14/18 at 2:33 pm to Tigerfan56
--do not assume 2% COLA annually for any government position. do not assume that you will have a job as long as you might want one. gov't jobs are subject to huge swings--all you need is an administration or congress hostile to your agency, and boom, no job for you.
--do not assume any inheritance from your parents. old people have the annoying tendency to live a long, long time, thereby necessitating that they actually get to spend the money they've earned. nursing homes, memory care, personal assistants, home renovations to accomodate wheelchairs--all of these things can be extremely expensive, and the "expensive elderly" phase of life can last 10, 15, 20 years, depending on your family's tendency toward long life. besides, even if the funds aren't spend toward Mama/Daddy's upkeep, they are absolutely entitled to leave their $$$ elsewhere....they may look at you and say, "hey, good gov't job, pension, let's leave the bulk to handicapped cousin Joe, or to the cat sanctuary, or to the Perpetual Adoration chapel, or to our alma mater for a scholarship fund."
--save for your retirement. save your own money for your own retirement. you need to be saving for other things, too, but do not un-fund retirement because you THINK you might get a fat inheritance.
--do not assume any inheritance from your parents. old people have the annoying tendency to live a long, long time, thereby necessitating that they actually get to spend the money they've earned. nursing homes, memory care, personal assistants, home renovations to accomodate wheelchairs--all of these things can be extremely expensive, and the "expensive elderly" phase of life can last 10, 15, 20 years, depending on your family's tendency toward long life. besides, even if the funds aren't spend toward Mama/Daddy's upkeep, they are absolutely entitled to leave their $$$ elsewhere....they may look at you and say, "hey, good gov't job, pension, let's leave the bulk to handicapped cousin Joe, or to the cat sanctuary, or to the Perpetual Adoration chapel, or to our alma mater for a scholarship fund."
--save for your retirement. save your own money for your own retirement. you need to be saving for other things, too, but do not un-fund retirement because you THINK you might get a fat inheritance.
Posted on 6/14/18 at 2:59 pm to castorinho
quote:
Taking potential inheritance into account when planning for retirement does not seem to be a very good idea.
It is really tempting though. The wife and I should inherit 7 figures from each set of our parents. Granted that is (hopefully) 20-30 years down the road.
What I did was model it. And then attribute various probabilities to it, and then see what the numbers showed. In the end, our target retirement number ended up excluding potential windfalls from inheritance. That money could be there.
In the end, save for retirement. What it may enable you to do is to stop working much earlier in life, which I think is a good thing.
Posted on 6/14/18 at 3:00 pm to Tigerfan56
quote:
So my calculation is based off 37 years of service and a much higher salary at the end.
Do you want to work for 37 years? I sure as frick don't want to work until I am 65. Start saving now.
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