Retirement Targets

[CycloneSpinning]

Moving away from defined benefit pensions to 401K was just another con from the Reagan years. Oh, you will have all this money and it yours to do what you want to do with. That is great, IF and that is a big if, you are putting money in the program from day one and getting a good match from your employer. The business has bet, correctly by the way, that most of the employees will not max out their 401K on an annual basis and save them money over the long term, which was not possible under the pension plan.

Pensions are amazing, but I get the benefit of a 401k to both worker and employer if people are being enrolled and contributing. In theory a person should be able to do better in a 401k than in a pension (as they can invest more aggressively than the business would/could). The business isn’t saddled with this enormous obligation they have to manage and worry about regardless of their own solvency/profitability (or whether we’re in an economic boom or depression).

But yes, if people don’t enroll or contribute, it’s a major issue. The responsible thing would have been for companies to contribute regardless and still have employer contributions be optional. A 3-5% contribution by the employer each year on its own isn’t much…but it’s better than nothing. And while it wouldn’t provide for any sort of a meaningful retirement (even combined with social security), at least in theory it could help someone survive for a couple years when they physically can’t work any longer.

 

[AllTimeClone]

Haven’t reached this point yet, but I’ve been thinking about it as well. I’m tempted to think a good accountant may be more valuable than a financial advisor. I do like the money guy team, and in theory Brian would be the best of both worlds (not that I would assume I would work with him), but fees always turn me off. I’d rather pay a fee for an hour or two conversation once or twice a year perhaps…

Look up Nectarine. There is a whole network of financial advisors who charge based on hours instead of a percentage of your money. This is how financial advisors/realtors should work in my opinion.

 

[CycloneSpinning]

Sorry to derail the latest conversation, and perhaps this was already discussed somewhere in a previous page, but it just hit me the other day that though I am doing well with all of the targets by age, #x income, etc, we are a single income family with my wife who will be at home full time with the kids for a while. Should that be a factor into retirement targets, or since all income/expenses are combined into one I am "on track" with my nest egg target that I was already shooting for?

Are you concerned with how much you can contribute as a family (reduced liquidity due to only one of you working), or are you concerned with your wife’s accounts technically falling behind recommendations?

 

[1SEIACLONE]

The stopped the annual printouts 1-2 years ago.

Did not know that since I retired, a couple years ago, but you still can request one as they are moving to an all digital system, where you log in and can see your benefits and projects there. Same information but just not mailed out to you. Why would someone in the program not be checking up on it once or twice a year? Because they do not really care, which I could see if you were just starting, but as you get older and closer to retirement, from age 50 on, you really should start caring and planning for the future.

 

[VeloClone]

Totally respect that, I just think the idea of “thanking” parents for having kids working in those roles is a rough take. Can we go around and trash all the parents of kids who bring down society or contribute nothing? Kinda my point of a slippery slope.

Not the thread to discuss it and I won’t derail but with the state of the world we could certainly do with a whole lot less people having kids. Obv can’t go down to zero but thanking parents is just a massive stretch.

I also have a bias both from my career and being a DINK so obv my thoughts on this are skewed

Yes.

 

[CycloneSpinning]

My wife and I are 5 years away from early retirement, we've saved our whole working career, we have a good nest egg, we have a new house that will be paid off by the time we retire, no debt, emergency funds, I've met with financial planners, I use software, I subscribe to youtube channels, invest pretty conservatively now, etc. I'm always in constant fear that something bad will happen, preventing us from retiring.

Does anyone else feel the same way?

If you’re a planner and a saver, I think it goes with the territory. You run Monte Carlo scenarios and see one opportunity for failure and say to yourself…there’s a chance.

I think the best thing to tell yourself is that you’ve leaned on this set of skills and knowledge to this point…you won’t lose it when you retire. Set up plans for how you will take regular distributions, think of that as income, and know you can and will adjust if you need to.

And if that one scenario comes true…we’re likely all screwed.

 

[1SEIACLONE]

Pensions are amazing, but I get the benefit of a 401k to both worker and employer if people are being enrolled and contributing. In theory a person should be able to do better in a 401k than in a pension (as they can invest more aggressively than the business would/could). The business isn’t saddled with this enormous obligation they have to manage and worry about regardless of their own solvency/profitability (or whether we’re in an economic boom or depression).

But yes, if people don’t enroll or contribute, it’s a major issue. The responsible thing would have been for companies to contribute regardless and still have employer contributions be optional. A 3-5% contribution by the employer each year on its own isn’t much…but it’s better than nothing. And while it wouldn’t provide for any sort of a meaningful retirement (even combined with social security), at least in theory it could help someone survive for a couple years when they physically can’t work any longer.

The bolded part is what the company is betting on, and why it saves them money. Under a defined pension program, the employee had no choice but to start putting money into the system and so did the employer, because it was in the union contract. But neither is true of a 401K program, you chose not to invest, then your employer does not have to do it either.

 

[BCClone]

Did not know that since I retired, a couple years ago, but you still can request one as they are moving to an all digital system, where you log in and can see your benefits and projects there. Same information but just not mailed out to you. Why would someone in the program not be checking up on it once or twice a year? Because they do not really care, which I could see if you were just starting, but as you get older and closer to retirement, from age 50 on, you really should start caring and planning for the future.

Most teachers my wife works with and know only check when they are close to rule of 88. Then they realize that they either need to teach until 62-65 or find a part time job since it only covers 65% and is a flat payment with no COL. They hear pension and assume they are taken care of.

Why I wish IPERS would make appointments at each school. Any investment person I have co facts me a couple times a year.

 

[Marcelason78]

…… I wish IPERS would make appointments at each school. Any investment person I have co facts me a couple times a year.

Agree.
Same with private companies and their employees. There was zero training/information when I was young and uneducated on how investments and financial advisors work.

 

[dmclone]

If you’re a planner and a saver, I think it goes with the territory. You run Monte Carlo scenarios and see one opportunity for failure and say to yourself…there’s a chance.

I think the best thing to tell yourself is that you’ve leaned on this set of skills and knowledge to this point…you won’t lose it when you retire. Set up plans for how you will take regular distributions, think of that as income, and know you can and will adjust if you need to.

And if that one scenario comes true…we’re likely all screwed.

You nailed it with the Monte Carlo; that's exactly what I do as shown here.



After I see something like this, I think to myself, "I can't be accurate on how much we're going to need to live in retirement.". I then go back and raise the income needs to get a lower percentage.

 

[CycloneSpinning]

You nailed it with the Monte Carlo; that's exactly what I do as shown here.

View attachment 154128

After I see something like this, I think to myself, "I can't be accurate on how much we're going to need to live in retirement.". I then go back and raise the income needs to get a lower percentage.

I get it. Sometimes I try to flip my mind and think of the risk of saving too much/being too conservative. It’s a different kind of risk, but as much as I don’t want to run out of money, I also don’t want to be so miserly that my wife and kids don’t enjoy their lives…we miss out on vacations together, they don’t get new things, etc. Not easy though…I know the struggle.

 

[frackincygy]

Yup, if only one my professional financial advisors would have told me 40 years ago— “Just invest in an index 500 fund and forget about it. I’ll never be able to outperform it and you’ll save a ton in my management fees.”

I actually had one tell me exactly that a year or so ago. My wife and I had just had our first child, moved to a new home, and wanted to know where we were. Sat down and talked with the advisor, reviewed the accounts, and chatted about my interest in stocks/ the markets. He told me, keep doing what you're doing - keep putting money into index funds with low fees, and come talk to me again in 20 years.

I was gobsmacked at the honesty and tbh he turned me into a future customer based on his honesty alone.

 

[KnappShack]

I actually had one tell me exactly that a year or so ago. My wife and I had just had our first child, moved to a new home, and wanted to know where we were. Sat down and talked with the advisor, reviewed the accounts, and chatted about my interest in stocks/ the markets. He told me, keep doing what you're doing - keep putting money into index funds with low fees, and come talk to me again in 20 years.

I was gobsmacked at the honesty and tbh he turned me into a future customer based on his honesty alone.

I had one also tell me that I didn't need his service

Good stuff. My first job put of college was at a broker shop and they were absolutely not of that mindset. At all.

 

[frackincygy]

We move away from them because many companies were underfunding their programs, and when laws were passed to shore those up. Companies moved away from pensions to 401K programs because they cost the company less money.

SS is not a terrible program, and it's not an investment program, like so many on here think. It is old age insurance, nothing more, and nothing less. Way too many on here are thinking it as a ME program, I can make more money in the market than I will get out of SS. It's not a ME program but a WE program. It's a program for keeping people off the streets or living with their children in their old age.

All we hear its either "its not going to be there for me, so why should I be forced to pay into it" and "I could make more money in the market than what I will ever get from SS."

Ok. the how do we pay for the people under the following scenario.

30 year old hit by a drunk driver on his way to work and is now mentally handicapped and can no longer work. Only had 10 years in the 401K privatized SS program, that money is not going to last him long.

2nd one, the same guy has two small children and is killed in the wreck, they would receive SS benefits till age of 18 under the current program, who covers them once its a 401K program?

It's not a ME program folks, it's a WE program.

Idk about others, but I carry dismemberment/disability insurance and life insurance policies for those exact scenarios you presented. Some of the policies are provided by my employer as a benefit, but I also have additional coverage I pay for through an independent provider. But I guess I'm a ME person.

 

[OscarBerkshire]

A couple other situations were: 1) they were a liability on the books and really made expansions or getting loans much more difficult. 2) what happens when a company goes BK, those pensions are destroyed basically.

Having a wife as a teacher, I’ve learned that many of them just say they have IPERS when retirement comes up. They really aren’t sure how it works. Several get to their rule of 88, or near it, and pull up the website and read that it says it’s a supplement to SS and then start asking questions. That is just one pension, several work the same way. If you retire right away and live 20 more years on your own, the value gets eroded hard.

I wish IPERS (can’t speak for other pensions with this) would have better education on it for beginning educators.

Yeah “DAE corporations bad????” Is super prevalent in our culture rn but it wasn’t this idyllic system. A 401k is protected from that and you the individual get to control where it is invested (for the most part). There are plenty of horribly managed pensions, and in the case those are in the public domain, then taxpayers have to step up to cover the promised benefit (Illinois residents wya)

 

[1SEIACLONE]

Most teachers my wife works with and know only check when they are close to rule of 88. Then they realize that they either need to teach until 62-65 or find a part time job since it only covers 65% and is a flat payment with no COL. They hear pension and assume they are taken care of.

Why I wish IPERS would make appointments at each school. Any investment person I have co facts me a couple times a year.

According to the IPERS website they just started the switch over to web based information this year. So last year and before everyone would get a statement over how much they would make at retirement. I have only known one teacher that retired at 55 hitting their rule of 88. He came back and worked half time for another 8 years. The biggest problem with retiring early is insurance and paying for it. Many schools offer a buyout if you have been in district for 15 to 20 years to get you to retire, but most wait until they are 62 before they retire so they can then also draw SS. Other wait until they are 65 so they can then get on Medicare also, and not have to worry about insurance. It should never be a surprise to anyone on how much money they are going to be getting, if it is, that is on them.

Not sure IEPRS has the staff to hold meetings at every school, city, hospital and police force covered by the pension plan. They had a booth at the state fair until this year, or you an always go on line, set up an account. Plenty of information out there, but you do have to look or attend one of the session they have around the state.

 

[danielyp29]

Are you concerned with how much you can contribute as a family (reduced liquidity due to only one of you working), or are you concerned with your wife’s accounts technically falling behind recommendations?

The latter. My wife has a 401k from few years she worked before leaving to stay home with the kids, but I've never factored that with my targets. If she goes back and starts contributing more into her accounts we'll probably just generally consider it extra. I am still on track with the targets (still 25-30 years away) with the 25x expenses formula, but maybe just had a slight panic that I was actually only shooting for 60-70% of the real targets because these goals/targets were for individual, not combined.

 

[1SEIACLONE]

Yeah “DAE corporations bad????” Is super prevalent in our culture rn but it wasn’t this idyllic system. A 401k is protected from that and you the individual get to control where it is invested (for the most part). There are plenty of horribly managed pensions, and in the case those are in the public domain, then taxpayers have to step up to cover the promised benefit (Illinois residents wya)

States like Kentucky for years under funded their public retirement program, it was both parties, and put them in jeopardy down the road. How is any of that the responsibility of the workers? They had an agreement with the state, that they would take below scale wages for a good retirement after 30 or more years, and now the state is trying to renege on that agreement.

 

[OscarBerkshire]

States like Kentucky for years under funded their public retirement program, it was both parties, and put them in jeopardy down the road. How is any of that the responsibility of the workers? They had an agreement with the state, that they would take below scale wages for a good retirement after 30 or more years, and now the state is trying to renege on that agreement.

Yes and that has happened in mutiple polities in the united states over history. Is it right? No. Is it reality? Yes. Many people are broke in retirement that have relied on pensions that aren't there. The nice part about that for them is that they get to blame someone else that they can't afford to retire. With a 401k you have only yourself to blame

 

[BCClone]

According to the IPERS website they just started the switch over to web based information this year. So last year and before everyone would get a statement over how much they would make at retirement. I have only known one teacher that retired at 55 hitting their rule of 88. He came back and worked half time for another 8 years. The biggest problem with retiring early is insurance and paying for it. Many schools offer a buyout if you have been in district for 15 to 20 years to get you to retire, but most wait until they are 62 before they retire so they can then also draw SS. Other wait until they are 65 so they can then get on Medicare also, and not have to worry about insurance. It should never be a surprise to anyone on how much money they are going to be getting, if it is, that is on them.

Not sure IEPRS has the staff to hold meetings at every school, city, hospital and police force covered by the pension plan. They had a booth at the state fair until this year, or you an always go on line, set up an account. Plenty of information out there, but you do have to look or attend one of the session they have around the state.

I don’t care what the website says, my wife got a letter last year saying she would not receive one and she needed to go online if she wanted the info. So I signed her up and got it going for her because I knew she wouldn’t.