Monday, April 14, 2014

Retirement Update

It's the end of the 4th quarter of 2014 so I thought it was only pertinent to check back up on our retirement accounts, especially since we have a brand new Roth IRA for South County Boy.

According to Fidelity, by age 35 you should have been able to save your annual salary... by age 45 you should have 3 times your salary saved... by 55 you should have 5 times your salary saved... and by 67 you should have 8 times you salary, assuming you work until age 67...

I have no idea if we are going to work until 67... I hope not, but those are just benchmarks and if you want all the details on how they got to that one, you can check out this article here.

So how are we doing? (Numbers pulled 4/10/14)

South County Girl:
On average, i'll make slightly under $53,000.00 this year.
Roth IRA's:
  • Vanguard: $30,780.47
  • Capital One 360: $10,056.46  (man I need to transfer this!)
  • In savings for 2014: $827.96
  • ICMA- RC: $3,111.82
Before my pension, I've got $44,776.71 saved, which is almost 84% of my salary!

The current cash value of my pension is $32,315.56... I have to say I'm really proud that my own retirement savings are larger! Pensions are slowly becoming a thing of the past so we like to pretend it doesn't exist and save outside of it. Hopefully by doing so it means we will really to both retire at 55 and enjoy life more fully. The cash contributions/interest can never be taken away from me... but they can change the formula used for calculating my pension.

  • I currently work assuming a 2.7% formula @ 55 years. I could go to work tomorrow and HR could tell me, starting today, you're earning a pension that will pay out with this new formula: 2% at 60... 
    • The almost 10 years I have worked at would use my current formula, but the new formula would go into place for the next 20 years down the line, significantly reducing the amount of money I would get in retirement.... and any pension I pull automatically forfeits the cash value.   

Right now if I were to quit my job, my formula would "lock in" and I would get $5,688.36 a year or $474.03 a month. It would only take 68 months or 5.68 years to go through the cash balance, making it smarter to pull a pension... but that money gets to sit in the account for 27 years earning 6% interest... which means at 55, it would be $162,635.63... taking almost 28.5 years to pay down... making me 83. With the cash, I know I'd pull more then the $474.03 a month so it wouldn't last me 28.5 years in reality. Pulling the pension and forfeiting the cash would be a safe bet because Hubs would keep getting the check if I snuffed it and we'd have our other accounts to help us out.

South County Boy:
I'm going to estimate that South County Boy makes $27,000 a year. ($880 a paycheck for 26 paychecks... add in a $4k profit sharing check & I rounded up for the occasional Over Time).

Roth IRA: 
  • Vanguard: $5,500.00
  •  Fidelity: $752.38 (vested balance) | $1,128.59 (balance w/ employer contributions)
Total using vested balance: $6,252.38 | 23.15% of his salary. 
I'm actually proud of this because we just started this last year and we will hopefully make the 2014 goal and again, we will only be turning 28 this year... so if he keeps working, we should be able to hit the benchmark by the time he reaches 35. 


  1. Hi, I'm not sure you understand how a pension works. If you start drawing your pension at 55 (whether you still work there or not), the monthly amount is for life. Not just until the cash value of your pension is used. Therefore, if you left your job tomorrow and worked for a non-public company, your pension at 57 would be $474.03 per month for the rest of your life. How do I know this? Because I worked for a PERS public agency and I've collected far more in my monthly pension than what had accrued in my account. It is NEVER a good idea to take your money out of a pension. Chances are you'll survive your DH (just going by percentages here) and will possibly live for at least 30 years or more after 55.

    1. Thanks for the comment... I don't think I articulated myself very well because I know the pension is set for life... the amount can't change once I start it.

      I guess I was trying to talk about the formula... because they can change that moving forward at any time and have for new hires only at this point.

  2. Great. That's usually what they do: "grandfather" the current staff and reduce the formula/benefits for new hires. In any event, you're still much better off playing the odds and not withdrawing your pension money.