43 year old public employee with 5 years left

[Dan]

Hi all!

I'm a 43 year old public employee with 20 years on the job. As we have a 25 year retirement at 3% per I have 5 more years to draw 75% for life...with a 2% simple interest COLA.

The way it looks my pension will be about $75,000 per year, with a $1,500 yearly COLA. Additionally, I have about $80,000 in my 457 plan and hope to sock away more before 2013. We also get a lump sum payment for unused sick and vacation time which should add in excess of $50,000.

As I have 5 years to retire my mindset has definitely changed recently. Already planning and there is soooo much I want to do. We also have a DROP (Deferred Retirement Option) program which I can participate in, but right now I'm just not feeling it. Don't get me wrong I love my job, but I look forward to retiring while still young and healthy.

Currently single and bought my ex-wife out of her claim to any pension money so its mine all mine!!

Anyway, looking forward to contributing to the forum and learning from all you grizzled FIRE veterans!!

Dan in Texas

[cloudeleven]

Quote:

Originally Posted by Dan We also get a lump sum payment for unused sick and vacation time which should add in excess of $50,000.

Does Texas not have a limit on the amount of lump sum money a public employee can be paid for accumulated sick/vacation leave at retirement? Some states have a pretty low limit I think, so you might want to double check.

[Maurice]

Welcome, Dan.

Do I understand correctly that the COLA is fixed at 2%? If I were you I would be somewhat aggressive with your investible assets in order to hedge inflation as much as possible. A big inflationary period that could erode that 75k+2% considerably. Even moderate inflation of 4% or so will take its toll over a 40 year retirement.

Good luck, and welcome to the board.

[bow-tie]

Quote:

Originally Posted by Maurice ...A big inflationary period that could erode that 75k+2% considerably. Even moderate inflation of 4% or so will take its toll over a 40 year retirement...

Maurice has a good point. How much do you plan on spending per year, Dan? If you can live on 40k/year, then 75k with a 2% COLA should work out pretty well for you...

[haha]

Quote:

Originally Posted by Dan Currently single and bought my ex-wife out of her claim to any pension money so its mine all mine!!

How much did that cost?

I am surprised that there was enough money in all of Texas to accomplish such a feat.

Ha

[Dan]

Hey thanks for the comments everyone!! Been away from my computer the past few days so I have some catching up to do.

First, Texas does not have a state law affecting how much municipal employees can be paid for their accrued sick and vacation time upon retirement. Each city/county can determine that for themselves.

Next, yes a 2% COLA isn't alot, and I agree with Maurice that I will need to keep alot of my cash in stocks since I could have a very long retirement. My expenses should be less than $75,000 annually, so I will continue to invest every month after I retire. The retirement fund will pay my medical until I qualify for Medicare, so I am very fortunate there.

And last, I was only married for three years, so although I won't quote the amount of the check I wrote, it was surprisingly reasonable. I have alot of friends that will be paying their ex-wives anywhere from 25-50% of their pension upon retirement. Just very thankful I won't have to worry about that.

For those interested, check out Article 16, Section 66 of the Texas Constitution. Was added a few years ago to protect retirement benefits for certain public retirement systems in the state. Paragraph (e) is the meat of the statute. I would like to see more retirement systems in the country strengthened and protected, but I'm really not sure if this has or is being done in other states. Comments??

[Walt34]

Quote:

Originally Posted by Dan For those interested, check out Article 16, Section 66 of the Texas Constitution. Was added a few years ago to protect retirement benefits for certain public retirement systems in the state. Paragraph (e) is the meat of the statute. I would like to see more retirement systems in the country strengthened and protected, but I'm really not sure if this has or is being done in other states. Comments??

You are indeed very fortunate! A constitutional guarantee (even a state one) is about as ironclad as it's going to get.

I know what you mean about writing big checks or worse, sending big chunks of their pensions to ex-wives forever. That never happened to me but many guys I know are still working for that reason.

[Spanky]

Hi Dan,

It's great to have a COLA pension of $75,000 per year.

Spanky

[jclarksnakes]

Dan,
....Like was already mentioned that 2% cap on the COLA could come up way short if there is a period of higher inflation. The important question for you to figure out over the next five years is how much you will need in retirement. Reading between the lines of what you wrote it seems like you are probably making around $100K a year now. If you only have $80K in all your retirement savings then the obvious answer to the question about how much you need to live is......"pretty close to $100K a year". Being divorced at 43 it is probably easy for you to think that you have allready made all your financial mistakes and that you can save and invest a lot more for your retirement. Some of us who are older can tell you about some real BIG financial mistakes we made after age 43.
....Can you make it in retirement on your pension? Sure you can if you are ready to live on somewhat less than all of it for the first decade or two.
Good luck!
Jeff

[Dan]

Wow! Hard to believe it has already been almost 2 1/2 years since I posted this. Only 2 years and 8 months to go

As my retirement date approaches, I am reconsidering entering our DROP program. If I did the full 5 years I would only be 53, but would have approximately $600,000 in cash minus taxes. That amount includes my 457 account, DROP acct, etc.

Also, my COLA for those 5 years would add 7500 a year to the yearly pension, making it approx. 82,500.

The nice thing is I can leave when I want and collect the money I have at that point. Don't HAVE to stay the whole 5 years.

You guys are an inspiration!! I read this forum every day and it makes me consider expenses, investments, inflation, etc. I don't post alot, but what I read on here does make me think alot.