Review of my status, with #s

[Bimmerbill]

Hello all,
I've been feeling a bit down lately, with the constant negative market news. Plus, turning 42 this weekend, so maybe a bit of mid life angst.

Can you all take a look at my savings plan and let me know if I'm doing OK?

I'm a fed gov't employee making $73,420 per year. DW makes about 6K PT. I used to be a GS-12, but now am in the new pay system (NSPS) so don't know how my pay will increase each year. I'm at the bottom end of my pay band, so can increase yearly for quite a while before I hit the top.

I save 18% into my gov't TSP plan. This doesn't max it out, but maybe after this years COLA/raise it will be close. If not this year, then prolly next year.

I retired from the Army Guard last year, so am eligible for retirement benefits at age 60. They turn out to be roughly $600 or $700 a month, plus medical benefits at age 60. This includes yearly COLAs, even in the 18 years I need to wait to collect. It has survivorship, so if I die my wife/child can collect some of it immediately. Who knows how this will change in 18 years...

Working for the feds is vesting me in the fed pension plan, basically 1% salary per year worked. Projections are hard, since I don't know how my salary will increase.

Early retirement is at age 56, with substantial reduction in monthly payment. Based off of today’s salary my monthly would be about $1K with 50% survivor benefits.

If I waited until age 60, monthly would be $1600, and age 62: $2000.
I'm shooting for age 56. Either way I can carry health into retirement. Unknown how much the monthly cost will be when I retire.

I'm married, 1 DD, age 2.5. I expect expenses to increase with my daughters age. So, things are getting tight. Just started daycare, $500 a month. Heating oil is crazy, so that’s $3400 this year (ouch!).

Have 180K in my TSP. It was close to 200K months ago, but is steady at 175-180 with market flux and regular contributions of my 18%, and matching 5%. 35% S&P, 20% Wilshire 4500, 35% EAFE, 10% govt securities (cash).

Also have 50K or so in wife’s IRA at vanguard, and about 5-6K in a ROTH at vanguard. Doing $50 a month just to get started in the Roth. I know I should reduce my TSP contributions to fully fund the ROTH, but automatic contribution out of my paycheck is so easy with the TSP. Hoping for a ROTH option to the TSP soon.

Owe $160k on the house, worth prolly $220, tax appraised at 259K (but at height of real estate boom). Owe 10K on truck, 5K student loans. Things seem to be getting tight financially and I was thinking of reducing TSP contributions. DW works part time, will pick up more hours. I've been pushing for FT work since DD is now in daycare.

I have 450K or so in life insurance, plus pensions will pay out 1500 or so monthly, plus social security (1800 month?). Working on another 250 to 300K term life for me, may pick up 250K on DW too.

Don't have short term disability, but do have 700 hours of sick leave saved up. Could qualify for long term disability if I can't do my gov't job, so would get some $$ plus Social Security.

Not much of an emergency fund, I am trying to pay off the car loans to have fewer monthly payments. Then plan on socking away the $$ for an EF. Maybe 5 or 10K in the bank at any given time.

DDs college fund? Not sure I can swing anything, but if I keep current contributions going and retire at 56, she should be 18 or so, I should be pretty set.

What else should I look at? I've taken the daycare costs out pretax (health care too), so will see what sort of hit I take in paycheck. DW and I are pretty thrifty, but I buy stuff I want, nothing extravagant, but the $40 or $50 here and there sure do add up. Food cost seem crazy lately too. I guess I'm feeling the pinch.

Plus, reading about all those who make 100K plus gets me kind of itchy and dissatisfied with my gov't paycheck. COLA this year of 3.9% plus some sort of performance based payout, so may get 7-9% raise, but unknown at this time. Maybe I'll try to draft up a rough budget?

Anyways, how about some feedback? Am I on the right track? Saving too little? Too much?

 

[soupcxan]

When you say you have insurance, are those existing term policies or variable/annuities? I'd be wary of the latter.

As for the +$100k salaries, keep in mind that cost of living varies greatly by location and that some may have taken on sizeable student loans plus forgone income for several years to get to their current earnings.

 

[FUEGO]

I know you said your wife is seeking more work hours, but make sure it makes sense to pay $6000 a year in daycare so your wife can work and make $6000 a year (unless the salary is expected to go up substantially). Circumstances may dictate that she wants to work just to work (and get out of the house!) and that is ok.

To gauge your financial picture, it might be better to cobble together a quick spreadsheet showing how much you have, how much you are saving, and what you will have at age 56 (in 14 years) if that is your target. Then, figure out your projected expenses in retirement, and figure out how much you will need after pensions and SS are paid out. The deficit must be provided for by your savings.

But having close to $250k in investments at 42 doesn't seem too bad. You are probably ahead of a lot of folks your age.

 

[Bimmerbill]

My life insurance is thru work. I want to pick up a term policy to supplement too.

My wife was staying at home with DD, but it got too much for her. She was working PT nights just to get out of the house. Now that DD is in daycare (week 2) she will have time to unwind and job shop. She is going to try to pick up more hours at the local hospital where she works. Decent pay and good working conditions.

 

[saluki9]

Bill

I've read your post a couple times just to see what I'm missing.

I still can't find anything. It looks like you're doing a great job.

 

[Coach]

Bimmerbill, I think you are doing very well. Saving over 18% of your income is very commendable.

I know watching the market can get discouraging. But you're in for the long haul. Try not to watch.

Personally I would not reduce my TSP contribution in order to fund a Roth IRA -- I'd want to maximize my tax-advantaged saving first. It sounds like you'll hit the TSP contribution limit soon. Then you can start building the Roth.

I might reduce my TSP contribution to get some debts paid off -- especially high interest rate debt.

Upping the family's second income would really help a lot. I hope that works out.

Bottom line, I agree with salunk9 -- you're doing a great job!

Coach

 

[chinaco]

Bill,

Looks like you are making good progress to me. Keep at it.

Don't worry too much about the market... stay diversified.

 

[Milton]

Plus, reading about all those who make 100K plus gets me kind of itchy and dissatisfied with my gov't paycheck.

Unless you have experience, qualifications and contacts that would make a jump to the private sector at a higher salary a realistic prospect, you should put such considerations out of your mind.

1. First, there are pros and cons to all jobs. As a civil servant you have far more job security than most private workers. You probably also have better pension rights, shorter hours, and more vacation entitlement, too. I.e., you need to look at the whole package, not just salaries.
2. (Again, assuming that you are more or less stuck in a fed job), envy is not a productive emotion and will only chip away at whatever job satisfaction you enjoy.
3. Finally, you will likely be happier in life (which is not a competition) if your goal is to have 'enough', not 'the most'. Who cares what others may have, as long as you and your family are healthy and have everything that you reasonably need (vice want)?

 

[Bimmerbill]

Thanks all. Overall I'm pretty happy with the fed package. 40 hours a week max is pretty sweet. I know if I went private sector I'd be working a lot more than that for more money.

I don't think I'm envious, but like to consider the possibilities. Like the "what if" scenarios. I like to catagorize scenarios and play them out in my mind. I did read that it takes about a 20 or 30% raise to equal a pension, and you have to invest it all to come out even.

I have almost 12 years in the fed system, so leaving it will get harder as time passes. Plus I can always get promotions and move up the pay scale.

Term life looks pretty cheap (20 year 250-300K) for me, but I have no clue about disability insurance. Anyone know how much it may run?

For true ER, I can always hope we get BRACed and I get the early out package ;-)

 

[BigBob]

but I have no clue about disability insurance. Anyone know how much it may run?

LTD is a bit pricey. As a 47 yo male, I pay $34.52 every 2 weeks that would give me about $50k per year until I reach 65 or 70 depending on when I went on disability.

 

[ats5g]

Hey Bill,

My wife is a fed. Term life through a private insurer was cheaper than life insurance through the fed system. I think it was FEGLI. Might want to explore that option to save some $$.

- Alec

 

[Bimmerbill]

Thanks. I have some FEGLI, which is pretty cheap due to my age, but will increase in price. I'm still looking into term life. Strangely enough, USAA dropped the ball on my application. I need to call and gripe...

 

[Khan]

Thanks. I have some FEGLI, which is pretty cheap due to my age, but will increase in price. I'm still looking into term life. Strangely enough, USAA dropped the ball on my application. I need to call and gripe...

I recall reading that FEGLI was a better deal than most until age 45 or so.

 

[jimnjana]

Bill,

I think you are doing great. If I were you, I'd temporarally stop reduce TSP to pay off your debts as you said things were getting a little tough. Also, I think putting minimum into TSP to get match and then after you are done paying your debt off fund the ROTH. You may also want to start saving for college for the DD.
JMO

Jim

 

[Bimmerbill]

You know, I think I have the skills and education to really make the big bucks. I seem to be lacking the drive. People tell me I'm a type-A personality, but I don't see it. I think I'm lazy, probably too lazy to work over 40 hours a week. Probably a control freak, but I'm first born.

Heck, I just finished off my MBA with a 3.93 GPA, one of the top students in my class. Sure, it was a state university, but hey. I pick up most things very easily, so am glad I was blessed with intelligence. It makes things boring.

Maybe its procrastination. I'll get around to looking at it someday...

Anyways, I'm working on a budget now. I get paid bi-weekly, so its a bit tough to use the commonly available spreadsheets out there. I did just sell one of my cars, so may be able to pay off my truck if I squeeze things really tight. That will only leave a 180 a month car payment.

Will try to chug along until raise time in JAN. Prodding DW to pick up more hours.

 

[Rambler]

You are doing fine, it seems you already have a good handle on things, a good start. Ditto Milton about focus on "enough". That's what I am trying to focus on now.

R

 

[frugal-one]

I am a fed too and use WAEPA (Worldwide Assurance for Employees of Public Agencies, Inc.) term insurance. It is a much better rate and have received back 25% of premiums for a number of years. Call 1-800-368-3484 or www.waepa.org to get info.

 

[Urchina]

BBill,

1. $73K/year is nothing to sneeze at. Add in your benefits and pension, and the fact that you apparently LIKE your job and Boy Howdy!

2. No amount of money will compensate for being able to make it home for dinner with your family. My dad was a public employee until his early retirement this year at 58. My mom stayed home with us. Do you know what I remember? I remember my dad at my swim meets, ball games, class concerts, our dinner table. I remember growing up with my dad. I don't remember the amount of money they contributed to my college, or the things I wanted but didn't get. Really.
3. I wouldn't stop contributing to retirement to ease the pinch. I'd stop buying half of the $50 gadgets or whatnot, and put that money to the truck. It'll get easier in a bit, and you'll pick up speed.

4. And, one of my favorite Star Wars quotes, from when they're under heavy fire going for the Death Star, is "Keep on target! Keep on target!"

 

[Bimmerbill]

Yeah, the 40 hour work week is really nice. It certainly adds to quality of life. Job is decent enough. I'm a hands on techie and really good at it. Current job is tech contract management, so I don't get to do any good techie stuff anymore. Still, its good ;-)

 

[FinanceDude]

Term life looks pretty cheap (20 year 250-300K) for me, but I have no clue about disability insurance. Anyone know how much it may run?

For true ER, I can always hope we get BRACed and I get the early out package ;-)

Disability is affordable, considering the risk. Check to see if you can buy extra through work. If not, get a quote from New York Life or Northwestern Mutual. I would think you could get a 60% LTD policy for $150 a month or so, but that's a guess..........

 

[FinanceDude]

Maybe I'll try to draft up a rough budget?

Anyways, how about some feedback? Am I on the right track? Saving too little? Too much?

You need a budget.there's probably $300 a month leaking out of your pocket that you can't track. That could double up the truck payment, and it will go away quick.

I thought you bought a BMW?? Did you pay cash??

 

[Milton]

You need a budget.there's probably $300 a month leaking out of your pocket that you can't track.

Budgets are tedious and often ineffective. It might be easier and more productive to simply keep track of all of your expenses for, say, three months (cf. Your Money or Your Life). Potential savings will become readily apparent.

 

[dex]

Budgets are tedious and often ineffective. It might be easier and more productive to simply keep track of all of your expenses for, say, three months (cf. Your Money or Your Life). Potential savings will become readily apparent.

Some rather big generalizations there - care to elaborate?
----
Tracking expenses is the first step - where is your money going.
A good budget is an informed plan as to where you would like to spend your money. (No guarantee.)
------
Only tracking your spending is like trying to drive a car by only looking in the rear view mirror.

 

[Milton]

It doesn't take much time to jot things down on an ongoing basis, so for most people keeping track of expenses will be quicker and easier than preparing a detailed budget (I don't see much real point in a non-detailed budget).

Only tracking your spending is like trying to drive a car by only looking in the rear view mirror.

That can be true. I know someone who spends hours on 'Quicken' maintaining a detailed record of past spending, with absolutely zero impact on his free-spending, credit-funded ways. It's rather like buying a book but not reading it, and kidding yourself that you have magically become more knowledgeable.

However, I assume that most people participating on this forum are both intelligent and genuinely interested in saving money. If a person with those characteristics keeps a record of his or her spending, two things tend to happen:

(1) the cumulative impact of unconscious, minor, unnecessary purchases becomes more readily apparent, making them easier to eliminate (David Bach's 'latte factor', although he is not the first person to publicize the concept);

(2) the very act of recording all expenses can tend to reduce spending (one tries to avoid jeopardizing the modest pleasure of writing a '0' at the end of the day).

 

[Khan]

However, I assume that most people participating on this forum are both intelligent and genuinely interested in saving money. If a person with those characteristics keeps a record of his or her spending, two things tend to happen:

(1) the cumulative impact of unconscious, minor, unnecessary purchases becomes more readily apparent, making them easier to eliminate (David Bach's 'latte factor', although he is not the first person to publicize the concept);

(2) the very act of recording all expenses can tend to reduce spending (one tries to avoid jeopardizing the modest pleasure of writing a '0' at the end of the day).

That's certainly been my experience.