Your opinion on my situation

[roadyrunner]

I'm 51 years, FERS federal employee, with 27 years of service.
Recently divorced with one child in 7th grade.

Salary of $120k. I hope to retire in 5 years, when my child goes off to college, and whose other parent is helping fund her 529 plan currently.

My TSP has a balance of $650k
My home has equity of $250k
My personal savings are $250k
No debt

My investments lately are all very safe, but barely keeping up with inflation.
I see myself receiving about $40k a year from my pension annuity, $30k from my TSP annuity, and SS of maybe $20k when I'm eligible.

Based on the information about my assets, I'd appreciate any review experienced people may have about my situation, what other things I need to think about, or any suggestions you may have. Thanks in advance.

 

[freedomatlast]

It's difficult to comment without knowing what your annual expenses are.

 

[gcgang]

You're in great shape if you can live on $70k/yr.

 

[Blue Collar Guy]

I'm 51 years, FERS federal employee, with 27 years of service.
Recently divorced with one child in 7th grade.

Salary of $120k. I hope to retire in 5 years, when my child goes off to college, and whose other parent is helping fund her 529 plan currently.

My TSP has a balance of $650k
My home has equity of $250k
My personal savings are $250k
No debt

My investments lately are all very safe, but barely keeping up with inflation.
I see myself receiving about $40k a year from my pension annuity, $30k from my TSP annuity, and SS of maybe $20k when I'm eligible.

Based on the information about my assets, I'd appreciate any review experienced people may have about my situation, what other things I need to think about, or any suggestions you may have. Thanks in advance.

the problem with "safe" investments is that they usually only keep pace with inflation, many of them lose when inflation is factored in. take one of the many risk tolerance tests with regard to asset allocation, answer truthfully. if it shows you can handle more risky investments you will out perform inflation.

 

[OldShooter]

... risk tolerance tests ...

I am skeptical that those have much value. From Fred Schwed:

"There are certain things that cannot be adequately explained to a virgin by words or pictures. Nor can any description that I might offer here even approximate what it feels like to lose a real chunk of money you used to own."

Having ridden through a number of big hits, beginning with 22% on October 19, 1987, I have a pretty good sense of my risk tolerance. But I sincerely doubt that filling out on-line questionnaires will give anyone a sense of what it is really like. They are always fun, though.

 

[pb4uski]

OP, have your run your situation through Firecalc? or Quicken Lifetime Planner?

If your expenses are typical, then you're probably all set.

But you should consider taking on some modest investment risk as an inflation hedge.

 

[evilanne]

From 56-62, you should also get FERS supplement that should be about the same as (maybe a little less) SS in addition to 32% of average high 3 salary. You stated you had no debt...does that include your house? If so, looks like you are in excellent shape.

Are you maxing out contributions on TSP? Catch Up? This can give you better cushion when the time comes to retire.

 

[rodi]

You mention SS - have you checked to see what kind of SS you'll qualify for? I know some government pensions reduce the ability to claim full SS. But the situation doesn't apply to me - so I don't know the details.

 

[evilanne]

FERS Employees are eligible for SS
FERS Supplement:
What Is the FERS Supplement Worth? - Retirement Planning - Pay & Benefits - GovExec.com
TSP Calculators:
https://www.tsp.gov/PlanningTools/Calculators/index.html

 

[Blue Collar Guy]

I am skeptical that those have much value. From Fred Schwed:

"There are certain things that cannot be adequately explained to a virgin by words or pictures. Nor can any description that I might offer here even approximate what it feels like to lose a real chunk of money you used to own."

Having ridden through a number of big hits, beginning with 22% on October 19, 1987, I have a pretty good sense of my risk tolerance. But I sincerely doubt that filling out on-line questionnaires will give anyone a sense of what it is really like. They are always fun, though.

i agree thats why i said truthfully, and even truthfully you need to experience the pain of a downturn to appreciate the word. lol

 

[ABQ2015]

You mention a TSP annuity. If you convert your TSP to an annuity and have a pension and SS, then all your retirement income will be annuities. I think some of the TSP annuities may provide for COLAs. The FERS pension COLA is a diet COLA so will not quite keep up with inflation. You may be too risk averse, especially given that you are retiring in your mid 50's but could live to be 100.

 

[Nature Lover]

My investments lately are all very safe, but barely keeping up with inflation.
I see myself receiving about $40k a year from my pension annuity, $30k from my TSP annuity, and SS of maybe $20k when I'm eligible.

Based on the information about my assets, I'd appreciate any review experienced people may have about my situation, what other things I need to think about, or any suggestions you may have. Thanks in advance.

As mentioned by others above, you need to think about/estimate your expenses in retirement. And because you'll have so much of your income in pension and annuities from tax deferred savings, you need to look carefully at taxes. Depending upon where you will live when you retire, taxes can eat up a smaller or larger portion of your income.

 

[clobber]

My thoughts:

0) You're doing good for a gov't employee.

1) Don't forget that while working you are paying 6.2% OASDI, 0.8% FERS, and 1.45% Medicare every pay period. Those are mandatory and reduce your 120K salary to roughly $109.8 K

2) Your TSP balance is good. I'm going to guess that you might have been maxing the contributions for a while. Once you retire, you will not be contributing to TSP. Use the number that is accurate for you, but that might make your current take home more like $109.8K - $18K = $91.8K. If you are currently doing catch up contributions, you might even be putting in as much as $24k/year.

3) Your other numbers seem reasonable to me for the FERS annuity, TSP (annuity, really?), and SS. As others have said, DON'T forget about the FERS supplement. That will be about 27/40 * (2000?) = $1350/mo or $16k/year from your MRA (56 I guess) to age 62. So overall, you would have $86k/year - and then more when you reach 62 and SS replaces the FERS supplement.

4) I hope the numbers look better now. If those numbers are accurate, then you will have almost a 94% replacement income rate. (86k/91.8k). I didn't count taxes in there. You get taxed now and you will get taxed later, so those did not make much of a difference in my own calculations. I also did not count FEHB because you will pay now and later, though the taxes on it are different - but dont change the calculation a lot.

5) You used the term TSP Annuity. Very very very few people choose to purchase the TSP Annuity. Most everyone keeps it as an investment account (even if they move it out of TSP). Put it this way, you purchase the annuity with your $650k and they give you ~3500/mo. You die 2 months later. They keep your $650k and tell you good luck pushing up the daisies. Ok, I'm guessing a reduced annuity might go to spouse or child, but still. Seems like a terrible deal. Alternatively, you can just withdraw your $30k/year (monthly of course) for the next 22 years - which is how long it will last you with 0% interest. It will last much longer even in the G fund. Most people would keep a mix of stocks/bonds/G and that money would probably last (and even grow) until you are 100.

Hope that helps

 

[texcurtis]

I retired 2 years ago with FERS with an early out & buy out.

A few thoughts:
Retire when first eligible ,
Supplement pension as has been mentioned is in addition to pension (56-62),
consider using TSP funds once supplement ends to postpone claiming SS (& increasing SS) 62-65 or so,
perhaps invest in L-income rather than TSP annuity to gain flexibility yet invest conservatively,
Save up leave last couple years to have a big check to live on while the pension gets finalized (will take months for sure, but you'll get partial in the meantime).

 

[Milton]

Fixed

the problem with "safe" investments is that ... many of them lose when inflation is factored in

Almost all of them lose money after inflation and taxes are factored in.

 

[joeea]

I am skeptical that those have much value. From Fred Schwed:

"There are certain things that cannot be adequately explained to a virgin by words or pictures. Nor can any description that I might offer here even approximate what it feels like to lose a real chunk of money you used to own."

Having ridden through a number of big hits, beginning with 22% on October 19, 1987, I have a pretty good sense of my risk tolerance. But I sincerely doubt that filling out on-line questionnaires will give anyone a sense of what it is really like. They are always fun, though.

We all need to start somewhere.

You could visit a financial advisor who will ask a lot of questions and help you come up with a feel for your risk tolerance and suggest an asset allocation, or you could use one of those online tools.

Once you go through some market ups and downs, then you'll know what your real risk tolerance is.

 

[38Chevy454]

I agree that your savings should have more equities to help protect against inflation. Even conservative would be a 50% equities for your TSP. Since you have the pension, think of that like the annuity portion. While you might make it on a fixed return very safe account, as stated you will not keep up with inflation.

A common asset allocation used is 60% equities/40% fixed income, and that is intended to stay ahead of inflation.

 

[cooch96]

OP, $70k seems like a lot of money to me, but you may live, or wish to live, in a high COL area. And I don't know how much you're paying in alimony, so perhaps $70k isn't adequate.

Knowledge is power. I recommend your to start working your way through this site's reading list. this might make you more inclined to adopt a more aggressive, diversified, and balanced portfolio and you can build up your nest egg.

And may I complement you on your word choice of child? Folks referring to their children as kids (baby goats) is a pet peeve of mine. A stupid pet peeve, to be sure, but I am what I am.

 

[Milton]

And may I complement you on your word choice of child? Folks referring to their children as kids (baby goats) is a pet peeve of mine.

On a similar note, I dislike people using the term 'grow-ups' rather than 'adults'. It's not something that causes me distress, but it just seems so infantile.

Regrettable expressions that are far too common (especially used by airlines!):

1) ''last and final' (e.g., "last and final call for passager Jane Smith"): stupidly redundant. This is a close cousin to the idiotic phrase 'first and foremost';

2) 'more than pleased' (e.g., "if you need assistance with a connecting flight, we will be more than pleased to help you"): really? If receiving mundane requests for information is cause for ecstatic joy, you really do need to get out more.

Sorry everyone for the thread highjack.

 

[ivinsfan]

On a similar note, I dislike people using the term 'grow-ups' rather than 'adults'. It's not something that causes me distress, but it just seems so infantile.

Regrettable expressions that are far too common (especially used by airlines!):

1) ''last and final' (e.g., "last and final call for passager Jane Smith"): stupidly redundant. This is a close cousin to the idiotic phrase 'first and foremost';

2) 'more than pleased' (e.g., "if you need assistance with a connecting flight, we will be more than pleased to help you"): really? If receiving mundane requests for information is cause for ecstatic joy, you really do need to get out more.

Sorry everyone for the thread highjack.

Number 2 seems like a petty thing to complain about, just for clarity sake tell me how you would rephrase that..they are just saying they will be happy to help you...I'm not gonna complain about somebody being pleasant and polite. Are you objecting to them using 3 words instead of two? Also on the boarding I've heard "Final boarding" repeated more then one time because they really mean "you need to get your butt on the plane" last and final means we are done messing with you, either get on the plane or find another flight.

 

[Bestwifeever]

... Folks referring to their children as kids (baby goats) is a pet peeve of mine. A stupid pet peeve, to be sure, but I am what I am.

You must not have met my [-]kids[/-] children back in the day. Little savages.i

 

[Milton]

tell me how you would rephrase that..they are just saying they will be happy to help you.

You answered you own question.

Also on the boarding I've heard "Final boarding" repeated more then one time because they really mean "you need to get your butt on the plane".

"Final" should mean final. However, in airline use it does not. As you note, they keep repeating it ad nauseum (presumably because if a passenger does not board the aircraft they will have to root around in the baggage compartment to take off their checked bag, which will cause more delay than merely waiting for the tardy passenger to appear).

Instead of "final" calls, they should simply say "passenger Smith, your flight is boarding at Gate 17", if that's what they really mean rather than anything "final". But the dullard clerks like to sound important, by issuing commands.

last and final means we are done messing with you, either get on the plane or find another flight.

In my experience, the horrible "last and final" phrase is generally broadcast repeatedly, rather than at the end of a series of "final" calls.

In any case, as previously noted "final" should actually mean final, and adding the word "last" to it is redundant. If they really mean "last call for passenger Smith", they should simply say that (once).

The stupidity and pretentiousness of airline communications is so widespread that I have merely scratched the surface. It is further covered in Paul Fussell's book, BAD, or, the Dumbing of America (1991) [chapter 3, "BAD Airlines", and Chapter 18, "BAD Language"]. See also Fussell, Class: a guide through the American status system (1983), pp. 158 and 159.

Cornball-elegant is also the rhetoric of the airlines and of airports, whose clients are 90 percent middle class. If one couldn't infer the hopeless middle-classness of airports from their special understanding of the ideas of comfort, convenience and lug-zhury, one could from their pretentious language, especially the way they leap to designate themselves "Internationl", or even, like Houston, "Intercontinental". They will do this on the slightest pretext, like having a plane take off now and then for Acapulco or Alberta, while remaining utterly uncontaminated by any sign of internationalism, like dealing in foreign currencies or speaking languages or sympathizing in any way with international styles.

On the aircraft itself, virtually everything said or written shall be bogus, from such formulations as "motion discomfort" and "flotation devices" to "beverages" and "non-dairy creamer". On a recent flight from New York to London, a steward announced, "Smoking is not permitted while you make use of the lavatory facilities" - a perfect example, almost a definition, of the middle-class pseudo-elegant style. The little menu cards given out by transatlantic airlines, ostensibly to indicate the components of the meal but actually to tout the duty-free goods (including "designer" neckties and scarves), constitute a veritable exhibition palace of the fake elegant. One I've encountered in a TWA flight does forget itself and slip once, calling beverages drinks in a thoroughly upper-class way, but generally it holds the line, especially in describing the meals offered (I have added italics): "FILET TIPS DIJONNAISE. Tidbits of Beef Tenderloin in a Mild Creamy Mustard Sauce Presented[ with Pommes Chateau and Petit Pois". Another meal is said to be: "Complimented by Buttered Broccoli". And then, to cap it all: "Please accept our apologies if due to previous passenger selections, your entree preference is not available". Or, as a civilized person would put it, "Not all items available", the corollary of "No smoking in the toilets".

 

[ivinsfan]

You answered you own question.

"Final" should mean final. However, in airline use it does not. As you note, they keep repeating it ad nauseum (presumably because if a passenger does not board the aircraft they will have to root around in the baggage compartment to take off their checked bag, which will cause more delay than merely waiting for the tardy passenger to appear).

Instead of "final" calls, they should say "paging passenger Smith", if that's what they mean rather than "final". But the clerks like to sound important, by issuing commands.

in my experience, the phrase "last and final" is generally broadcast repeatedly, rather than at the tail end of a series of "final" calls.

In any case, as previously noted "final" should mean final and adding the word "last" to it is redundant. If they really mean "last call for passenger Smith", they should simply say that (once).

The stupidity and pretentiousness of airline communications is so widespread that I have merely scratched the surface. It is further covered in Paul Fussell's book, BAD, or, the Dumbing of America (1991) [chapter 3, "BAD Airlines"]. See also Fussell, Class: a guide through the American status system (1983), pp. 158 and 159.

I'm guessing you don't like commercial flying,I know a few people who work for airlines and believe me they are trained in how to make these announcements, it's not the clerk "liking to sound important"

But if the announcements get you that riled up, it's probably best you don't actually get on the airplane. Anyway back to the OP and his question.

 

[Milton]

I know a few people who work for airlines and believe me they are trained in how to make these announcements, it's not the clerk "liking to sound important".

Riiiiiiiiiight ...

But if the announcements get you that riled up, it's probably [-]best[/-] better you don't actually get on the airplane

Fixed.

Anyway back to the OP and his question.

Agreed!

 

[ivinsfan]

Riiiiiiiiiight ... I'm sure people say you are a barrel of laughs...If they dare talk to you...

Fixed.

Agreed!