Hi, I am 34 and trying to get my act together...

[alpacajohn]

Hi. I am 34 and married-we are debt free (I finished paying off 70k in student loans). I make 89k and my wife makes 65k a year. We have about 70k in cash, 175kin mutual funds, and 50k in IRAs. I am also vested in the PA teachers state retirement system (7 years), and now 2.5 years into the CA teachers state retirement system. We rent at ~2k per month, and may end up moving over the next 3-4 years back to the east coast so we aren't looking to buy a home. We are family planning and hope to have two kids, and the first within a year if everything goes according to plan. At this point my biggest question is what to do about the PA pension. If we move back to the east coast we probably won't be going to PA, so I won't be getting back into that system. My gut is not to touch it but it's certainly a shame to have had my years split between two systems. The more I read about 403bs, the option presented to teachers, the more I think they should be avoided at all costs because of the fees. My instincts are to just keep maxing out IRAs each year and slide extra savings into low risk Vanguard funds. I don't have any sort of retirement date in mind and I haven't played with the calculators at all-it feels so far away-just want to keep saving maximize returns along the way.

Any advice humbly and greatly appreciated about my pensions, my overall plan, what I should do with extra savings, Vanguard funds, whatever.

Happy to be here and thanks in advance. Very inspired by many of the posts and hearing about people's progress.

 

[38Chevy454]

What are the fees on the PA 403b with the options for investment choices you have? All programs 401k, 403b, 457 will have some fees associated. Even self-directed IRA will have some fees.

Why not transfer the money out of the PA 403b and put into a self-directed IRA? Then you can have more choices for the investments and can control the fees better. When you move out of CA you can do the same and transfer those funds into the self-directed IRA. Either of these moves should have no effect on your pension, as that is a calculation based on your service, not your 403b balance.

Good job on the savings you have so far and getting to debt-free status. You obviously do well with LBYM principles. Keep that up and you'll be good shape for retirement.

 

[alpacajohn]

Thanks for the response and the encouragement. Currently, do not have any money in PA 403bs-converted that into self-directed IRAs years ago. Don't have any money in CA 403bs either, never got involved with them. Just have the money that gets automatically socked into the pension fund.

As far as I know...

 

[mystang52]

Re: fees for 403 b. My wife is a teacher in the NJ school system. We no longer contribute to her 403B but the fees were not outrageous. Certainly, they were higher than our current fees with Vanguard. But, the fees were not so high as to outweigh the benefits of contributing to that 403b. Because I'm ER'd, we no longer contribute and moved her entire funds to Vanguard IRA.
It's simply going to be a task of crunching the numbers. How much, in dollars, do the fees add up to vs alternate investment choices. Then, you can make an educated choice [hey, unintentional but not a bad pun ].
I commend you on your current financial situation.

 

[ugeauxgirl]

The 403 b option is worth considering because of the tax savings. Since you have no kids and no house, you don't have many big deductions. If you DON'T contribute to the 403B you would have only kept $7300 out of $10000 of your pay after taxes (assuming a 27% tax bracket). If you contribute the 10K you get to keep ALL of it- if you got a match that would be even better. I'd think a bit more about the 403B.

 

[Mdlerth]

At this point my biggest question is what to do about the PA pension. If we move back to the east coast we probably won't be going to PA, so I won't be getting back into that system. My gut is not to touch it but it's certainly a shame to have had my years split between two systems. The more I read about 403bs, the option presented to teachers, the more I think they should be avoided at all costs because of the fees...

I don't have any sort of retirement date in mind and I haven't played with the calculators at all-it feels so far away...

What options do you have regarding the PA pension? It isn't clear from your post what those options are.

Since you have some vested rights but won't be re-entering it, does it just sit there as an annuity to be triggered at a specific age? Could you start collecting it now, albeit with some reduction for claiming it early? Are there COLA provisions for it before or after RE? Could you cash it out now into a retirement account that could benefit from twenty or thirty years of growth? And even if that account is a 403b, which you dislike because of fees, would you be able to subsequently transfer it from the 403b to another IRA?

Without "any sort of retirement date in mind", it sounds like there could be a long time for that PA pension to either dissipate via inflation or enjoy some compounded growth. Worst case could even be that it goes belly up due to political developments; a lot can happen in twenty years. But without more data I don't know whether there is anything you can do.

OTOH, it's probably worth checking out one or two of the calculators. They are free, and if you run several different sets of assumptions you might be able to at least bracket the time frame your potential FIRE date might encompass. It makes a lot of difference if it's 10 years away vs 30 years away.

Welcome to the forum. You are much further along than I was at your age. Good job!

 

[alpacajohn]

Mdlerth-nice handle! And, thanks for the response. I collected some info about PA pension options.

I can pull out/roll over 84k right now. I can retire right now, and get $320 a month for the rest of my life. I can pull out 42k and get $120 for the rest of my life.

I'm currently in my third year of CA pension system-5 to vest. I can purchase years or service, using the PA money. If purchased 8 years (the number I had in PA), it would cost 130k, so I'd be ~ 50k short. I could also purchase less years of service-5 years would be 90k. I can also get on a payment plan to purchase years of service.

What do you think? Thanks again.

 

[Mdlerth]

Sorry for the delay in getting back to you. I'm at sixes and sevens. If only I were retired now, I wouldn't get so far behind in the things I care about!

Why would you purchase vesting years when, according to your first note, you'll still be in CA for another 3-4 which will put you over the 5-year vesting threshold for free?

The number you quote for cashing out the 84k PA retirement is roughly similar to a quick quote ($336/mo) I ran on immediateannuities.com, although the earliest age they let me enter was age 40. It does not sound like you are expecting to retire right away, so unless the 84k is fixed forever with no compounding I would not convert it to a payment now. Better to leave it in some tax-deferred vehicle where it can grow over time until you finally FIRE.

Of course, I have no idea whether that PA $$ will grow faster where it's at or if you roll it into some other retirement account. "Past performance is no indication... etc." But I would NOT convert it into current income. Not while you and DW are still w*rking.

Just about everybody here will suggest you determine an investment Asset Allocation of equities/fixed-income/cash for your total portfolio. Arrange your savings into this AA, and periodically rebalance among these categories. Index funds are highly popular since they temper variability and inflict low expenses.

There are guidelines like "subtract your age from 100 and that's the percentage to put into equities", but as far as I have observed from reading other posts on this forum, what your particular AA is almost doesn't matter. Some people are happy with 80%/20%/0%, while others sleep more soundly with 40/40/20. For any AA you choose, somewhere there is a post advocating it. What seems to be most important is that you occasionally rebalance to maintain your chosen AA, since that forces you to sell assets that have risen and to purchase assets that are cheap.

Hope I'm not too late. I think you are on a good path, but be careful you don't get too eager and punch out prematurely. At 34, even if it takes another 20 years, you'll still be FIRE-ing way earlier than almost everybody.

Live long and prosper.

 

[alpacajohn]

Thank you for the detailed and considerate response. It's not too late-I've done nothing but sit tight. I hadn't given much thought to AA at all but will not take a good look. Thanks again for your help.

 

[Travelfreek]

I learned that my return to CA state govt work after a 30 year absence (worked for USPS), provided me with free healthcare premiums (so far) in retirement. I had to repay the withdrawn contributions ($5900) to reinstate 5 years of service from the 70's. That investment resulted in my ability to capture the health benefit vesting which was just a 5 year requirement back in the day. Don't overlook the PA retirement benefit if health benefit is involved. It may be worth recapturing down the road. My return to CA state work could have been a short stint (even a month) to regain valuable benefits for life.