Making Millions

[wildcat]

I think I'm a bit impatient... My friends and I just graduated from college and they all ran out and bought cars and trucks (25K), and I'm still driving my 1992 Honda Accord with 200k miles. I guess I just want to go out and do the same, without any $ worries

Geeman no offense but I hate to hear that. Sounds like you want money for the wrong reasons, i.e. buy whatever you choose because you can afford it. To me money is not material possessions. To me money is freedom and worth more than a friggin brand new car that will be worth zilch sooner or later. You are just starting your FIRE quest so I don't recommend that frame of mind.

 

[maddythebeagle]

A little rust is a badge of honor in my book. Why are you concerned with what your friends are doing. Most people are in debt up to their eyeballs....

 

[retire@40]

To me money is freedom and worth more than a friggin brand new car that will be worth zilch sooner or later.

Every dollar gives you four cents of financial independence.

 

[Mr._johngalt]

A little rust is a badge of honor in my book. Why are you concerned with what your friends are doing. Most people are in debt up to their eyeballs....

Hello Maddy...........I struggle with this one. Our vehicles are both 8 years old but look sharp. Driving a rust bucket (unless I was OldRancher
or unclemick) ..............I just can't do it; yet. We had a 1990 Jeep
which was in real good shape accept the body kept rusting through.
I sold it and now I kind of miss it as I had so little invested and it was
doing the job. I'm rambling. The point is that having set the
pace for the "non-Jones" for decades, it is damn hard to switch that off,
even for me.

JG

 

[dandan14]

My grandmother's cousin keeps trying to tell me to get into the government. Only problem there is, my grandma's cousin retired way back in 1980, as a GS-13, and she's under that old system where you didn't pay social security, and you'd get a good retirement.

Nowadays, I don't know if it would really benefit me much to go into the gov't. And my Mom, who's been gov't like forever, occasionally mentions that she wishes she'd gone contractor, so she could make more money. I guess the grass is always greener on the other side of the fence. Well, and over the septic tank!

Interesting you should bring this up. I had lunch with a friend of mine in DC this weekend. He went to work for the fed. govt about the time I went to work in the corp. world.
He is now a GS-13 (you can find govt. pay scales here: http://www.opm.gov/oca/05tables/index.asp) and makes pretty decent money. The real kicker is that the federal govt. is one of the few places you can get an old style pension. So if you put in 30 years (or less for a lower percentage) you get 75% of your highest salary (top 3 years averaged) for the rest of your life. It's hard to beat that! I would guess my Personal Pension Acct. would only last 2-3 years at that draw rate.
I was thinking it may be interesting to put together a quick spreadsheet showing the value of the pension in today's dollars. Anyone want to run that spreadsheet and post it?

 

[maddythebeagle]

I think folks have been throwing around x25 the annual pension for a cola pension. I think that is reasonable.

My state pension will also be the average of the highest 3 wage years. That is something else that I am considering to boost before I take off. I dont know if I want to just take on a bunch of overtime (within reason) right before I leave the last few years.

 

[azanon]

The real kicker is that the federal govt. is one of the few places you can get an old style pension.  So if you put in 30 years (or less for a lower percentage) you get 75% of your highest salary (top 3 years averaged) for the rest of your life.  It's hard to beat that!

I wish!   I think maybe you're thinking of active duty military.   Last i checked (many years ago), they offered 50% of original pay at 20 years, and 75% of original pay at 30 years or something similar.

But regular federal employees who retire at 30 years get only 30% of their "high 3" (highest yearly salaries when they worked), not 75%, for their pension.  The other "two legs" are Social security and the TSP.

Azanon
GS-12 Federal employee

 

[Andre1969]

The federal government used to be really lucrative, under the old system where you didn't pay social security, but paid instead into their own fund. However, any employees hired after sometime in 1984, IIRC, are on a different system that, from my understanding, isn't really any better than your typical non-gov't job where you have a 401k and pay SS,but don't get a pension. My Mom plans on retiring from the gov't when she hits her 39th anniversary. She has enough leave saved up so they count that towards it, actually giving her 40 years. I think she said she'll be making around $60K per year. I don't know what she makes now, but she's only a GS-12. I don't know what step she is, but I think the range is around $61-82K. I'm guessing she's toward the upper end of it.

But then my grandmother's cousin retired back in 1980 from a GS-13 job. I don't know how much she brings in, but it's not much. Barely keeps her afloat. I'm guessing that she probably rose through the ranks really quickly, and while she had some really good earning years, she just didn't have enough years total to get a really lucrative retirement package?

 

[azanon]

Even under the old Federal system (CSCR), you'd only get 56.25% of your high-3 if you had exactly 30 years of tenure to calculate.   (1.5xfirst 5 years, 1.75x for years 6-10, and 2x times remaining years worked).   And yes sick leave does get tacked onto that so it could add up to a year or two more if you had that much.

40 years tenure, under the old system, then should have been approximately 76.25% of her high-3.

Source:
http://www.opm.gov/asd/pdf/ri83-001.pdf

 

[Nords]

My state pension will also be the average of the highest 3 wage years. That is something else that I am considering to boost before I take off. I dont know if I want to just take on a bunch of overtime (within reason) right before I leave the last few years.

Ah, the overtime/burnout trap.

The military claims that their "high-3" retirement is 95% of the old "final pay" system. Unless you have a dramatically different pay scale, trying to turn your A into an A+ may be a dangerous exercise in diminishing returns. It's probably easier to spend your time jiggering your ER budget or working a couple more (normal) years.

The federal government used to be really lucrative, under the old system where you didn't pay social security, but paid instead into their own fund.  However, any employees hired after sometime in 1984, IIRC, are on a different system that, from my understanding, isn't really any better than your typical non-gov't job where you have a 401k and pay SS,but don't get a pension.  My Mom plans on retiring from the gov't when she hits her 39th anniversary.  She has enough leave saved up so they count that towards it, actually giving her 40 years.  I think she said she'll be making around $60K per year.  I don't know what she makes now, but she's only a GS-12.  I don't know what step she is, but I think the range is around $61-82K.  I'm guessing she's toward the upper end of it.

But then my grandmother's cousin retired back in 1980 from a GS-13 job.  I don't know how much she brings in, but it's not much.  Barely keeps her afloat.  I'm guessing that she probably rose through the ranks really quickly, and while she had some really good earning years, she just didn't have enough years total to get a really lucrative retirement package?

Let's not turn the federal retirement system into the Emerald City. Its biggest advantages, even today, are affordable healthcare and COLA pensions. That's it, end of story, nothing better, pay no attention to the man behind the curtain.

Sure, we all know GS-12/13/14s who are living the life of luxury-- or who at least appear to be doing so. But when I think of the GS system, I think of a woman I knew at my last command. She started working in the IT department during the Vietnam War's Tet Offensive-- back when computers were mainframes with batch punchcards used for "automated data processing". She's had a few promotions since then, and she got a really nice 30-year pin a few years back, but as she enjoys her 38th year she's still a GS-8 and I think she's actually still using the same desk she started with.

She has a rich life and a loving family outside of work and she wouldn't have chosen to do it any other way. She's not gonna be rich in her retirement. But she won't be laying awake at night on a fixed pension wondering if she should spend the rest of her SS check on cat food or on medication, but not both.

If I had to sum up the federal retirement system in one word it would be "security". That also comes at a price...

 

[azanon]

Nords,

As maddy said (I believe it was her), there are "early outs" in the federal system; if you're offered them anyway. I can "early out" as soon as 50 years old (since i'll have 20 years+ of service then) and get a reduced pension + healthcare benefits.

If i can afford to and if i'm offered one then, I might very well take it. Too many unknowns now though.

 

[work4beer]

Geeman-

I was in your shoes 10 years ago: 22, no savings, making $45k and saving 25% after taxes (17% before taxes).

With any luck, I will have $1M in liquid assets within 5 years at age 37. Work hard and pay yourself first and you'll get there.

I have no regrets about forgoing nice cars and the like, I much prefer the freedom that having some wealth offers.

-W4B

 

[Michael Moore]

azanon, I think the rule is at least 20 years of service and at least 50 years of age, or 25 years of service and any age. The hit on the pension when we had our last early out 2 years ago was pretty significant for me, as the high-3 was lower and I had the extra 2 years of reduction (plus we'd just paid the house off and my cash reserves were very low).

This year things are definitely "good enough" so 29 and 52 is out for me.

cheers,
Michael

 

[azanon]

azanon, I think the rule is at least 20 years of service and at least 50 years of age, or 25 years of service and any age.

That's correct. I wasn't stating the actual rule as you can see in my post above; just stating when i'd first be eligible, which is using the first aspect of the rule. Going by the latter aspect of that rule, I wouldnt be eligible until i was 52 (my 25 year point).

 

[Arif]

What most people don't realize with military pensions is although you get 50% after 20 years it is only 50% of base pay. So although you may be getting an allowance for housing (BAH) of $1000 per month and $200-300 for food (BAS). That is not calculated in your retirement. Most soldiers don't think about it till they get that first retirement check. So for instance if I stayed in the Army and retired as an 04 making $80k my retirement would be $33k. Not chump change but not quite 50% either. Part of the reason I decided to make my own pension instead of doing another 10 years.

 

[Nords]

What most people don't realize with military pensions is although you get 50% after 20 years it is only 50% of base pay. So although you may be getting an allowance for housing (BAH) of $1000 per month and $200-300 for food (BAS). That is not calculated in your retirement. Most soldiers don't think about it till they get that first retirement check. So for instance if I stayed in the Army and retired as an 04 making $80k my retirement would be $33k. Not chump change but not quite 50% either. Part of the reason I decided to make my own pension instead of doing another 10 years.

Absolutely, but the best data available, scant & anecdotal as it is, indicates that at least 85% of those officers use their pension as a launching pad for a new career.

I think the biggest advantage of a military pension, small as it may be, is that (1) you survived to receive it and (2) it solves ER's challenges of healthcare & inflation.

 

[Arif]

I think the biggest advantage of a military pension, small as it may be, is that (1) you survived to receive it and (2) it solves ER's challenges of healthcare & inflation.

Very true. Witnessed it first hand when a coworker (retired military working GS job) was diagnosed with cancer. He said the best benefit of retiring was not the paycheck but the health benefits as the bills he racked up fighting lung cancer was astronomical.
BTW-Got a ballpark quote for health insurance (wife, son and I) in Panama of $130 per month. They are suppose to be sending me more details on what it covers and doesn't. I might be comparing apples and oranges at this point but Tricare (COBRA) for a family was $8k per year! If I chose that option that would be half of my annual living expenses in Panama. For that much money I'll just clone some body parts for spares. Pretty sure it would come out cheaper.