401K plus pension

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

Is $6500 per month from pension a current $$ or a projected $$ at age 58? You will also receive SS benefit when you reach 62. You should receive at lease $3000 per month or more in another 20 years. However, your buying power will be cut by half because of inflation. If I assume your $6500 plus $3000 from SS at age 62, you should have $9,000 per month, but you buying power is equivalent to today $$ of $4500 per month. Now, you have to answer you own question. Can I live with $4500 per month today? If yes, then you don't worry about contribution to your 401K. If it is not, then you need to contribution to you 401K with the appropriate amount.

OP - This PP explained it like you are 5 years old, but it doesn't get any better than this. You can't mix today's dollars and then year dollars because you buying power changes too much. Also, pension on paper vs take home pension is different -- for example, i just retired last year after 38 years of govt @ 62. my on paper pension is about 6700/month but take home is much smaller - only about 70-75% of that. as for your q re. 401k, yes, you should def max out. you are behind.

+1 to both these PPs. People constantly fails to think in terms of future dollars v today’s dollar.

Also is the pension inflation adjusted? If not, that value will erode over time.

Op - I am unsure how to add inflation to the pension. I typically get a 3% salary escalation every few years. I plan on working for the next 15-20 years.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

Is $6500 per month from pension a current $$ or a projected $$ at age 58? You will also receive SS benefit when you reach 62. You should receive at lease $3000 per month or more in another 20 years. However, your buying power will be cut by half because of inflation. If I assume your $6500 plus $3000 from SS at age 62, you should have $9,000 per month, but you buying power is equivalent to today $$ of $4500 per month. Now, you have to answer you own question. Can I live with $4500 per month today? If yes, then you don't worry about contribution to your 401K. If it is not, then you need to contribution to you 401K with the appropriate amount.

OP - This PP explained it like you are 5 years old, but it doesn't get any better than this. You can't mix today's dollars and then year dollars because you buying power changes too much. Also, pension on paper vs take home pension is different -- for example, i just retired last year after 38 years of govt @ 62. my on paper pension is about 6700/month but take home is much smaller - only about 70-75% of that. as for your q re. 401k, yes, you should def max out. you are behind.

+1 to both these PPs. People constantly fails to think in terms of future dollars v today’s dollar.

Also is the pension inflation adjusted? If not, that value will erode over time.

I don't know anyone who fails to think about the effect of inflation on future dollars.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

Is $6500 per month from pension a current $$ or a projected $$ at age 58? You will also receive SS benefit when you reach 62. You should receive at lease $3000 per month or more in another 20 years. However, your buying power will be cut by half because of inflation. If I assume your $6500 plus $3000 from SS at age 62, you should have $9,000 per month, but you buying power is equivalent to today $$ of $4500 per month. Now, you have to answer you own question. Can I live with $4500 per month today? If yes, then you don't worry about contribution to your 401K. If it is not, then you need to contribution to you 401K with the appropriate amount.

OP - This PP explained it like you are 5 years old, but it doesn't get any better than this. You can't mix today's dollars and then year dollars because you buying power changes too much. Also, pension on paper vs take home pension is different -- for example, i just retired last year after 38 years of govt @ 62. my on paper pension is about 6700/month but take home is much smaller - only about 70-75% of that. as for your q re. 401k, yes, you should def max out. you are behind.

+1 to both these PPs. People constantly fails to think in terms of future dollars v today’s dollar.

Also is the pension inflation adjusted? If not, that value will erode over time.

I don't know anyone who fails to think about the effect of inflation on future dollars.

They absolutely do. I see numerous posts on this board and others that state X amount will produce Y income upon retirement in 15-30 years and that is a ton of money. When in fact, it is not a ton of money 20 years from now, when accounting for inflation.

OP needs to try to figure out her anticipated expenses in retirement, in future dollars, add in taxes, and then subtract expected SS and her pension. She can then estimate how much she needs in her 401K to make up that differential.

OP isn’t maxing on $150K and her 401K balance is low. If that’s due to childcare or similar expenses that disappear well before retirement, that’s one thing. But if it’s on things she could cut back on, she should and put more into retirement. Because she is creating two problems: she is potentially living outside her means now, and she is creating an expectation of maintaining that lifestyle in retirement.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

Is $6500 per month from pension a current $$ or a projected $$ at age 58? You will also receive SS benefit when you reach 62. You should receive at lease $3000 per month or more in another 20 years. However, your buying power will be cut by half because of inflation. If I assume your $6500 plus $3000 from SS at age 62, you should have $9,000 per month, but you buying power is equivalent to today $$ of $4500 per month. Now, you have to answer you own question. Can I live with $4500 per month today? If yes, then you don't worry about contribution to your 401K. If it is not, then you need to contribution to you 401K with the appropriate amount.

OP - This PP explained it like you are 5 years old, but it doesn't get any better than this. You can't mix today's dollars and then year dollars because you buying power changes too much. Also, pension on paper vs take home pension is different -- for example, i just retired last year after 38 years of govt @ 62. my on paper pension is about 6700/month but take home is much smaller - only about 70-75% of that. as for your q re. 401k, yes, you should def max out. you are behind.

+1 to both these PPs. People constantly fails to think in terms of future dollars v today’s dollar.

Also is the pension inflation adjusted? If not, that value will erode over time.

Op - I am unsure how to add inflation to the pension. I typically get a 3% salary escalation every few years. I plan on working for the next 15-20 years.

Just put your present salary in an excel and have it increase 3% every 3rd year. Then calculate your pension at 15-20 years in the future.

Also monthly calculate expenses before taxes. Use the SS online calculator to subtract SS, then subtract your pension. Take that final number and multiply by 12. Then multiply that by .04. That’s what you need in your 401K at retirement. From there, figure out what contributions you need for the next 15-20 years to get you to that number (minus the 835k-1.35M your 200K will supply in 15-20 years).

If you plan on retiring in 15 years, add your annual up your annual SS payment, multiply by 5 and add that to the amount needed. Also add in insurance costs Medicare kicks in if needed.

This is a rudimentary calculation but should be decent.

[Anonymous]

Look into whether the pension is inflation adjusted. On my plan, inflation adjustment doesn’t kick in until you are 62. Inflation is covered for the first 2 percent, but not for inflation between 2 and 3 percent. It adjusts for inflation over 3 percent. You can choose coverage between 2 and 3 percent, but the coverage results in a lower pension.

[Anonymous]

Civil Service pensions are inflation adjusted. I am not aware of any other place with a pension these days.

[Anonymous]

1) You need to understand what your expenses are or will be in retirement. Calculate them in today's dollars. The biggest one for most people is housing. Without a baseline understanding of your spend, you can't really know how much you need. Most people require something like 70% of current HHI. Remember that taxes on earned income plus fica etc are higher than taxes on retirement monies, in general.

2) an investment calculator will show you an approx of what your 200k will be in 16 years and you can play around with how much you are putting in. If you put in 24k/year (you are looking at 1.2-1.4 m (conservatively) in 16 years. A 4% withdrawal strategy should be fine at 58--so if you have 1.2 million at retirement, you can draw an additional 48k/year in addition to your pension. I did not include employer match here..a basic investment calculator will allow you to play with different scenarios.

3) investigate your pension--assume it has a COL increase, correct?

4) add up your pension plus 4% withdrawal from 401k, and that is your baseline. Look up what your social security will be at 62/67/70---if you have a decent life expectacy, wait at least until 67 and layer that in. With 78k in pension, plus 48k in 401k, plus ??? in social security you will likely have greater spending power than you do right now, esp with lower taxation.

Adding up those things, that is your retirement budget. Your biggest expense between 58 and 65 will be medical insurance, unless that is already covered elsewhere.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

Is $6500 per month from pension a current $$ or a projected $$ at age 58? You will also receive SS benefit when you reach 62. You should receive at lease $3000 per month or more in another 20 years. However, your buying power will be cut by half because of inflation. If I assume your $6500 plus $3000 from SS at age 62, you should have $9,000 per month, but you buying power is equivalent to today $$ of $4500 per month. Now, you have to answer you own question. Can I live with $4500 per month today? If yes, then you don't worry about contribution to your 401K. If it is not, then you need to contribution to you 401K with the appropriate amount.

OP - This PP explained it like you are 5 years old, but it doesn't get any better than this. You can't mix today's dollars and then year dollars because you buying power changes too much. Also, pension on paper vs take home pension is different -- for example, i just retired last year after 38 years of govt @ 62. my on paper pension is about 6700/month but take home is much smaller - only about 70-75% of that. as for your q re. 401k, yes, you should def max out. you are behind.

+1 to both these PPs. People constantly fails to think in terms of future dollars v today’s dollar.

Also is the pension inflation adjusted? If not, that value will erode over time.

I don't know anyone who fails to think about the effect of inflation on future dollars.

Then you don't know too many people.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

Is $6500 per month from pension a current $$ or a projected $$ at age 58? You will also receive SS benefit when you reach 62. You should receive at lease $3000 per month or more in another 20 years. However, your buying power will be cut by half because of inflation. If I assume your $6500 plus $3000 from SS at age 62, you should have $9,000 per month, but you buying power is equivalent to today $$ of $4500 per month. Now, you have to answer you own question. Can I live with $4500 per month today? If yes, then you don't worry about contribution to your 401K. If it is not, then you need to contribution to you 401K with the appropriate amount.

OP - This PP explained it like you are 5 years old, but it doesn't get any better than this. You can't mix today's dollars and then year dollars because you buying power changes too much. Also, pension on paper vs take home pension is different -- for example, i just retired last year after 38 years of govt @ 62. my on paper pension is about 6700/month but take home is much smaller - only about 70-75% of that. as for your q re. 401k, yes, you should def max out. you are behind.

+1 to both these PPs. People constantly fails to think in terms of future dollars v today’s dollar.

Also is the pension inflation adjusted? If not, that value will erode over time.

I don't know anyone who fails to think about the effect of inflation on future dollars.

They absolutely do. I see numerous posts on this board and others that state X amount will produce Y income upon retirement in 15-30 years and that is a ton of money. When in fact, it is not a ton of money 20 years from now, when accounting for inflation.

OP needs to try to figure out her anticipated expenses in retirement, in future dollars, add in taxes, and then subtract expected SS and her pension. She can then estimate how much she needs in her 401K to make up that differential.

OP isn’t maxing on $150K and her 401K balance is low. If that’s due to childcare or similar expenses that disappear well before retirement, that’s one thing. But if it’s on things she could cut back on, she should and put more into retirement. Because she is creating two problems: she is potentially living outside her means now, and she is creating an expectation of maintaining that lifestyle in retirement.

No. It’s mostly people massively overestimating retirement income needed to live a comfortable retirement who perceive that people are ignoring the effects of expected inflation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

Is $6500 per month from pension a current $$ or a projected $$ at age 58? You will also receive SS benefit when you reach 62. You should receive at lease $3000 per month or more in another 20 years. However, your buying power will be cut by half because of inflation. If I assume your $6500 plus $3000 from SS at age 62, you should have $9,000 per month, but you buying power is equivalent to today $$ of $4500 per month. Now, you have to answer you own question. Can I live with $4500 per month today? If yes, then you don't worry about contribution to your 401K. If it is not, then you need to contribution to you 401K with the appropriate amount.

OP - This PP explained it like you are 5 years old, but it doesn't get any better than this. You can't mix today's dollars and then year dollars because you buying power changes too much. Also, pension on paper vs take home pension is different -- for example, i just retired last year after 38 years of govt @ 62. my on paper pension is about 6700/month but take home is much smaller - only about 70-75% of that. as for your q re. 401k, yes, you should def max out. you are behind.

+1 to both these PPs. People constantly fails to think in terms of future dollars v today’s dollar.

Also is the pension inflation adjusted? If not, that value will erode over time.

I don't know anyone who fails to think about the effect of inflation on future dollars.

They absolutely do. I see numerous posts on this board and others that state X amount will produce Y income upon retirement in 15-30 years and that is a ton of money. When in fact, it is not a ton of money 20 years from now, when accounting for inflation.

OP needs to try to figure out her anticipated expenses in retirement, in future dollars, add in taxes, and then subtract expected SS and her pension. She can then estimate how much she needs in her 401K to make up that differential.

OP isn’t maxing on $150K and her 401K balance is low. If that’s due to childcare or similar expenses that disappear well before retirement, that’s one thing. But if it’s on things she could cut back on, she should and put more into retirement. Because she is creating two problems: she is potentially living outside her means now, and she is creating an expectation of maintaining that lifestyle in retirement.

No. It’s mostly people massively overestimating retirement income needed to live a comfortable retirement who perceive that people are ignoring the effects of expected inflation.

You have no idea if what any one person is saving is enough because you don’t know their expenses. If you’re taking a few trollish posts on this board as evidence that most people are massively over saving then you’re wrong.

Most people do not save enough for retirement. And for those that have the room to save, most people do not save enough because they do not accurately predict what their expenses are going to look like in retirement. One factor is that they do not appropriately account for their future expenses and factoring inflation over the course of a 20 to 30 year retirement.

[Anonymous]

OP I did some very quick math. I assumed an 8% return on your 401K and your present pension amount (it’s unclear is that is current dollars (52% of current income) or based on a presumed inflation of about 2.5% per year till 58 (so future income). I assumed the latter.

So if you are getting a 3% increase every 3 years, with no COLA, your ending salary at 58 is $180K. Your SS at 62 is $67K (future dollars) but you may want to assume a 30% haircut on that. If you do, you need $54K/year to cover your salary at 100% in retirement. you will also need to fund a 4 year SS gap.

So using the 4% rule, you need about $1.5M in retirement. If you contribute 10% of your salary to the current 200K, that should get you there. This calculation is slightly conservative overall (assuming 30% SS cut, needing 100% of salary in retirement and 8% in 401K returns as opposed to 10%). Adjust if you need to cover insurance before Medicare.

[Anonymous]

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

OP if you are a federal employee check with your HR folks to see if you have access to a tool called FedHRNavigator. If so see if they have the retirement calculator module installed. If so you can just answer some questions and it will do the behind the scenes calculations for you. You can change assumptions for contributions to retirement account, inflation, etc., it will also give you a fairly accurate estimate of your future social security benefits.

[Anonymous]

Anonymous wrote:I have $200,000 in a 401K plus a pension that I am vested into for approximately $6500 per month starting at the age of 58. I am currently 42. Am I super far behind? I feel like I should have way more in my 401K. Making $150,000 a year (but that is new). Started at $55,000 and have gone up over the past 15 years.

you're not super far behind but you likely should be saving more.

I was able to go from $0 in my TSP at 40 to about $800k at 51, and while i did not max all that time i have been maxing for at least the last 7 years (now including catch-up).

i'll hopefully have around $2mil in the TSP when i retire in a decade or so, and maybe a $6k/mo pension that will receive COLA increases. hard to know what SS will be available in 15 years + time so i don't usually count it in my projections.

[Anonymous]

U.s. your pension amount pretax? That makes a big difference. Also are you married? If you are married, assume 75% of your amount for the spousal option.

[Anonymous]

Invest, but not in 401k past the match. Go with regular investment account than can be tax free.
401k, SS, and pension will be taxed.