Author Topic: Rate my situation  (Read 3941 times)

J.P. MoreGains

  • Stubble
  • **
  • Posts: 122
Rate my situation
« on: October 15, 2023, 06:58:21 PM »
Hello all,

Relatively new here, looking to get some perspective on my situation. (I don't have a computer at home so won't check any replies right away... but I'll check this week at work)

About me...

44 years old, single, no kids.

No debt.

I work as a Software Developer for a large school district. This is a new job that I've had since July 31st.

Work details:

Salary: $74,900

Perks:

-Free health care (basic cheap plan)

- I have both a 401k and 457b and can max out each one at $22,500.
  - so if I understand the above correctly, if I max out those my taxable income would be $29,500 right?
  - so from what I see federal and state tax on the 74,900 would total: $12,472
     - but after maxing out the federal and state tax on the 29,500 would be $2941
     - so... I would save $9,531 on taxes... access to the 457b really drops me down to a lower tax bracket.
     - does any of this seem off at a glance?

- State Pension
  - after 5 years I would get 12.5% per year of my highest 5 year average salary, so assuming no raises...
  - So this would be $9,362.50 per year (if i stay longer the percentage goes up and I can buy years of service if I want)
  - so... does the below estimation of value sound right... ?
    - If I live 25 years until 90 years old after retirement at 65 (i'm in good health and planning to 90!)
    - the pension would pay me out $234,063
    - if I factor that into the 5 years I worked to get the minimum pension
    - It's like an extra $46,812.50 per year of work right????
    - maybe this is an overly simplistic way of looking at it... but I kind of think it's like you might as well add $46k per year on my salary if I end up staying 5 years right?
    - granted no guarantees on living to 90 but I think that's a huge benefit for only 5 years of service.
    - the coworker I was hired with was complaining that the pension isn't a lot and that it's not worth anything... I disagree and think that that is a bad perspective.

- They contribute $28 per paycheck to HSA plus what I contribute

- Lower stress and less pressure than other tech jobs

- 235 day work year and I can take time off whenever I want, can use sick days whenever I want etc.

- Collaborative and chill work environment

Financial snapshot
- This is from September 6th... I'll add generally what I've saved since then after...

Cash: $700
Checking: $ 6,537.25
Savings: $ 6,510.86
457b: $1,750.59
401k: $0.00
HSA: $165.88
TIAA: $17,131.49
Vanguard: $42,445.32
AmerFunds: $39,995.34

All Total: $115,236.73 for Sept 6th.

Since September 6th...

For the month Sept 7 to October 6th I saved $4,450
- This was a more than I anticipate for most months... but I can plan on saving 4k per month until Jan 1st
- After Jan 1st I may need a second part time job to keep the 4k mark... I'll see

Generally a very probable and achievable goal is to save 4k a month for the future year.

My total contributions to my 401k and 457b and HSA since starting job July 31 is ~10k. Most of that recently since it took some time for HR to set these up.

Overall... I'll likely save 20k from August through December. I think this pace is maintainable for 2024.

I may take a nice trip here or there so that might eat into it and why I want a second job for extra money and still hit my goal.

Expenses
- biggest factor in my favor is $650 rent all included in a boarding house which is like a dorm for poor people in a relatively high cost of living city
- last month total expenses were $1,027 but this is because I paid phone and car insurance in advance
- generally I plan on $1,200 per month and definitely under $1,500 per month
- car paid off so that is good
- don't eat out often, cut my own hair, generally don't spend money
- this month my expenses will be higher since I've went and set some things right with donations... gave a friend I used to live with $100 since he charged me low rent... I'll do this from time to time and give him maybe $500 or $1000 total since he really gave me a sweet deal to rent a room... I'm happy about this
- I'm also giving some donations to spiritual places that I frequent, plus doing other nice things for friends
- I don't see any big expenses except for trips to see the world some to not get bored

Overall

How do you rate my situation?

How would you rate this self assessment of my situation... ?

Self assessment

- Generally... I'm in a fortunate situation and should be grateful.

- Generally... I'm already saving more than the vast majority of people in USA right? I mean 4k a month has to put me in top 10% or 5% of savers right since most people don't save much at all? Or am I way off?

- Generally... I'm on a good trajectory if I keep it up.

- But... I'm already 44 so the time is now.

- I feel among the crowd in this forum I'm behind and getting a late start.

- I can't count on Social Security since I'm not contributing now because of pension and because I lived a lot of years outside of USA when younger so my expected payout is very very low.

- I've always been a low earner and am new to bigger salary

- Big plus is I'm in software so there is opportunity for higher compensation in the future if I go after it

- My focus should be on higher compensation since that will have the most impact... I can only shave so much off of $1,200 a month expenses... biggest impact will come from higher earnings

- I'm not at $0 so that is good... but at 44 years old 120 something k isn't all that great among this crowd.

So what do you all think? How should I feel about my situation?

I would say that I'm a B-

I got so much more potential so I want to get to a A+

Thanks for you perspective.

Sincerely,

John Pierpont








2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 7961
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: Rate my situation
« Reply #1 on: October 15, 2023, 11:16:05 PM »
Just some quick thoughts.

Congrats on the gig, sounds pretty sweet from a workload vs. comp standpoint.

You're 44 years old with ~2 years of after tax income saved already. With those relatively low expenses you have a 5+ year runway of savings if shit hits the fan. With a $48k/yr savings goal, you will hit 25x annual expenses before your 55th birthday. By then you'll also be pretty close to being able to draw social security.

Overall you're in a great spot, despite the late start!

Your biggest risk seems to be changing your lifestyle drastically where expenses might double or triple to be more in line with average consumption patterns for your peers, perhaps a serious romantic partnership? Children? Who knows, you're single for now but could that change?


J.P. MoreGains

  • Stubble
  • **
  • Posts: 122
Re: Rate my situation
« Reply #2 on: October 16, 2023, 07:52:59 AM »
@2Birds1Stone

Yes, I think I should be grateful about the compensation I have... one of the guys I studied with in the same course is 22 years old and got a 140k offer. But... he's smarter than I am and that's his path. Even with all that extra money I'm still saving more than he is. So - if I focus on myself I have a good situation.

I do see 55 as sort of a target year to aim for.

I also plan for an affordable overseas retirement where I can buy a house or condo in cash and live pretty cheaply.

It's true that my expenses are very low for now... I don't see making any changes in the next couple years but that is definitely something to look out for. I don't see family within that short time frame either. But if I expand the time frame out some who knows what could change. I'd like to keep my expenses low though until I get a big stash in the bank. I actually don't really see myself getting married or anything since I think that is on the risky side... I think I'd rather just date some when I can.

The other thing is living in retirement and maybe wanting to have a better lifestyle... not a ton bigger but maybe more than I spend now so that would have to be planned for. Plus my social security is going to be not the best since I've already spent a lot of years outside the USA and didn't contribute a lot.

I really think if I could get a higher income I could make great progress... then ride out the 10 years saving more than I am now.

Thanks for your thoughts... I do see lifestyle change as something that could slow me down for sure so need to look out for that.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 22413
  • Age: 66
  • Location: NorCal
Re: Rate my situation
« Reply #3 on: October 16, 2023, 08:16:34 AM »
The thing that jumps out at me us your housing. Is it actually subsidized or otherwise intended for low-income people? If it's just a dump that anyone could rent, that's fine. If you're taking up a slot that an actual poor person could benefit from, that might bear looking into.

reeshau

  • Magnum Stache
  • ******
  • Posts: 2585
  • Location: Houston, TX
  • Former locations: Detroit, Indianapolis, Dublin
Re: Rate my situation
« Reply #4 on: October 16, 2023, 09:36:44 AM »
- I can't count on Social Security since I'm not contributing now because of pension and because I lived a lot of years outside of USA when younger so my expected payout is very very low.

A couple comments on these points:

A pension does not automatically exclude you from social security.  Yes, 15 states do not include their teachers (school employees) in Social Security

Your years abroad may not be lost, either.  Did you work while abroad, and pay public pension taxes?  These may have their own payouts coming, or might apply to US Social Security.

In my case, I worked in Ireland for 3 calendar years.  If I had worked there for 5, I would be entitled to a very small public pension payout from Ireland.  As it is, the tax treaty between the US and Ireland allows for mutual credits, so that when I file for US Social Security, they will contact the Irish authorities to claim my contributions there, and credit me.  This will not contribute as much as if I paid FICA here, but it's not lost.  And frankly, better than dealing with 2 tax authorities foe the rest od my life.

mtnrider

  • Pencil Stache
  • ****
  • Posts: 519
  • Location: Frozen tundra in the Northeast
Re: Rate my situation
« Reply #5 on: October 16, 2023, 11:54:08 AM »

It looks like you're thinking things through, and you're in a good starting place.  Better than most.  And your frugality is noteworthy.

The pension is indexed for inflation, so we're talking real dollars, right?

Like 2Birds1Stone says, I'd say to think some about what 55 year old you might want.  We get used to life's little luxuries, and the rooming house life might be less inviting, say, if you want a dog.  Or develop a health problem that requires dashing to a potentially occupied bathroom.  Or...

It might be worth costing out what you see as a potential maximal lifestyle at age 60.

I'd take a look at plans to improve the income side.

It's a govt job, so is it unionized?  Or do you have guaranteed raises?  If you get a Master's degree, would your pay rate go up faster?

You might game out other options, such as enjoying the school system developer job until you have enough in retirement funds, and then jumping into a better paying job towards the end of your career.  Developers with less experience make less, so your 75k salary might not be too far off the norm, depending on the area.  I know experienced developers in that range, who made a similar lifestyle tradeoff.  You'll be gaining experience over the years.  When it's worth enough, you might plan to cash in on that increased earning potential.



RWD

  • Walrus Stache
  • *******
  • Posts: 6604
  • Location: Arizona
Re: Rate my situation
« Reply #6 on: October 16, 2023, 12:08:56 PM »
For age 44 you're a little behind the median household net worth in the US. I guess that would rate your progress up to now a "C." Your current position/trajectory is good though, with low expenses and healthy savings. You could be FI in 6-7 years, with no lifestyle inflation. I think if you want a grade I would give a "B."

How long have you been in software development? $75k salary is decent but I'd expect a software developer your age to make more. A range of $110k to $150k is reasonable, even in a median cost-of-living city.

J.P. MoreGains

  • Stubble
  • **
  • Posts: 122
Re: Rate my situation
« Reply #7 on: October 16, 2023, 05:23:42 PM »
Just replying to and also reflecting on the comments.

@RWD I'm new to software... 3 months into my first development/coding job. Before this I worked on an admissions CRM for a college. Salary is definitely low... I had two friends I did a course with get 135k and 140k offers. But I'm really grateful! It was a tough time to be job hunting... I put out 597 applications to get an offer. So maybe I can make a big jump in salary in the future.

In the future I hope I can have big jump in salary and very modest improvement in lifestyle to keep the trajectory. The good news is that even if I'm not done in say 7-10 years I'll be in a good spot and close. Bigger salary could really accelerate things though.

@mtnrider I'm not exactly sure what indexed for inflation means... If you mean that in the future there are increases factored in then I think yes.  Again, I'm still 4.75 years away from being eligible so it's just theoretical. I could always go for a higher salary elsewhere... but this could be a good factor to get me to stay.

Yeah, I think in the future I will want a better lifestyle that will cost more. This could be offset by living in an affordable country some. But I still want to be able to buy plane tickets when I want or have some good experiences and be ready for unforseen health or life circumstances. So it could be that I have to tack on a couple more years of work.

I have a master's degree and that was factored in. I'm not technically in a union but it's a union workplace and we get a good deal overall. There are yearly cost of living adjustments so I get a pay increase based off of that. I think I can basically count out a substantial raise/new position after a year. It would take likely 2 years to get that. I wouldn't see the new position much over 100k. So there is incentive to consider positions after a year experience. Not saying I'll do it... because overall things are great, but I would consider for a big salary

The other X factor is talking to my parents about their assets for when they pass away. I'm planning on not considering this at all and running my own race. I think once I get to the 250k - 500k range I'll likely talk to them. That's what could put me over the finish line and give me some comfortability and safety. They see me saving 4k a month (which I also did before a few years ago) so they are impressed. They were always slow and steady and I'm going to push things more. But they've done well... mainly have never lived lavishly, have a pension, saved. So that is a factor for when I get close. But I really want to put the emphasis on this is my thing to build and my responsibility.

@reeshau Yes, I can get social security I just don't think it will be much since I haven't paid in a lot. From what I've read about our pension social security is factored into the payout so it can be minimized some but I can also get some from what i've read.

My work abroad was mostly research assistant work for postgrad stuff and also teach english stuff. Altogether short stays for not much money.

@Dicey The room is available for anyone, not government or subsidized or anything like that. The truth is that most people who have other options wouldn't want to live here. I say poor people just because that's what the clientele seems to be... it's mostly an older crowd of people that don't really have a lot of options. There are some strange characters also. I think I'm lucky to have found it given my priorities. I think if it were nicer there would be a huge demand for something like this among 20 something young people that want to be in a band, be artists, not work for the man, etc. It's just too old and dingy for young and cool people or people who are picky about cleanliness or bed bugs.

The landlords that run it are good people, I think they definitely do their best and it's just a case of you get what you pay for. Everyone who stays here knows what it is and there are a bunch of long term residents. But yeah, most people wouldn't want this. For me it's a hidden gem though.

mtnrider

  • Pencil Stache
  • ****
  • Posts: 519
  • Location: Frozen tundra in the Northeast
Re: Rate my situation
« Reply #8 on: October 17, 2023, 08:20:53 AM »
Indexed for inflation is pretty much want you guessed - so if inflation goes up 10% one year, your pension goes up 10% to go along with that.  It's common in government.

It might be worthwhile for you to look over https://www.bogleheads.org/wiki/Employer_retirement_plans_overview (see Defined benefit plan).  And maybe pick up a copy of the Boglehead's Guide to Investing at the library.  It's going to be harder to make good investing decisions without knowing the big picture of how plans work.

Malum Prohibitum

  • Pencil Stache
  • ****
  • Posts: 846
Re: Rate my situation
« Reply #9 on: October 17, 2023, 09:08:19 AM »
Salary: $74,900

Perks:

-Free health care (basic cheap plan)

- I have both a 401k and 457b and can max out each one at $22,500.
  - so if I understand the above correctly, if I max out those my taxable income would be $29,500 right?
  - so from what I see federal and state tax on the 74,900 would total: $12,472
     - but after maxing out the federal and state tax on the 29,500 would be $2941
     - so... I would save $9,531 on taxes... access to the 457b really drops me down to a lower tax bracket.
     - does any of this seem off at a glance?


No, you are off.

You would reduce your gross income by the double $22,500 (for 2023), not your taxable income.  Then, from your gross income, you must deduct the standard deduction, $13,850 in 2023 for single filers.

So your $29,500 (should be $29,900, math error) drops to $16,050 for taxable income.

So figure your taxes on $16,050.

Also, note that contribution limits and the standard deduction will increase for 2024.  The amounts will be announced next month.

I see you have some HSA money.  If your free health care basic cheap plan is HSA eligible, any money you put into your HSA account is also subtracted from your income for income tax purposes.
« Last Edit: October 17, 2023, 09:16:09 AM by Malum Prohibitum »

zolotiyeruki

  • Walrus Stache
  • *******
  • Posts: 5624
  • Location: State: Denial
Re: Rate my situation
« Reply #10 on: October 17, 2023, 01:18:01 PM »
Something to consider:  with your very frugal spending and ability to max out your 401k, it may be advantageous for you to only do enough tax-deferred contributions to bring your taxable income down just inside the 12% tax bracket, which tops out at $44,725 for 2023.  The remainder of your savings you could contribute to a Roth account, or even a taxable account, to minimize your tax exposure down the road.  I think it's highly unlikely that your future spending will put you in a lower marginal tax bracket than you're in now, and tax rates are set to revert higher in 2025, so it may be prudent to pay a bit more in taxes now to avoid a bunch more taxes later.

reeshau

  • Magnum Stache
  • ******
  • Posts: 2585
  • Location: Houston, TX
  • Former locations: Detroit, Indianapolis, Dublin
Re: Rate my situation
« Reply #11 on: October 17, 2023, 01:24:33 PM »
Something to consider:  with your very frugal spending and ability to max out your 401k, it may be advantageous for you to only do enough tax-deferred contributions to bring your taxable income down just inside the 12% tax bracket, which tops out at $44,725 for 2023.  The remainder of your savings you could contribute to a Roth account, or even a taxable account, to minimize your tax exposure down the road.  I think it's highly unlikely that your future spending will put you in a lower marginal tax bracket than you're in now, and tax rates are set to revert higher in 2025, so it may be prudent to pay a bit more in taxes now to avoid a bunch more taxes later.

+1

Excellent strategy specific to this income level, and contrary to general advice.

SunnyDays

  • Magnum Stache
  • ******
  • Posts: 3512
Re: Rate my situation
« Reply #12 on: October 17, 2023, 01:55:31 PM »
Saving money on housing is great, but not at the expense of having bedbugs!  Have you considered the implications of possibly bringing them to work with you?  That might be the end of your higher paying job.

oneday

  • CMTO 2023 Attendees
  • Walrus Stache
  • *
  • Posts: 8936
  • Age: 48
  • Location: SF Bay Area, USA
  • only good pies and no bad pies -mspym
Re: Rate my situation
« Reply #13 on: October 17, 2023, 10:48:37 PM »
Quote
- But... I'm already 44 so the time is now.

- I feel among the crowd in this forum I'm behind and getting a late start.

- I'm not at $0 so that is good... but at 44 years old 120 something k isn't all that great among this crowd.

I want to specifically address these parts. Since I was also feeling that way. Since you are 44 now, and I am 47, I'm going to show you what happened to me between the ages of 44 and 47.

I had a certain stash, let's call it X. At age 44 the year was 2020. I had been having panic attacks at my prior job (burnout, overloaded), so since I had this nice stash and good employment prospects, I decided to take a little sabbatical, starting Jan 15. Which I did. I quit & did a little travel & a little visiting family & a little time decompressing. Then the pandemic hit, and my job prospects went into the tank. At first I was scared to get a job and be exposed to new people, and a whole office full at that. Eventually I was hired on as a remote employee and started in Dec 2020. So the amount of time I worked that year was measured in day or weeks. Virtually no contributions to retirement. Probably some small amount (in the hundreds of dollars) for the first paycheck of January, and nothing for December, since I was not eligible for the 401(k) until the following January. I did make the full IRA contribution of $6,000 out of cash savings in early 2021. I didn't feel the need to hold on to as much cash once I had the job. Total $0 I'm not including cash savings moved to investments; that is just moving deck chairs on the Titanic. But far less catastrophic.

The next year (2021 age 45) I strove to make up for lost time. Not only was I in a new job, I was living in a new place and in a new relationship. Everything about my life had changed and a lot of the constraints of the Before Times were removed. I vowed, as you have, to catch up or make up for lost time. This was the first year in my life that I'd ever maxed out both a 401(k) and an IRA. $25.5K. Plus another $10.4K from my paychecks into my first-ever taxable brokerage account. My employer also matched a portion of my contributions for the first time, a modest $3K, for a total of $38.9K. I will also mention that as I settled into the job I again felt the need to hold less cash and dumped about $47K from savings into the brokerage account. Total: $38.9K

In 2022 I turned 46 and was on a roll. Again maxed out the 401(k) and IRA at $26.5K. This year I was more systematic and aggressive about taxable investing and got $19.4K from paychecks into the market. Plus $3K employer match. Total $48.9K

In 2023, I have again maxed out 401(k) and IRA; this year that comes to $29K. And so far, I'm on track to put $27,500 into the brokerage. Plus $3K employer match again. Total: $53K

So in the last 4 years, investing close to what you estimate you will be doing, I put $140.8K (plus the savings) into the market. The total change in the stash (X) is 248%. Yes, I now have 2.48x what I started the pandemic with. You propose putting $192K into the market over the next 4 years...more than I did. And that will give you about 2.6x the stash you have today (ignoring market returns). Plus you will almost be eligible for the pension. Although if you change jobs, carefully calculate what you are losing in future benefits vs gaining in current salary to make a fully informed decision.

You are not behind, because there isn't anywhere you are "supposed" to be. I think you will astonish yourself watching your balances grow over the next few years.

You might have gotten a C in History, but History is continually unfolding, so you'll bump that up in time. You get an A+ in Current Events and all the Participation points. If you do take on a side gig, give yourself some Extra Credit! :) All in all, a very healthy report card.

You are right about one thing though: the time is NOW!

J.P. MoreGains

  • Stubble
  • **
  • Posts: 122
Re: Rate my situation
« Reply #14 on: October 18, 2023, 12:58:27 PM »
On a quick break at work so I'll reply to some posts. Appreciate the comments

@mtnrider Good clarification - from what I understand not strictly indexed for inflation, but there are adjustments/increases. I can check if it is indexed though but my first impression is that it's not but that yearly adjustments are built in. I'll check out that Bogleheads link thanks! I saw a bit from there on investment order which I try to follow but I've learned just enough to get started. There is a lot more for me to learn.

@Malum Prohibitum Thanks for pointing this out... forgot about that for standard deduction and I had no idea about the HSA deduction either. I definitely plan on maxing out HSA and 401k and 457b next year for the new limits

@zolotiyeruki & @reeshau Someone had suggested this to me when I was getting started at this job but I didn't understand the strategy completely being new. I do have access to a roth 457b which would I think be perfect since then I could draw on it as soon as I were to leave this company and taxes would already be paid. The reason I'm doing what I'm doing is that I didn't work at all in 2023 until this job started on July 31st and I want to save as much as I possibly can between now and Jan 1st. I think the idea is to just get excited about it. So I liked the idea of everything going to pretax accounts and living off of savings. This way I get to really see an impact. But that strategy seems to be the wisest it was just difficutl for me to understand and set up right away.

@SunnyDays The good news is that I sleep in a tent! I bought a small one person tent that I put on my bed and the mesh is fine enough that really small bugs can't get through. So I'm protected... I haven't had a problem in my room and want to keep it that way. I can't wait to meet a lady friend and invite her over to my tent lol

@oneday That is some nice progress! And consistent... Being consistent over years is what it takes. 2.48x is really impressive when I really think about the progress in the time frame! I like the A+ in Current Events... the big thing for me is to not "drop out"... I'm definitely at risk for that by taking a few months off to go travel. I definitely can't afford to do that. So I have to stick around until graduation. Point is that in a few years I'll be in a really solid spot. You're a good example of some great progress I hope I can copy.




reeshau

  • Magnum Stache
  • ******
  • Posts: 2585
  • Location: Houston, TX
  • Former locations: Detroit, Indianapolis, Dublin
Re: Rate my situation
« Reply #15 on: October 18, 2023, 01:56:44 PM »
One additional thing to understand:  a 457 has different legal standing than a 401k.  It is deferred compensation, not cash held by a custodian.  In case of bankruptcy, you would be an unsecured creditor.  If you worked directly for the state or federal government, that would be one thing.  It is very rare, but local governments can go bankrupt.  (Orange County, CA; Detroit)  Private companies go bankrupt much more often, but can take out private insurance for the account holders.  I have no idea if local governments do, but I suspect not.

If your district is highly indebted or otherwise distressed, it might be something to worry about.  If not, just be aware of the black swan possibility, and think about that difference as you diversify.

The pension has its own status, but I would also understand its funding levels, and weight your dependence on it by the risk, if it's less than solid.

zolotiyeruki

  • Walrus Stache
  • *******
  • Posts: 5624
  • Location: State: Denial
Re: Rate my situation
« Reply #16 on: October 18, 2023, 02:26:59 PM »
Here are a few more thoughts:
--If you stay until age 55, your 401k funds will be available for withdrawal without the 10% penalty
--The 457b funds can be withdrawn without penalty as soon as you leave
--Here's another reason to favor the Roth: any contributions can be withdrawn at any time without penalty or taxes.  If, in retirement, you structure your income to come partially from Roth withdrawals and partially from tax-deferred income (traditional IRA/401k/457b), the Roth income doesn't get included in your 1040 form, and you can end up with a ridiculously low taxable income.

For example, let's say you withdraw $15k from your Roth IRA, $10k from a taxable account (which you bought at $5k), and $15k from a traditional account.  Your total withdrawals are $40k, but for tax purposes, the Roth withdrawals don't count, and only the gains on the taxable account count as income.

So your AGI would be only $20k.  Take out ~$14k for the standard deduction, and your taxable income is $6,000.  The $5k of capital gains gets taxed at 0%, and the remaining $1k of income gets taxed at 10%, so your total tax bill on $40k of withdrawals (and $20k of "income") is a whopping $100.

J.P. MoreGains

  • Stubble
  • **
  • Posts: 122
Re: Rate my situation
« Reply #17 on: October 19, 2023, 07:59:47 AM »
@reeshau  I wasn't aware of this possibility... even if it is low probability it's better to understand that it could happen. Are you saying that my 457b money could disappear in a worst case scenario? They don't match it, it's just taken out of my check and invested in an account with Corebridge an investment company. I'm under the impression that it is mine no matter what. Am I mistaken?

As for the pension it is guaranteed by the state and theroetically they could somehow vote to not honor it but I think they would have to move mountains to actually make that happen... they do decrease benefits based on when you started service... so I'm in a different category altogether from someone who started 20 years ago. The big change is that before you could start collecting the pension much earlier in your 50s or even 40s as long as you qualified, now you can't start until at least 60 and if you take it at 60 you're getting a much lower percentage. So 65 is the real target date to collect.

With this there is the opportunity to buy years of service... but that is pricey. So it would be something to consider since it is "guaranteed" income in retirment.

@zolotiyeruki This is a good example of a tax situation and shows how little I actually understand. Right now all I really understand is "live cheaply and invest as much as possible". I really don't have a good understanding at all about how to optimize withdrawals and plan for actually withdrawing and using the money. I guess I have years to learn before I get there. But all the decisions now have consequences so I have to try my best to pick up what I can.

reeshau

  • Magnum Stache
  • ******
  • Posts: 2585
  • Location: Houston, TX
  • Former locations: Detroit, Indianapolis, Dublin
Re: Rate my situation
« Reply #18 on: October 19, 2023, 08:49:03 AM »
@reeshau  I wasn't aware of this possibility... even if it is low probability it's better to understand that it could happen. Are you saying that my 457b money could disappear in a worst case scenario? They don't match it, it's just taken out of my check and invested in an account with Corebridge an investment company. I'm under the impression that it is mine no matter what. Am I mistaken?

Short answer, Yes.  The money is in the account, so it's not co-mingled.  But since it is future compensation, it is subject to bankruptcy proceedings, and the claims of more senior creditors.

Long answer:  ask.  They may have an insurance policy on it (common for smaller companies; larger companies "self insure," which is absurd because it means nothing in a bankruptcy)  Your state may have some arrangement, as well.

As another way to think about mitigating it:  rather than just withdrawing what you need for income each year, withdraw up to your tax bracket limit (whatever limit is comfortable) and bank it yourself, to shorten the withdrawal timeframe.

My experience is with GM.  Their executive deferred comp program fell into this category, and they lost 100%.  They were "self-insured," which really meant they couldn't fathom going bankrupt.  100% avoidable tragedy, although not a sympathetic group of victims.

J.P. MoreGains

  • Stubble
  • **
  • Posts: 122
Re: Rate my situation
« Reply #19 on: October 19, 2023, 04:58:01 PM »
Short answer, Yes.

Wow! Who would've thunk it!

The "advisor" didn't tell me about this. I'm going to have to ask him.

Also, this money shows up in my account annoyingly slow... I just got my pay statement for pay day tomorrow and the previous contributions haven't hit my account yet.

It's like at least 10 business days I think.

Anyway, I'm going to ask the advisor about that.

But for the most part it seems like a really worst case scenario... so low probability but still better to know going in.

beekayworld

  • Stubble
  • **
  • Posts: 236
  • Location: SoCal
Re: Rate my situation
« Reply #20 on: October 23, 2023, 08:46:41 AM »
@reeshau  I wasn't aware of this possibility... even if it is low probability it's better to understand that it could happen. Are you saying that my 457b money could disappear in a worst case scenario? They don't match it, it's just taken out of my check and invested in an account with Corebridge an investment company.

I'm not familiar with Corebridge. It might be worth looking at what their expense ratio is. Vanguard is known for having very low expense ratios.  Also is Corebridge activey managing the money or is it left in ETFs?

J.P. MoreGains

  • Stubble
  • **
  • Posts: 122
Re: Rate my situation
« Reply #21 on: November 21, 2023, 01:43:44 PM »
I'm not familiar with Corebridge. It might be worth looking at what their expense ratio is. Vanguard is known for having very low expense ratios.  Also is Corebridge activey managing the money or is it left in ETFs?

Corebridge is the company my employer has for all 457b. It's the only choice if I want to participate unfortunately. And... it's set up so they use a Vanguard fund and just provide customer service or whatever.

This is my fund: VANGUARD TGT RTMT 2045 (VTIVX) "managed" by them.

I wish I could just invest 457b directly with Vanguard but I think the employer does this since most people probably need/want some account rep that they can call.