Author Topic: Moving to Colorado  (Read 2676 times)

Magclaw

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Moving to Colorado
« on: April 28, 2017, 11:44:58 AM »
My wife just got a faculty job in Denver. During recruitment the whole family made a trip there and WOW its alot different than Philly. So suffice to say we are very excited by the new job and new city. (Hey maybe I might even get to meet MMM!)

Now being an avid reader on these forums I of course wish to maximize my retirement saving.

I will be a stay-at-home dad until I can find a job myself, but I have a few questions about my wife's options.

Her new job gives her access to PERA (Public Employees Retirement Association). Which sounds great to me, but we have to decide now to either take the PERA option or not, and its a one time decision. I am going to list the options:

Either PERA: You contributes 8%. University contributes 10%. PERA members will not pay into Social Security. which means you are really only contributing 2%.
or   401k(TIAA): You contributes 5%. University contributes 10%.

Also I believe PERA returns are pension like. You collect based on 1.6x(#of years of service)x(average of 5 max years salary).

In addition to these Mandatory plans she can also contribute to:
CU's 403(b) Plan - sponsored by CU
PERA 401(k) Plan - sponsored by Colorado PERA
PERA 457 Plan - sponsored by Colorado PERA

Now I have 2 questions:
1. Would you take the PERA choice or not?   (I see no reason not to)
2. My wife does not plan on retiring early. Would you max out 18,000 the 403(b)/401(k) plan AND 18,000 into 457 plan?

I would appreciate any help with these questions.
« Last Edit: April 28, 2017, 11:49:30 AM by Magclaw »

the_fixer

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Re: Moving to Colorado
« Reply #1 on: April 28, 2017, 03:57:48 PM »
PERA can have an impact on the amount or ability for your wife to receive social security so check into it and make sure you understand it and how that fits into your retirement planning.

Welcome to the neighborhood I live about 8 mins from the CU campus

al_prof

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Re: Moving to Colorado
« Reply #2 on: April 28, 2017, 05:01:27 PM »
Long time lurker, my first post so please excuse if I don't get the etiquette/details right!

Am an academic myself and work at a Big State U. My 2 cents:

1. I would strongly suggest opting for 403b over pension. If your DW is going to get a strong income (high-5/low-6 figures) OR there is income growth possible during tenure-track/after tenure, I would suggest going for the 403b option instead of pension. In fact, in almost any situation I would recommend going for 403b over pension. We "think" that academia is the best profession (it is BTW ;-) and we will never want to retire but based on my limited experience this feeling is not very stable (for a variety of reasons). Plus, if your DW is a rookie, there is a great likelihood that the academic Kool-Aid pumped into her during her studies is still strong when she asserts that she will be working 'forever' ;-). Trust me, as time goes by the ancillary demands of the profession, due to service/teaching obligations dull the 'fun' inherent in the job a bit. In addition to all of this, there are the tenure-related uncertainties to be considered especially if you are early career faculty on tenure-track. You'd want a retirement saving account that is 'portable'. Going with a 403b (esp. if TIAA is the custodian makes it extremely portable - pretty much any other university she goes to will have TIAA). If she quits academia, she can let it run as is OR roll it over into a 401/IRA.

Further, based on some of my senior (and not so senior) colleagues' experience what I have seen is that a pension only serves to bring in and reinforce a 'trapped' feeling. So ironically, a pension seems to increase the feeling of disenchantment/disengagement which gets accentuated in mid- to late career stages. My recommendation: go with 403b. I can't comment on the social security contribution/availability-in-later-life angle very much...personally I'm VERY happy to have avoided the pension (even though it is probably one of the best pensions out there in the country).

2. If you do indeed go with 403b, I think the simultaneous availability of 457b and 403b is one of the few perks of university employment that is vastly underrated. I would STRONGLY recommend maxing out both. I still deeply regret not maxing out my 457b for quite some time (more on account of sheer ignorance - didn't even know about it until fairly recently). Maxing BOTH accounts significantly reduces tax outflow and as a consequence, helps you keep more of your salary money with you (albeit partly in inaccessible accounts - more about the 'relative inaccessibility' below).

3. As a corollary to #2 above, if income NOT STRONG, I would suggest that first your DW puts in enough in the 403b to ensure max university match. Once that is done, max out the 457 - this is because 457 money is accessible to you even before 59.5 years age without that pesky 10% penalty that 403b/401k suffers from. Thereafter, do everything you can to max out 403b. After that, open up Roth IRA for you and DW and max those two suckers.

4. Operationally speaking, university bureaucracies 'do' the retirement contributions on a "$-per-paycheck" or "percentage-of-paycheck" basis. I've always selected a high $ amount or a high % (or both). For instance, currently I've picked 50% for my 457b and about 25% of paycheck for 403b. Why? This has the effect of 'front-loading' my contributions - the money is 'working' longer --> more capital appreciation, more dividends (reinvested, naturally). To be honest, I didn't think this smartly when I did it actually :-).....I did because I'm lazy and the university folks take care of ensuring that I don't cross 18k! So that saves me the trouble of monitoring this stuff :-).

Hope this is helpful...and congratulations on the new job, new city and new life! Have fun!

al_prof

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Re: Moving to Colorado
« Reply #3 on: April 28, 2017, 05:22:13 PM »
Hmm...based on a second read I see that I've misunderstood the question you posed as an "either pension OR 403b" choice - that was the choice I was given when joining so I suppose I saw what I wanted to see.

Since the PERA/SS choice is an add-on choice, the way I would think about it is that social security is a federally underwritten 'pension'. PERA seems to be a 'state' underwritten one. I'd personally pick a federally sponsored one over a 'state' sponsored one. That said, my take is more of a relatively uninformed opinion than something based on knowledge/expertise.

Others on the forum may be able to chime in with better insights...

clarkfan1979

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Re: Moving to Colorado
« Reply #4 on: April 28, 2017, 09:43:50 PM »
I would do the 401K. It's more flexible.

Good luck with the new move and your wife's new job.

Faculty jobs don't pay very well for the cost of living in Denver. However, they are still competitive, so your wife must have some skills.

My wife and I live in the Denver area during the summer. Our friends ask us when we are going to move back. We like it, but not enough to take the pay cut to move back full-time.

I teach community college in Hawaii and make 65K. If I stay there for 30 years, salaries top out around 120K. Most community college jobs in the Denver area start at 45K and salaries top out around 70K. The UH system also has a little bit better health insurance and pension benefits.



NinetyFour

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Re: Moving to Colorado
« Reply #5 on: April 29, 2017, 06:25:30 AM »
I did not have the choice to go with COPERA, so I am with TIAA.  I have a set % (not set by me) that goes to my TIAA 401a (employer also contributes a set %), and I also set up a TIAA 403b account.  I recently found out that even though I am not in PERA, I could set up a 457 through them.  I have done that and this year I hope to max out both my 403b and my 457.  (Since, I'm old, I can sock $24k into each of those.)

I think your wife's choice between PERA and the 401k will depend on how large she thinks her max 5 years of income will be.  For me, it's not very much, so I think I'll do better with the TIAA option.  You might also look at the funds she will have available in her 401k versus PERA--what are the fees like?

Good luck, and welcome to the Centennial State!

Tyson

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Re: Moving to Colorado
« Reply #6 on: April 29, 2017, 06:06:25 PM »
Also, Denver can be inexpensive or very, very expensive to live in.  Here's a great thread that talks about how to have a lot of fun and do it for a lot less:

https://forum.mrmoneymustache.com/welcome-to-the-forum/denver-frugal-living-tips-wanted/msg1515807/#msg1515807

If your wife is ending up at any of the downtown universities, I recommend living on the west side of downtown.  There's still a few "up and coming" neighborhoods that you can get a little less expensive of a house, although that's disappearing fast. 

But the best advantage is this - you're still only 10 or 15 minutes from downtown and all the city life, but you're much, much closer to the mountains than if you lived east of downtown. 
« Last Edit: April 29, 2017, 06:11:37 PM by tyort1 »

BuildingFrugalHabits

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Re: Moving to Colorado
« Reply #7 on: April 30, 2017, 09:07:40 AM »
The best bang for the buck in my opinion is by far Lakewood or Wheatridge.  From either town, you are biking distance to downtown or to golden and the foothill mountains.  Go in either direction and the houses get a lot more expensive!  As far as PERA goes, we had a similar choice and went with the non-pension option. If you think you can commit to staying in the PERA system, do the math and see if it makes sense.  Otherwise, the DC plan is portable and we liked the flexibility.  It's nice to have choices! 

Let us know what you end up doing and good luck with the move.