Question for teachers nearing retirement/retired

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Teacher88
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Joined: Thu Jan 02, 2014 8:10 pm

Question for teachers nearing retirement/retired

Post by Teacher88 »

If you are approaching retirement how much money do you have in your 403b/ROTH etc? If you already retired, how much did you retire with?

I am currently 46 and can retire in 10 years. I have always invested 10-15% but when you start off making $45000 that is not much. 20 years later I have approximately $400000 in my retirement accounts and I am curious how that compares? At this point I am not sure I will retire in 10 years but it is an option.
Ron Ronnerson
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Location: Bay Area

Re: Question for teachers nearing retirement/retired

Post by Ron Ronnerson »

I’m not sure I qualify as “near” retirement but I’ll give you a data point since I’m also 46. I had nothing saved until age 32. Now we have $800k in retirement accounts ($350k of this is in Roth IRAs), $60k in taxable investments, $100k in bank accounts, and $650k in home equity. I started out making around $60k seventeen years ago and now make $113k. My wife used to work for a small business and made about $50k/year until four years ago, when she became a stay-at-home parent. She is the same age as me and likely already retired.

We save around half our income (including mortgage principal). My plan is to go part-time (working 3 days a week) at age 55 and retire at 61. Retirement should be fully covered by pension and social security.
KESP
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Re: Question for teachers nearing retirement/retired

Post by KESP »

I am retired, but teaching was a second career for me. I worked for 20 years and had about $350,000 in my 403b. I also have an IRA from from previous business life in the amount of $500,000. The problem with 403bs is that they are often full of high cost annuities, and for some reason teachers don't push for better options. I figured for years I was paying between 2%-3% in fees to AXA/Equitable. After a year of fighting, I got our district to add Aspire, which gives everyone access to low-cost mutual funds from multiple companies, Vanguard and Fidelity are just 2. Look at what you are paying your 403b provider and if the fees are bad, start fighting for better options.
DoubleComma
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Re: Question for teachers nearing retirement/retired

Post by DoubleComma »

Teacher88 wrote: Wed Oct 13, 2021 7:23 am If you are approaching retirement how much money do you have in your 403b/ROTH etc? If you already retired, how much did you retire with?

I am currently 46 and can retire in 10 years. I have always invested 10-15% but when you start off making $45000 that is not much. 20 years later I have approximately $400000 in my retirement accounts and I am curious how that compares? At this point I am not sure I will retire in 10 years but it is an option.
Answering on behalf of the teacher in my life; who's a similar age and also eligible to retire at 50 but will likely push to 55 or 57. In our district the 403b was almost universally high cost annuity plans so for the first several years so we simply didn't use it and saved outside tax differed plans. About 6 years ago two 403b options that were more traditional options with low cost mutual funds were made available and from that time forward the maximum amount has been contributed ($18,000-$19,500) and now the 403b account has just under $150k last I looked.

Based on the teachers we know, you are well above average in savings beyond the pension plan.
MHA556
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Joined: Wed Sep 01, 2021 8:01 am

Re: Question for teachers nearing retirement/retired

Post by MHA556 »

Not a teacher but my wife is, and I pretty much handle the investment finances while she handles day to day finances, so I know her retirement stuff inside and out...

My first question would be if you have a pension, what kind of plan do you have, as most teachers get something- some local plans here are 2% per year, or 1% per year + you invest anywhere from 5-15 % into an individual. If your 403b is all you have going, then obviously you need to save a lot more. Also I would assume you are paying into SS as well.

If you have a decent pension, then you are likely sitting good. If just the 403b, then not as great.

Also - how are your expected expenses looking? Kind of important...


At 50 my wife has 20 combined years in with a blended pension plan- 1% per year payout, plus she has a 15% contribution going into a 403b like account. She has to go 10 more years or her pension gets a serious penalty for early retirement. And initially she only contributed 5%, so that account started off real slow.

You are well ahead of where my wife is currently for savings, but then she started with a low contribution rate, worked part time only for a few years, and took several years off entirely when our children were younger. (Worth it). So she kind of has an excuse. Plus she has me, I retired already but have a much better pension than what she will get.
Buy Right Hold Tight
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Re: Question for teachers nearing retirement/retired

Post by Buy Right Hold Tight »

I’m the same age and you have me doubled up. I’d love to have saved more but we had a bajillion kids and each had a serious health issue prior to discovering bogleheads six or seven years ago. God willing our pensions will cover everything and then some but, we try to max out an IRA each to supplement.
Katietsu
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Re: Question for teachers nearing retirement/retired

Post by Katietsu »

MHA556 wrote: Wed Oct 13, 2021 7:49 pm My first question would be if you have a pension, what kind of plan do you have, as most teachers get something- some local plans here are 2% per year, or 1% per year + you invest anywhere from 5-15 % into an individual. If your 403b is all you have going, then obviously you need to save a lot more. Also I would assume you are paying into SS as well.
This. There are teachers from a couple different states in my extended family. The pension/social security benefits they receive as well as the required contributions are very different.
tibbitts
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Re: Question for teachers nearing retirement/retired

Post by tibbitts »

Teacher88 wrote: Wed Oct 13, 2021 7:23 am If you are approaching retirement how much money do you have in your 403b/ROTH etc? If you already retired, how much did you retire with?

I am currently 46 and can retire in 10 years. I have always invested 10-15% but when you start off making $45000 that is not much. 20 years later I have approximately $400000 in my retirement accounts and I am curious how that compares? At this point I am not sure I will retire in 10 years but it is an option.
I was not a teacher in the traditional sense, although I did teach at a vo-tech and also at a college, and I did retire with a Teachers Retirement System pension. But I don't understand the point of asking other people who may have had completely different career paths at different institutions what amount they retired with? What if they retired with $2M in their 403b+457+Roth plus a six-figure pension-plus-social-security income? I wish I did, and know of some people who have, but how will knowing that benefit you? You can't go back in time and reproduce the career and results they experienced. Your savings and pension are what they are; better to do the best you can with that in terms of investments, allocation, etc. than waste time thinking about what someone else has accumulated.
bmpembe
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Re: Question for teachers nearing retirement/retired

Post by bmpembe »

What state are you teaching in and what does your pension plan look like, if any? My wife and I are teachers in Illinois. We’re 30 and have about $200k in retirement between Roth IRA and Roth 403b plans.

My wife’s mom retired from teaching after 29 years in Illinois and just started collecting about 90k per year in pension with a COA Of 3% per year. She retired in May at 59. My father-in-law was also a teacher but changed careers after about 20 years in the private sector. He will be collecting a small teacher pension and also social security. He retired at 62. They have about $200k in traditional 403b and at least that in a taxable account from an Inheritance.


Teachers in Illinois do not pay into social security. State income tax is also not paid on retirement income. So they are living off of their pensions and are leaving their non-pension assets to grow.

Of course, you’re looking for a point of reference here, but everyone’s situation is drastically different from the next... best of luck to you!
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CyclingDuo
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Re: Question for teachers nearing retirement/retired

Post by CyclingDuo »

Teacher88 wrote: Wed Oct 13, 2021 7:23 am If you are approaching retirement how much money do you have in your 403b/ROTH etc? If you already retired, how much did you retire with?

I am currently 46 and can retire in 10 years. I have always invested 10-15% but when you start off making $45000 that is not much. 20 years later I have approximately $400000 in my retirement accounts and I am curious how that compares? At this point I am not sure I will retire in 10 years but it is an option.
Even if you didn't have a pension (which you will), you are doing well.

Fidelity's parameters are for retiring at FRA (age 67) with taking SS at that time. They suggest the following multiples along the way. So at age 46, a multiple of 4X your salary is the benchmark they use for a 45 year old. If you have $400K, what multiple of your salary does that equate to at this juncture in your journey? What about pension and SS? Will you have both?

Image
https://www.fidelity.com/viewpoints/ret ... -to-retire

Adjusting for a teacher who will have a pension (and most will have SS as well except for a smaller group of states), you have to factor in the amount your pension will contribute, the age you will take it and how it impacts the multiple of salary suggested. We break everything - in our household - down into the amount spent and saved per day. How much we make a day x 365 days per year, how much we spend per day x 365 days per year, etc... . Following KlangFool's excellent advice - at least IMO it's excellent - of saving the equivalent of your annual expenses each year to build your nest egg up to a multiple of 25X or 30X or 33X expenses (depending on when you plan on retiring) is his way of looking at it and plotting out his course of saving each year.

Using those parameters of daily spend, the BLS Data shows this per household in the US...

Image
https://www.bls.gov/news.release/cesan.nr0.htm

Our household is in the Young Baby Boomers segment of that graphic shown above. As empty nesters, we spend between $165 - $183 per day in our household X 365 days per year. Side note: we have spent a lot less during 2020/21 due to Covid, so we saved more these past two years. Following KlangFool's recommendation to save annual expenses, that means we should save $60K to $67K per year which we do between our combined 403b/457b/401k/Roth IRA's and taxable accounts. We will have one pension in our household and two streams of SS, but in spite of that we save beyond our expenses for other goals surrounding heirs/legacy/charity - so quoting our numbers to you in terms of size of investment accounts jives with jmpembe's comment - "Of course, you’re looking for a point of reference here, but everyone’s situation is drastically different from the next... best of luck to you!"

Anyway, back to your household and trying to figure out if you are on track for your particular household. Knowing how much you spend each and every day X 365 is a good way to plan for the future. You can figure out how much of your daily income will come from your pension and your SS streams, so the remainder needed each day to cover your expenses from your investment accounts can be built to cover it. I like this table that breaks it down into daily spend so we can factor in the pension and our SS streams to see if and what we need from investments to cover a certain amount of daily spend...

Image
https://www.campfirefinance.com/rule-of-25/

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
fuddbogle
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Re: Question for teachers nearing retirement/retired

Post by fuddbogle »

bmpembe wrote: Wed Oct 13, 2021 9:01 pm What state are you teaching in and what does your pension plan look like, if any? My wife and I are teachers in Illinois. We’re 30 and have about $200k in retirement between Roth IRA and Roth 403b plans.

My wife’s mom retired from teaching after 29 years in Illinois and just started collecting about 90k per year in pension with a COA Of 3% per year. She retired in May at 59. My father-in-law was also a teacher but changed careers after about 20 years in the private sector. He will be collecting a small teacher pension and also social security. He retired at 62. They have about $200k in traditional 403b and at least that in a taxable account from an Inheritance.


Teachers in Illinois do not pay into social security. State income tax is also not paid on retirement income. So they are living off of their pensions and are leaving their non-pension assets to grow.

Of course, you’re looking for a point of reference here, but everyone’s situation is drastically different from the next... best of luck to you!
My wife is also a teacher in Illinois - Tier I (vs. the not as lucrative current Tier II pension) pension. She will retire in 5.5 years at 59.5 and between another state teacher retirement plan she'll be right around 70k annually to start off. She won't have as many years in Illinois as your mom. We also have combined money set aside in retirement/taxable accounts of about 1.3M. Hope to grow that to 2M by the time I retire but the market will dictate some of that growth (or lack thereof).

In your situation OP, it depends a lot on your retirement pension and if you'll get SS. Also what is your projected retirement spend? Run the estimated numbers and plan accordingly.

We could live on my wife's pension alone at retirement but we prefer to save more now so we can spend more later.
Nate7out
Posts: 253
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Re: Question for teachers nearing retirement/retired

Post by Nate7out »

fuddbogle wrote: Thu Oct 14, 2021 10:52 am
bmpembe wrote: Wed Oct 13, 2021 9:01 pm What state are you teaching in and what does your pension plan look like, if any? My wife and I are teachers in Illinois. We’re 30 and have about $200k in retirement between Roth IRA and Roth 403b plans.

My wife’s mom retired from teaching after 29 years in Illinois and just started collecting about 90k per year in pension with a COA Of 3% per year. She retired in May at 59. My father-in-law was also a teacher but changed careers after about 20 years in the private sector. He will be collecting a small teacher pension and also social security. He retired at 62. They have about $200k in traditional 403b and at least that in a taxable account from an Inheritance.


Teachers in Illinois do not pay into social security. State income tax is also not paid on retirement income. So they are living off of their pensions and are leaving their non-pension assets to grow.

Of course, you’re looking for a point of reference here, but everyone’s situation is drastically different from the next... best of luck to you!
My wife is also a teacher in Illinois - Tier I (vs. the not as lucrative current Tier II pension) pension. She will retire in 5.5 years at 59.5 and between another state teacher retirement plan she'll be right around 70k annually to start off. She won't have as many years in Illinois as your mom. We also have combined money set aside in retirement/taxable accounts of about 1.3M. Hope to grow that to 2M by the time I retire but the market will dictate some of that growth (or lack thereof).

In your situation OP, it depends a lot on your retirement pension and if you'll get SS. Also what is your projected retirement spend? Run the estimated numbers and plan accordingly.

We could live on my wife's pension alone at retirement but we prefer to save more now so we can spend more later.
My wife is an IL teacher as well. Tier 1 pension - I believe my wife can start collecting her pension at 55. She has 19 years service now and we are early 40s. We have a similar low 7 figure portfolio as above.

Here are a couple resources for IL teachers. The same groups have resources for other state teachers as well.

https://www.amazon.com/TL-Financial-Ret ... B098S1DYCT

(Book: TL;DR: Financial Literacy for Illinois Teachers’ Retirement System Members: Optimizing Financial Decisions Based on Your TRS Benefits (TL;DR Financial Literacy Series)

https://teachandretirerich.libsyn.com/i ... xperts-175
Last edited by Nate7out on Thu Oct 14, 2021 8:23 pm, edited 1 time in total.
bg5
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Re: Question for teachers nearing retirement/retired

Post by bg5 »

My wife and I are both teachers....we started investing kind of late but have really buckled down the past 5 years. I am 40 and my wife is 35 and we have a combined $500k in 403b, 457b and Roth IRA.

We make a combined income of about $160k and have invested $53k a year the past two years. We hope to keep this up but with 3 kids it seems like money is going everywhere as they get older :)

In Michigan we will get a pension that is about 45% of the highest 3 years of salary and if one of us dies the other gets the pension for life. We can also collect SS in Michigan along with our pension.

I plan to retire at 52 and am hoping to have around 2.5 million by that time....we shall see :)
fuddbogle
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Re: Question for teachers nearing retirement/retired

Post by fuddbogle »

Nate7out wrote: Thu Oct 14, 2021 6:56 pm
My wife is an IL teacher as well. Tier 1 pension - I believe my wife can start collecting her pension at 55. She has 19 years service now and we are early 40s. We have a similar low 7 figure portfolio as above.

Here are a couple resources for IL teachers. The same groups have resources for other state teachers as well.

https://www.amazon.com/TL-Financial-Ret ... B098S1DYCT

(Book: TL;DR: Financial Literacy for Illinois Teachers’ Retirement System Members: Optimizing Financial Decisions Based on Your TRS Benefits (TL;DR Financial Literacy Series)

https://teachandretirerich.libsyn.com/i ... xperts-175
Thank you for this. Have you purchased this book? Did you find anything you didn't know or couldn't find in the TRS website/retirement benefit guide. We met with TRS and I regularly run different estimates on their site. I *think* I have a good handle on how the retirement works and how to best maximize the pension. But.....I'm always willing to learn more.
hudson
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Re: Question for teachers nearing retirement/retired

Post by hudson »

Teacher88 wrote: Wed Oct 13, 2021 7:23 am If you are approaching retirement how much money do you have in your 403b/ROTH etc? If you already retired, how much did you retire with?

I am currently 46 and can retire in 10 years. I have always invested 10-15% but when you start off making $45000 that is not much. 20 years later I have approximately $400000 in my retirement accounts and I am curious how that compares? At this point I am not sure I will retire in 10 years but it is an option.
Education in my state:
High stress
low pay
good medical during working years and retirement
good but not great pension
Most teachers are good at retirement especially the two earner frugal families.

If possible, max out Roth, 403b, I Bonds and more.
If possible, go for a second career since you will be retiring years before your SS full retirement age.
As possible, be debt free before your first retirement.
Nate7out
Posts: 253
Joined: Wed Jan 16, 2008 2:06 pm

Re: Question for teachers nearing retirement/retired

Post by Nate7out »

fuddbogle wrote: Fri Oct 15, 2021 7:39 am
Nate7out wrote: Thu Oct 14, 2021 6:56 pm
My wife is an IL teacher as well. Tier 1 pension - I believe my wife can start collecting her pension at 55. She has 19 years service now and we are early 40s. We have a similar low 7 figure portfolio as above.

Here are a couple resources for IL teachers. The same groups have resources for other state teachers as well.

https://www.amazon.com/TL-Financial-Ret ... B098S1DYCT

(Book: TL;DR: Financial Literacy for Illinois Teachers’ Retirement System Members: Optimizing Financial Decisions Based on Your TRS Benefits (TL;DR Financial Literacy Series)

https://teachandretirerich.libsyn.com/i ... xperts-175
Thank you for this. Have you purchased this book? Did you find anything you didn't know or couldn't find in the TRS website/retirement benefit guide. We met with TRS and I regularly run different estimates on their site. I *think* I have a good handle on how the retirement works and how to best maximize the pension. But.....I'm always willing to learn more.
I did buy the book and I enjoyed it. It has some basic personal finance stuff in the beginning (bogleheadish) and then spends most of the book on TRS. I learned a few things about TRS from it, but if you've already met with them and done a deep dive on the website you probably know most of what is in there. It was good for my wife, who doesn't have as much of an interest in the topic as I do. She liked it. The most interesting thing I found out was that TRS is going to start a 457 this year for teachers. We haven't found out if my wife has access yet.

https://www.trsil.org/employers/Supplem ... vings-Plan
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