How much is optimal to have in 401K when retiring?

[Dakota731]

You can look at your state data base for teacher salaries since they are employed by the taxpayer and public knowledge. I’m looking now at my soon to retire cousins data and he is making over 100k. Since they pay out 95% of highest years salary for the entire pension, he will coach a sport, do the yearbook and head student council since each extra circular he does adds several thousand to his highest income year. By doing three or four extra things he can add $10000 or more to his pension every year for the next forty years if he lives that long (he’s 56).

 

[runwad]

I guess I only know my state Ohio and they've changed all this for new teachers. You really can't begrudge the teachers who started in the 80s and are getting the pensions they are, they were promised that. It would be wrong to pull the rug out from under them at this point. We are the stiffs that decided not to go into teaching, be mad at yourself.

 

[WVMomof3]

This is what I am seeing the formula for CA is. It does not match up to what you are saying to me.

CalSTRS 2% at 60: For those first hired on or before December 31, 2012, this is the formula for calculating a member-only defined benefit:

Age Factor x Service Credit x Final Compensation = Member-Only Retirement Benefit

The age factor is the percent of final compensation to which you are entitled for each year of service credit, determined by your age on the last day of the month in which your retirement is effective.

The age factor is set at 2% at age 60. The age factor is decreased if you retire before age 60 and increased to a maximum of 2.4% if you retire later than age 60. If you retire with at least 30 years of earned service credit, a 0.2% career factor will be added to your age factor, up to a maximum age factor of 2.4%.

So, at 54, your sister would have worked lets say 32 years.
.019(guessing, it just says less than 2) * 32 = 60.8% of final compensation

I can get your number at 62 with 40 years of service
.024*40 = 0.96

 

[WVMomof3]

And I think anyone working with kids (and parents) for 40 years deserves it! I can't even imagine. I couldn't do it.

 

[Dakota731]

I don’t fault teachers - who wouldn’t want that deal? It’s the fault of school boards who made those deals and politicians who suck up to certain groups to get votes. But it can’t go on forever - new hires need to be on a 401k plan that they contribute to like the rest of the “real world”. Homeowners can’t afford their ever rising taxes and schools are going bankrupt over pension costs.

 

[kymom99]

I don’t fault teachers - who wouldn’t want that deal? It’s the fault of school boards who made those deals and politicians who suck up to certain groups to get votes. But it can’t go on forever - new hires need to be on a 401k plan that they contribute to like the rest of the “real world”. Homeowners can’t afford their ever rising taxes and schools are going bankrupt over pension costs.

Teachers contribute to their pension. People are acting like it's a gift. If I had contributed 6% to SS and the other 7% to a 401k with some kind of company match, I'd have a lot of money put away. The money we contribute to the pension system is invested. It's not buried in the back yard. The difference is that it's a defined benefit when we collect it.

I'm not real sure why people are picking on teachers here today. I had to go to school a long time to make relatively little money. It's not a walk in the park. If it was, and if we were really paid as handsomely as people seem to think we are, everyone would do it.

 

[seb65]

I think every state is different. I do not make even close to 100K as a teacher (I wish! Raises are rare). I contribute 13% of my salary to my pension into the pension fund. When I retire, if my age and years of service fit the formula, I will get 80% of my salary as a pension, excluding any extra pay I may have gotten from coaching, tutoring, etc. In my state, we do not contribute to SS thus we do not get SS or survivor SS benefits. I do invest in other areas on my own.
My husband's aunt retired from another state, and her % for her salary is lower than the 80% (I forget what it was offhand). She also made less money than I do currently at my job.

 

[kymom99]

I think every state is different. I do not make even close to 100K as a teacher (I wish! Raises are rare). I contribute 13% of my salary to my pension into the pension fund. When I retire, if my age and years of service fit the formula, I will get 80% of my salary as a pension, excluding any extra pay I may have gotten from coaching, tutoring, etc. In my state, we do not contribute to SS thus we do not get SS or survivor SS benefits. I do invest in other areas on my own.
My husband's aunt retired from another state, and her % for her salary is lower than the 80% (I forget what it was offhand). She also made less money than I do currently at my job.

Also, if I die, unless I take a reduced payout so that my spouse continues to collect, my family only gets my contributions if any remain. They don't get the interest my money earned for the system. So there are trade offs and risks, as with any investment.

 

[starry_solo]

You can look at your state data base for teacher salaries since they are employed by the taxpayer and public knowledge. I’m looking now at my soon to retire cousins data and he is making over 100k. Since they pay out 95% of highest years salary for the entire pension, he will coach a sport, do the yearbook and head student council since each extra circular he does adds several thousand to his highest income year. By doing three or four extra things he can add $10000 or more to his pension every year for the next forty years if he lives that long (he’s 56).

i thought Most states outlawed the extra pay counting as part of the pension about 10 years ago.

 

[WVMomof3]

Yes, think of their pension as a forced 401K, they do contribute to it. In fact, according to this article about it, some never see what they put into it. Break even: Nearly every state requires teachers to contribute toward the cost of their retirement benefits, but most teacher pension plans are so back-loaded that teachers must work many years before their future benefits exceed the value of their own contributions plus interest. Even teachers who qualify for a minimal benefit often fail to reach this “break-even” point. We estimate that in California, only 49 percent of teachers will break even from the state retirement system.

And according to this chart on this page, only 2.5% of teachers received over 100,000 in benefits for the particular year they showed.
https://www.teacherpensions.org/blog/what-“average”-teacher-pension-example-california

And this chart shows the average teacher pension for each state, nowhere near the numbers you are saying. Yes, some make more, but most do not.
https://www.teacherpensions.org/blog/what-average-teacher-pension-my-state

 

[tvguy]

Yes, think of their pension as a forced 401K, they do contribute to it. In fact, according to this article about it, some never see what they put into it. Break even: Nearly every state requires teachers to contribute toward the cost of their retirement benefits, but most teacher pension plans are so back-loaded that teachers must work many years before their future benefits exceed the value of their own contributions plus interest. Even teachers who qualify for a minimal benefit often fail to reach this “break-even” point. We estimate that in California, only 49 percent of teachers will break even from the state retirement system.

And according to this chart on this page, only 2.5% of teachers received over 100,000 in benefits for the particular year they showed.
https://www.teacherpensions.org/blog/what-“average”-teacher-pension-example-california

And this chart shows the average teacher pension for each state, nowhere near the numbers you are saying. Yes, some make more, but most do not.
https://www.teacherpensions.org/blog/what-average-teacher-pension-my-state

Well, you kind of left out an important number regarding CalSTRS. That 49% includes those who pay in to CalSTRS but don't stay for the 5 year vesting period and lose everything they, and their districts pay in. That's 40% of the total people who have paid in. So adjusting for those who elect not to stay 5 years, only 20% don't get all their money back in retirement. https://www.ocregister.com/2017/01/31/two-thirds-of-teachers-are-pension-losers/

 

[mco65]

I think you will need just enough to visit WDW at least every other month.. i mean, you will be retired right!

 

[Dakota731]

i thought Most states outlawed the extra pay counting as part of the pension about 10 years ago.

Not in our state. My cousin is retiring next year so is padding his extracurriculars to get a highest income year for his pension.

And as far as teachers paying towards their pension - here it is a paltry 7% - the rest is made up by state and property taxes. So In essence the rest of us pay ALL our own retirement plus 93% of teachers’ pensions.

 

[Hikergirl]

Here it is tiered depending on when you were hired. Contributions range from 3-6%. The rest of us pick up the tab.

 

[starry_solo]

Not in our state. My cousin is retiring next year so is padding his extracurriculars to get a highest income year for his pension.

And as far as teachers paying towards their pension - here it is a paltry 7% - the rest is made up by state and property taxes. So In essence the rest of us pay ALL our own retirement plus 93% of teachers’ pensions.

CA outlawed it for most employees out years ago although it looks like administrators for schools (not teachers) can still spike it.

 

[tvguy]

CA outlawed it for most employees out years ago although it looks like administrators for schools (not teachers) can still spike it.

Pretty common with CHP for officers to work graveyard shift their last year to spike their final year pay. There is a stipend for graveyard shift under their union contract.

 

[DVCcurious]

I find this thread to be very interesting as I have wondered about the "number" myself many times.

My number is 18. That may not sound like much but that was a lot in the 90s. That would be like over 200 today with Tinder.

 

[DVCcurious]

I really see no reason for most people being paid by taxpayers to retire at 57 (or even earlier for some!) & make their full retirement.

Then maybe you should’ve worked for the government. Don’t get mad at me because you lacked foresight. When my spouse and I graduated college in the 90s all our friends laughed at us for taking federal government jobs. Well at 58 we’ll be out. And guess what.... our number is 0! We actually don’t need very much in our 401ks because we’ll both be getting pensions. We’ll have over a million each in our 401ks but that’s going to our kids. You could’ve been in the same position if you only planned better.

Everyone should work for the government. It’s by far the best deal going.

Don’t get mad at me because I made a better choice of career than you did.

 

[bdcp]

Then maybe you should’ve worked for the government. Don’t get mad at me because you lacked foresight. When my spouse and I graduated college in the 90s all our friends laughed at us for taking federal government jobs. Well at 58 we’ll be out. And guess what.... our number is 0! We actually don’t need very much in our 401ks because we’ll both be getting pensions. We’ll have over a million each in our 401ks but that’s going to our kids. You could’ve been in the same position if you only planned better.

Everyone should work for the government. It’s by far the best deal going.

Don’t get mad at me because I made a better choice of career than you did.

So, your retirement is FERS? That doesn't even get you 1/2 of your current salary, closer to 1/3. TSP and SS are supposed to make up the rest but it's still not even 60% for most people unless they've saved the max in TSP and even then it won't even come close to some of the %'s of current salaries I've seen. I'm a Federal employee and am retiring in just over two years at 60 which means I'm giving up a portion of the multiplier. If you work til 62 you get 1.1 multiplier, prior to 62, you only get 1, so why aren't you working til 62 which is considered full retirement age for the Fed Gov? DH has the vast majority of our retirement income so me retiring early doesn't make as much of an impact. So, unless you are drastically changing your lifestyle or don't need even 1/2 of your current salary, I can't see where you're coming up with not needing your 401K (TSP I assume).

 

[Alexle2007]

So, your retirement is FERS? That doesn't even get you 1/2 of your current salary, closer to 1/3. TSP and SS are supposed to make up the rest but it's still not even 60% for most people unless they've saved the max in TSP and even then it won't even come close to some of the %'s of current salaries I've seen. I'm a Federal employee and am retiring in just over two years at 60 which means I'm giving up a portion of the multiplier. If you work til 62 you get 1.1 multiplier, prior to 62, you only get 1, so why aren't you working til 62 which is considered full retirement age for the Fed Gov? DH has the vast majority of our retirement income so me retiring early doesn't make as much of an impact. So, unless you are drastically changing your lifestyle or don't need even 1/2 of your current salary, I can't see where you're coming up with not needing your 401K (TSP I assume).

Actually, there is a special retirement supplement for those who retire before age 62 to help them bridge the gap before you can receive SS benefits. So like DH is currently 52 and can retire at age 56 and 4 months and receive the special retirement supplement until age 62. DH keeps hoping Congress doesn’t do away with it before he is eligible. http://www.fedweek.com/reg-jones-experts-view/the-fers-special-retirement-supplement-3/