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Thanatosian
Apr 16, 2013

Angrier, Bitterer Man


Grimey Drawer

I made this post in the BFC newbies thread, then realized my next reply was going to be a loving wall of text, so I'm just going to lay all this out in its own thread, instead.

So anyway, today was my first day at a new job. Relevant information: I'm a 39-year-old computer toucher, just starting at what I hope is my last employer, a large, public sector institution. I live in the city of Seattle, I love it here, and I intend to live out the rest of my life here barring some really good option for moving to Europe presenting itself (or some unbelievably gently caress-you-money relocation offer to somewhere else in the U.S.). I'm currently single, never married, and I never want children. Pre-COVID, I was very happy with my living situation of being in a tiny-rear end two-bedroom apartment near the heart of Seattle's downtown with a roommate. So, to the problem: my income last year was $56k (after cashing in a hundred hours or so of PTO), my new salary is $96k. This is amazing to me, and it just sounds like... so much loving money. My problem is figuring out a bunch of poo poo related to, like, the rest of my life, now. To begin with:

So, I have the choice of two different retirement plans; in either case, I get a 403(b) and 457(b) plan with no matching regardless of the plan I choose.

The first plan gives me a small pension of 1% * service years (years employed, essentially) * average of my last 60 months of compensation. I can then opt to contribute unmatched to a define benefits plan (like a 401K) in six different ways, some of which are staggered by age, but whatever I pick I'm stuck with forever (I would probably go with either 15% or 10%). This takes a hit of being multiplied by about a little less than 90% for each year before 64 I retire, and a ten-year minimum to claim it early; so, if I retired at 64, it would be ~90%, 63 about 81.5%, 62 about 74%, etc., with 55 being the youngest I could retire, and if I left for a different agency before ten years it wouldn't be an option.

Option two is a 403(b) defined benefits plan that matches 7.5% of my salary until I'm 50, and then 10% after that. Very simple. This is the default, and most of the people working at my level (non-union salaried employees) elect this. I'm inclined to go this direction.

Overall goals: I would really like to own a house someday; not anything fancy, I think my dream home is probably a 3bd/2ba townhome with no yard and no HOA. Or maybe going in on a duplex with a friend who likes to landscape (I hate yardwork). I'd like to retire early so I can travel more and not work, I like to travel, I like to eat out, I like to drink socially.

I haven't really done a strict budget or an expenses outlay, but over the last five years (I've been making about this much for about three and a half years) I've finished paying down my student loans, knocked out some credit card debt from a period of unemployment, gotten my total retirement savings up to a little over $100,000 (not enough, I recognize; $26,000 in Roth, $80,000 in traditional), and I've got $20,000 in an Allied HYSA that is my emergency account. My part of the rent plus utilities is about $820 a month (one of the reasons I'm happy in the tiny-rear end apartment), I don't own a car, my work covers my transit pass (not that I've gotten a lot out of it over the last year), I'd take Lyft three times in an especially profligate month pre-pandemic. Before the pandemic, I ate out too much and went to bars too much; then and now I probably spend too much on gaming, and now I spend too much on takeout/delivery. I have a Netflix account I share with my parents that's $15 a month, Amazon Prime, and I just migrated both parents onto my phone plan through Verizon, but I'm getting five lines for ~$160 a year, plus about $600 in statement credit (they have a landline they ported, and I have a work phone and a personal phone). I did splurge after I got the new job, but I also have an incentive bonus and four weeks of PTO I'm cashing in that will cover the new desk, monitor, and chair I've bought. I have no interest in ever owning a car (I like to drive, I don't like to deal with owning a car). If everything went to poo poo, and my roommate had to abandon me and move back home, I could cover about a year of living expenses by cutting back (total apartment rent plus utilities is ~$1480 a month).

So, by my math, assuming I go with option 2 on the retirement fund, my new take-home is gonna be about $25,000 more than my old take-home. I'm not sure what to do with this; my inclination is to take one nice trip a year ($5000ish), and put the rest towards savings while continuing my relatively ascetic current lifestyle. Like I said, I'd like to own a home someday, and have the security of not having to worry about my rent going up. That being said, another part of me isn't interested in being tied down, and thinks maybe the best option is to live like this as long as I feel like I can, take advantage of the very large tax-advantaged retirement space I have, and plan to move to someplace low-cost-of-living in my mid-to-late-50s and stop working. If I maxed the 457(b), in three years I would double my retirement; in ten years I'd have half a million, assuming lukewarm market performance.

Sorry if this seems a bit stream-of-consciousness, I'm really at least partially rubber ducking, here, but this subforum is usually good for advice (the negotiation thread is significantly responsible for my new salary). Pick this apart, tell me where I'm being an idiot, what I haven't thought of, etc.

EDIT: My parents aren't, like, rich but they could probably help me out with a down payment without an impact on their lifestyle, too.

Thanatosian fucked around with this message at 04:26 on Feb 23, 2021

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EmmaDilemma
Jul 22, 2019


Keep your current standard of living the same (aside from adding the one nice 5k trip per year) and max out all the tax-advantaged options.

Options two includes both the 403(b) and 457(b)?

Congrats on the new job, new salary, and for paying off debts and increasing savings over the past 3 years.

Thanatosian
Apr 16, 2013

Angrier, Bitterer Man


Grimey Drawer

EmmaDilemma posted:

Options two includes both the 403(b) and 457(b)?
Yeah, unless I'm reaaaaaaaallllyyyyy misunderstanding something with the documentation I've got. I keep thinking I must be missing something, but I'm gonna call the benefits office sometime this week and make them go over it with me to make sure I'm properly understanding this.

moana
Jun 18, 2005

one of the more intellectual satire communities on the web


That 457 loophole is amazing, take advantage and max that poo poo out before you get used to having more money.

laxbro
Apr 20, 2013
Relax.

If you want to retire early then you likely have to take the 403(b) plan with match. From what you wrote, that is a modest pension and it becomes tiny if you retire a few years early. I would take the generous match and then try to see if you can contribute as much as possible (or max out) your 403(b), 457, and IRA. You'll retire rich if you can max out all three vehicles for 20+ years.

KYOON GRIFFEY JR
Apr 12, 2010




Agreed on 403(b) + match.

I would advocate that if you really like to travel that you try to spend money and time on it before you are retired. A lot of retirees plan to travel but once you're getting older it's more difficult and you can't do all of the stuff you wanted to do. I don't think it makes sense to be very frugal now to retire early to travel, versus being slightly less frugal now and traveling more, and retiring slightly later.

Thanatosian
Apr 16, 2013

Angrier, Bitterer Man


Grimey Drawer

KYOON GRIFFEY JR posted:

Agreed on 403(b) + match.

I would advocate that if you really like to travel that you try to spend money and time on it before you are retired. A lot of retirees plan to travel but once you're getting older it's more difficult and you can't do all of the stuff you wanted to do. I don't think it makes sense to be very frugal now to retire early to travel, versus being slightly less frugal now and traveling more, and retiring slightly later.

moana posted:

That 457 loophole is amazing, take advantage and max that poo poo out before you get used to having more money.


laxbro posted:

If you want to retire early then you likely have to take the 403(b) plan with match. From what you wrote, that is a modest pension and it becomes tiny if you retire a few years early. I would take the generous match and then try to see if you can contribute as much as possible (or max out) your 403(b), 457, and IRA. You'll retire rich if you can max out all three vehicles for 20+ years.

Good to see everyone is agreeing with me on the 403(b) match. I called my retirement people, and yeah, $19,500 for the 403(b) ($14,400 of this is gonna get filled with the 7.5% matching), $19,500 for the 457(b), and another $6000 for an IRA. Kyoon, my plan is to travel as much as possible, but for at least the next few years, that's only gonna be a few weeks a year (I only start with 12 days of vacation, and a couple floating holidays, unfortunately; it's a separate pool from sick days, at least). And I don't know if I can psychologically get myself to spend huge amounts on, like, luxury vacations; I like eating street food and checking out temples and museums. I also like to travel during the off season (spring and fall), so things tend to be cheaper.

I know I have an excessive amount of tax-advantaged saving vehicles to fill, here, but should I not even consider the house? I can probably get $20-$30k from my parents to help with the down payment in the next couple of years, I think I could probably safely afford a $500,000 house. It's not gonna be anything fancy, but not having to worry about my rent getting jacked up or my building getting bought and having to move every few years would be great. And while I'm used to living like I live right now, am I still gonna be okay with it as I get into my 40s and 50s?

SlapActionJackson
Jul 27, 2006
I'm comin to getcha

Thanatosian posted:

And while I'm used to living like I live right now, am I still gonna be okay with it as I get into my 40s and 50s?

Probably not, but longer you can delay getting on that hedonic treadmill, the cushier or earlier you can retire.

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Thanatosian
Apr 16, 2013

Angrier, Bitterer Man


Grimey Drawer

Okay, definitely settled on the 403(b) matching over the pension.

I'm thinking I'm going to do the 403(b) as pre-tax, and the 457 split half and half between pre-tax and Roth, then supplement with a Roth IRA at tax time assuming I can afford it. I recognize I'm probably wasting some Roth space, there, but I want to make sure I'm not retirement-funding myself into trouble due to poor liquidity. If I'm seeing myself saving a bunch extra, I'll rebalance into higher Roth contributions next open enrollment.

Seem legit?

Thanatosian fucked around with this message at 17:11 on Feb 25, 2021

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