Retirement planning
Apr. 8th, 2005 09:27 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
livingdebIt's been too long since I last updated. I'm going to try to quit worrying about whether I have an interesting enough topic and just write about whatever I'm thinking about.
My employer just held a two-day financial and retirement planning fair. Since I enjoy fantasizing about retirement (possibly in only eight years, nine months, and a week, if they don't change the rules too much, not that I'm counting), I attended several sessions.
Although I am already very well read on these issues, I did manage to learn a few things. We have two (tax-deferred) supplemental retirement plans available to us beyond the defined-benefit pension plan. One is the Texa$aver 457 plan, which I learned has negotiated lower fees from its vendors than people like me can get individually, because my employer is a bigger customer than I am. I also learned that the money from that program can be withdrawn as soon as I stop working with the state, regardless of my age at the time, with no early withdrawal penalty. I decided that this makes it a good vehicle for creating my own personal unemployment insurance plan. Defer taxes now--if I get fired or whatever and need the money, I pay taxes on it then, when my income will be lower. I also learned that the minimum monthly contribution is very small: $20.
(The other plan is a 403(b) plan which has a lot more investment options but has a 10% early withdrawal penalty if tapped before age 59.5.)
I knew that the maximum contribution toward these plans was so high it would never impact me ($14,000 each, for a total of $28,000; possibly more for those about to retire). But I learned that my employer's programs are unusually good, so it was suggested that these limits could become relevant for people who marry someone with a higher income but worse options.
I also realized that if I were married I should take joint income on my pension plan, because my spouse would probably be counting on at least some of my income for utilities and stuff. This saddened me because I didn't really want to take a lower salary. But then I looked up the difference, and it's not very big for people in my position (unless my spouse is much younger).
I learned of a study that showed that over a long period, the least risky combination of stocks and bonds is 80% bonds and 20% stocks (not 100% bonds). And having 60% bonds with 40% stocks gives you about the same risk as having 100% bonds, but with a much higher expected return.
People always talk about how great investment funds are because they allow you to diversify cheaply, so if one of your companies goes under, you don't lose that much money (compared to putting all your money in one company's stocks or bonds). What they don't mention is that if your fund company (or annuity company) goes under, you do lose a lot of money. So, if you can handle the multiplication of paperwork, fees, and statements, it makes sense to have two, three, or even four companies.
This reminds me of when I graduated and I kept hearing about how you ought to consolidate all your student loans so you have only one payment. When I looked into it, all the programs I saw were designed so that the new consolidated loan would be at the highest interest rate, rather than a weighted average, so no thanks. I could handle four payments.
My employer just held a two-day financial and retirement planning fair. Since I enjoy fantasizing about retirement (possibly in only eight years, nine months, and a week, if they don't change the rules too much, not that I'm counting), I attended several sessions.
Although I am already very well read on these issues, I did manage to learn a few things. We have two (tax-deferred) supplemental retirement plans available to us beyond the defined-benefit pension plan. One is the Texa$aver 457 plan, which I learned has negotiated lower fees from its vendors than people like me can get individually, because my employer is a bigger customer than I am. I also learned that the money from that program can be withdrawn as soon as I stop working with the state, regardless of my age at the time, with no early withdrawal penalty. I decided that this makes it a good vehicle for creating my own personal unemployment insurance plan. Defer taxes now--if I get fired or whatever and need the money, I pay taxes on it then, when my income will be lower. I also learned that the minimum monthly contribution is very small: $20.
(The other plan is a 403(b) plan which has a lot more investment options but has a 10% early withdrawal penalty if tapped before age 59.5.)
I knew that the maximum contribution toward these plans was so high it would never impact me ($14,000 each, for a total of $28,000; possibly more for those about to retire). But I learned that my employer's programs are unusually good, so it was suggested that these limits could become relevant for people who marry someone with a higher income but worse options.
I also realized that if I were married I should take joint income on my pension plan, because my spouse would probably be counting on at least some of my income for utilities and stuff. This saddened me because I didn't really want to take a lower salary. But then I looked up the difference, and it's not very big for people in my position (unless my spouse is much younger).
I learned of a study that showed that over a long period, the least risky combination of stocks and bonds is 80% bonds and 20% stocks (not 100% bonds). And having 60% bonds with 40% stocks gives you about the same risk as having 100% bonds, but with a much higher expected return.
People always talk about how great investment funds are because they allow you to diversify cheaply, so if one of your companies goes under, you don't lose that much money (compared to putting all your money in one company's stocks or bonds). What they don't mention is that if your fund company (or annuity company) goes under, you do lose a lot of money. So, if you can handle the multiplication of paperwork, fees, and statements, it makes sense to have two, three, or even four companies.
This reminds me of when I graduated and I kept hearing about how you ought to consolidate all your student loans so you have only one payment. When I looked into it, all the programs I saw were designed so that the new consolidated loan would be at the highest interest rate, rather than a weighted average, so no thanks. I could handle four payments.