Just wanted to seek some advice and provide some views on Police retirement in my state:
We go by the “RULE OF 80” which means…
Age + Years of Service = 80
Then they do some odd ball formula that takes into account your highest 48 consecutive month salary times a multiplier, divided by months of service and then divided by 12 to get your monthly/annual pension.
They currently take out 8.88% of my check towards this pension and the city puts in another 11-12% percent into this account for me. Long story short, my pension would be between $45-50k per year at the age of 51. They adjust this for inflation (Cost of Living) yearly. This does not include anything else such as a Roth IRA, 401k or 457. I still technically have 21-22 years until I would be eligible to retire.
The City offers us a 401k and a 457 plan, however, they do not match any of it. I normally contribute an additional 5% of my pay into the 457 plan (you can contribute up to $18,000) per year. This goes directly into the Fidelity Contrafund. The reason I did this is because the 457 plan can be withdraw at any point upon leaving your employer without any fees (you do have to pay taxes on it though if you start drawing it). The 401k traditionally could not be pulled out before 59 1/2 without penalty, however, they changed that for Public Service workers in 2015 per the Trade Priorities and Accountability Act of 2015. Now Public Service officials can withdraw 401k’s after age 50 without the 10% early withdrawal penalty. Obviously very appealing since you would not have to wait the additional 8.5 years to start drawing on it if you retire at 51.
So roughly 14% of my check goes to retirement (pension and 457). I will do more (additional 15-20%) once we become a 2 income family but for now that will have to do as I am trying to knock debt out. The reason I like doing the 457 is because it goes straight out of my paycheck pre-tax and I don’t have to worry about allocating it. Just wondering if there is anything else I should be looking at when I have more $$ to start allocating?
** I know most people do general investment accounts and Roth IRA’s but my employment situation is different since there is a pension and anything extra is obviously icing on the cake**
Thoughts? Suggestions on different or additional accounts? Would you pour all of your extra income into this 457 and/or 401k or allocate to different places? Vanguard etc.?