Too much retirement $?

[ssmjlm]

Take off the MM hat for a minute.

I just looked at my TSP balance (fed) and it's 3.72x my salary at age 42. I basically max every year and just pulled back by a percentage this year to not go over. 

That seems like a lot more than what most calculators tell you.

I'm wondering if I should pull back a little bit more and look into other savings vehicles? 

Other backstory, I will get a pension. I don't expect any big salary increases between now and planned retirement at 57 (limited promotions in my area). DH is solid on his retirement/pension, so we have some flexibility on my side. I'm the breadwinner.

Or just KOKO since we're used to it going to retirement?

[fortnightlily]

Are you investing in non-retirement accounts? Do you want the option to draw from investments for living expenses or big ticket goals prior to the age when you can legally take distributions from the retirement accounts?

Have you looked at tax and estate implications for whoever might inherit leftover retirement money if you haven't spent it all by the time you pass?

[ssmjlm]

Apr 10, 2024 14:37:46 GMT -5 fortnightlily said:

Are you investing in non-retirement accounts? Do you want the option to draw from investments for living expenses or big ticket goals prior to the age when you can legally take distributions from the retirement accounts?

Have you looked at tax and estate implications for whoever might inherit leftover retirement money if you haven't spent it all by the time you pass?

Yes, we have investments with a FA and our own savings accounts.

I am trying to be conscious of retirement balances because my dad is stuck with a bunch of annuties from his dad and they're a pain because they're doing too well and it's a whole thing with withdraws, taxes, etc.


The other thing is I'm the only living child of parents with a large portfolio of real estate, investments, and retirement. 

[hbomdiggity]

I would still continue to max to shelter from income tax. Anything beyond that should go into alternate vehicles.

I don’t think it’s too much. I understand you get a pension and have other sources, but would want more than that. I don’t trust the metrics. Our FA has a tool to include what our expenses and spending is likely to be and what we need to get there.

[jinkies]

Do you have plenty of money saved for your kid's college? I'd probably focus on getting a college fund maxed out if I had extra money.

[ssmjlm]

Apr 10, 2024 14:50:11 GMT -5 jinkies said:

Do you have plenty of money saved for your kid's college? I'd probably focus on getting a college fund maxed out if I had extra money.

We save a small amount, but it's being covered by my parents because she's the only grandkid, she should have more than enough when the time comes.

[fortnightlily]

Apr 10, 2024 14:42:33 GMT -5 ssmjlm said:

Apr 10, 2024 14:37:46 GMT -5 fortnightlily said:

Are you investing in non-retirement accounts? Do you want the option to draw from investments for living expenses or big ticket goals prior to the age when you can legally take distributions from the retirement accounts?

Have you looked at tax and estate implications for whoever might inherit leftover retirement money if you haven't spent it all by the time you pass?

Yes, we have investments with a FA and our own savings accounts.

I am trying to be conscious of retirement balances because my dad is stuck with a bunch of annuties from his dad and they're a pain because they're doing too well and it's a whole thing with withdraws, taxes, etc.


The other thing is I'm the only living child of parents with a large portfolio of real estate, investments, and retirement. 

My parents are already retired dealing with this, too. Lamenting having too much in their IRAs/401ks/TSP because they feel like they're getting hammered by the taxes on their RMDs, and then keep warning me that whenever I inherit the balance on the IRAs my grandparents left for me I'll have to drain it all and pay the taxes on that within 10 years per a relatively recent change in the law.

[dragon's breath]

I maxed TSP when it was a percentage max (then went up as high as 17%). I backed off to fund a Roth IRA (that I wish I had started earlier), and then backed way down to 6% (plus backdoor Roth) to fund some other stuff for a few years. I'm 45 and have 7.75x my income in TSP alone. By the time I retire, at MRA, I expect TSP to be 1.5 to 2 mil.

So, starting early definitely gave me an advantage, to the point where I feel like I can pretty much coast if I want. I have enough that if I got a VERA I'd be just fine, and I'd be overfunded if I have to work until MRA (but I'll stick it out to MRA anyway to keep the full benefits if I don't get a VERA).

If you don't need/want the money for other goals right now, no real harm in being overfunded (but consider Roth TSP if continued traditional contributions will create an RMD nightmare). However, in my position with one big financial goal left, I don't see myself ever bothering to max out TSP. I'd rather have the life/financial balance now too.

[gt7301b]

I don't think I would change much unless there are things that you putting off doing because you are saving the money rather than spending the money.  The one thing you could do is up the Roth TSP contribution since a Roth is traditionally felt to be a better asset to inherit. 

[konapoppy]

I would talk to the FA about your mix. You may decide you are comfortable diversifying into higher risk options or investment types given your situation.

[simpsongal]

ssmjlm, I'm in a similar position re TSP amounts and age. It's one of the reasons I took the TSP loan for my renovation. But that's not really spending down my balance since I have to pay it all back from payroll deductions. I lowered my TSP contribution for a bit, but I got scared re how it would impact our taxes, plus it just seems early to pull back....so IDK....maybe pivot to the TSP roth?

FWIW, even when I briefly dropped my contribution to 5%, it was like an extra $300 in my paycheck? Not enough to make a huge difference when I'm already used to not having those funds.

[ssmjlm]

We don't have any big projects or planned purchases. Our main thing this year is getting our interior repainted, which we have more than enough savings to cover, since we knew we would have to do this because builder paint is crap.

I would love to pay off DH's truck earlier than we're already working toward, but that's it.

I guess I'll just KOKO until something else changes. I know my dad has already moved stuff around and taken the tax hit to make more of their own stuff easier for inheritance after learning what my grandparents did.

[orval]

I would consider putting some in stock investments. My dh is the breadwinner and has maxed out his 401K (no pension) for years. Several years ago he started putting a large chunk every month into stocks.  I assume you have to work until 57 to get your full pension. You or your dh may consider retiring early if you can use the stock investments to pay for daily living. You have more flexibility with stocks so if you want to take a huge trip or do a major renovation, you can use it more easily than retirement vehicles.
I would consider meeting again with your FA to really go over your plan. We have a life long plan so we have an idea of how much money we are taking out of accounts at age 80 for example. It sounds like you will have plenty of money, but a good long term plan (especially the tax plan) is important.

[fortnightlily]

Also, I don't personally find savings target as a multiplier of current salary very useful. I prefer to use the "Financial Independence" metric of 25x-33x annual expenses and 3-4% withdrawal rate to determine how much I need to feel protected from running out of money for the duration of my retirement, then do the math on my current 401k balance to see if it will grow to that amount at retirement age even if I started cutting back on contributions now.

[ssmjlm]

Apr 11, 2024 8:13:15 GMT -5 orval said:

I would consider putting some in stock investments. My dh is the breadwinner and has maxed out his 401K (no pension) for years. Several years ago he started putting a large chunk every month into stocks.  I assume you have to work until 57 to get your full pension. You or your dh may consider retiring early if you can use the stock investments to pay for daily living. You have more flexibility with stocks so if you want to take a huge trip or do a major renovation, you can use it more easily than retirement vehicles.
I would consider meeting again with your FA to really go over your plan. We have a life long plan so we have an idea of how much money we are taking out of accounts at age 80 for example. It sounds like you will have plenty of money, but a good long term plan (especially the tax plan) is important.

DH just turned 51 and really only plans to retire a couple years ahead of me. There's no big reason (if he enjoys working/health is good) to retire if I'll still be working due to our age difference.

[lessel]

Does your FA specialize in understanding fed retirement stuff? If not you might want to get a consult from someone with expertise in that area. (Not saying switch entirely if you like your FA, but maybe a second opinion type of situation.) When we picked our FA I specifically wanted someone who had some insights into the fed retirement stuff and I've really appreciated her specific ideas and intel about my TSP and pension.

[ssmjlm]

Apr 12, 2024 13:44:31 GMT -5 lessel said:

Does your FA specialize in understanding fed retirement stuff? If not you might want to get a consult from someone with expertise in that area. (Not saying switch entirely if you like your FA, but maybe a second opinion type of situation.) When we picked our FA I specifically wanted someone who had some insights into the fed retirement stuff and I've really appreciated her specific ideas and intel about my TSP and pension.

Yes. He’s worked with all 3 generations of civil servants. He’s been really helpful in recommending post TSP vehicles and 529 investments and eventual usage.

[sandandsea]

I wouldn’t change it but would use it to move up my retirement date if it still seems high as you get closer. A lot can happen in 15 years. If there’s something you want to do now, I’d do it but I wouldn’t change it just because.