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Hi, both my husband and I have pensions (teacher and government worker). We both started our careers "young" and expect to retire with 35 years of service at ages 58 and 60 (we are 35 now). For us this means we can expect to get close to our salary in pension benefits. Additionally my job will provide medical insurance for both of us until I die.
Our jobs mandate that we contribute around 7.5% of our salary into the pension program.

How much extra should we contribute to the 403b (no match offered) my husband currently puts in $300 a month and I contribute $150. We will probably try for a child in the future, unfortunately due to daycare costs we will likely have to stop our 403b contributions for 5 years.

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Any debt?  Emergency fund?  If you are planning to have a kid, or kids, you should beef up that emergency fund.  One thing I regret is putting so much of my money in tax-deferred savings prior to having kids.  My wife & I both worked, had great health insurance, plenty of savings, etc.  When our son was born, we sent him to daycare, and we both continued working.  We decided to have another kid---SURPRISE---it's TWINS!!  We had planned to use daycare like we did with our son, but with twins and a 5 year old in 1/2 day Kindergarten, it just made more sense to have my wife stay at home.  Now, we're a single income family of 5 paying $1,200 a month for health insurance that has a $5,000 per person deductible ($10k family out of pocket max).  Our twins are over a year old, and the emergency fund has held up so far, but I'd feel better if I had more of a cushion in there instead of so much in retirement accounts.

Point being, figure out what you're going to do regarding kids & consider that if you plan on one, it could be two or more!!  What if one of you did have to stay at home?

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How sound is your public pension? You will be relying on your pension fund for the majority of your retirement income. If you're in Illinois, that might be a risky bet.

Are there COLA increases as a retiree?

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aliciabmatters said:   Hi, both my husband and I have pensions (teacher and government worker). We both started our careers "young" and expect to retire with 35 years of service at ages 58 and 60 (we are 35 now). For us this means we can expect to get close to our salary in pension benefits. Additionally my job will provide medical insurance for both of us until I die.
Our jobs mandate that we contribute around 7.5% of our salary into the pension program.

How much extra should we contribute to the 403b (no match offered) my husband currently puts in $300 a month and I contribute $150. We will probably try for a child in the future, unfortunately due to daycare costs we will likely have to stop our 403b contributions for 5 years.

  If you are putting relatively small amounts into 403b, consider if an IRA is a better option. Two things:
(a) What kind of investment options do you have in 403(b). Usually (but not always) you can find better fund options in an IRA.
(b) You can contribute pre-tax to a 403(b). Whether you can deduct an IRA contribution will depend on your income. Also, depending on your situation, a Roth IRA maybe better.

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I'd recommend contributing to a Roth IRA versus the 403(b). Reason being, your pension income will be taxable in the future. The Roth will 1) give you flexibility to withdraw funds without moving up into higher tax brackets in retirement 2) Contributions to Roth IRA can be pulled out at any time without penalty, allowing you to use the funds in an emergency 3) No minimum distribution requirements in retirement in case you find your pension is covering most or all your expenses 4) You can typically get much better (cheaper, fee wise) investment options in IRA versus the 403(b). I would always recommend someone first invest in IRA versus 401k/403b up to the IRA limits when there is no employer match.

In terms of how much, you should run some calculations and see how much money you want to have in retirement. As the other poster stated, you should look into the health of the pension fund and decide how certain you are that it will pay out what your expecting. Also depends if your pension includes cost of living increases. If you believe your pension is sound, it includes cost of living increases, and will basically replace all of your income in retirement then you may not need any further savings.

Another factor, most states cannot legally reduce your pension benefits, but they typically are allowed to remove the retirement health care benefit and/or start charging for it. Many states are doing so. You might look into your own state laws, but that's a very expensive benefit for states to offer (and is not typically paid with pension funds) and usually one of the first to be jettisoned when times get tough.

https://www.bloomberg.com/news/articles/2015-03-18/retirees-coul...

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Thanks for the reply. Does it matter that our state (PA) does not currently tax retirement income? If we put money into an IRA now vs our 403b will this impact our current tax rate? Being a DINK household we are in a higher tax bracket.

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Do you also contribute / participate in social security?

Your pensions are enough to cover your retirement. Theres no strong reason to have higher retirement savings. Saving in the 403b can cut your current tax rate but just defer that to your retirement. You could conceivably be in a higher tax bracket at retirement.
You might be better off putting your money elsewhere.

Do you have an HSA?
529 account?

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raringvt said:   Any debt?  Emergency fund?  If you are planning to have a kid, or kids, you should beef up that emergency fund.  One thing I regret is putting so much of my money in tax-deferred savings prior to having kids.  My wife & I both worked, had great health insurance, plenty of savings, etc.  When our son was born, we sent him to daycare, and we both continued working.  We decided to have another kid---SURPRISE---it's TWINS!!  We had planned to use daycare like we did with our son, but with twins and a 5 year old in 1/2 day Kindergarten, it just made more sense to have my wife stay at home.  Now, we're a single income family of 5 paying $1,200 a month for health insurance that has a $5,000 per person deductible ($10k family out of pocket max).  Our twins are over a year old, and the emergency fund has held up so far, but I'd feel better if I had more of a cushion in there instead of so much in retirement accounts.

Point being, figure out what you're going to do regarding kids & consider that if you plan on one, it could be two or more!!  What if one of you did have to stay at home?



We only want 1 child. No credit card debt, but I do have significant student loan debt (they will actually be paid off a year before I retire). We have a small car payment at 0%, and we hope to have it paid off before or shortly after we need to pay daycare. Our mortgage (just purchased a home) is around 24% of our current take home. We do have savings equal to around 4 months of household income. Either of us leaving our jobs to stay home is not economically feasible- even if something changed financially, we don't want to stop working and we both love what we do. I actually work two parttime jobs as well- we hope to do some home updates and want to use that extra money to fund those items. We both have good health insurance and expect our out of pocket for childbith to be around $600. Daycare will likely cost us 1k a month.

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jerosen said:   Do you also contribute / participate in social security?

Your pensions are enough to cover your retirement. Theres no strong reason to have higher retirement savings. Saving in the 403b can cut your current tax rate but just defer that to your retirement. You could conceivably be in a higher tax bracket at retirement.
You might be better off putting your money elsewhere.

Do you have an HSA?
529 account?

Our employers do not offer HSA options and no 529 (but currently no child- can you open one up for a future child?). The cut in the tax rate is nice. I also work two additional parttime jobs (adjunt at a community college and occasionally waitress on the weekends), so our tax rate is higher.

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717shylaylay said:   
I actually work two parttime jobs as well- 

  Wow!  Have a sister?

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Check to see if you have access to a 457 plan. It might provide better investment options compared to the 403(b) plan.

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cherry3m said:   717shylaylay said:   
I actually work two parttime jobs as well- 

  Wow!  Have a sister?

It actually drives my husband a bit crazy because I am gone a lot, but he is also very logical and appreciates it. I grew up pretty poor and I have this horrible fear of not being able to pay my bills (and I don't have a family "safety net" to rely on), so I've always worked several jobs "just in case".

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deleting duplicate

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717shylaylay said:    no 529 (but currently no child- can you open one up for a future child?).
  
Yes you con open a 529 in your own name now and then change the beneficiary to your child after they're born.

You also get a PA tax deduction on 529's.   
 

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I also have a teacher pension but through Maryland. I have my mandatory 7.5% contribution and I also put in $6000 to a 403b and max out a Roth IRA. I'm single and 31. I always question if I'm putting too much into my retirement!

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If I didn't have student loans each month we would save a lot more for retirement. My husband's masters degree was paid for (he is the teacher) but I had to pay for my MA (I work within law enforcement).
Teachers in my part of the state are very underpaid. He is from suburban-Philadelphia and if he was living at home he would be making closer to six-figures with his degree and years in. He is just over 50k now.

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717shylaylay said:   cherry3m said:   717shylaylay said:   
I actually work two parttime jobs as well- 

  Wow!  Have a sister?

It actually drives my husband a bit crazy because I am gone a lot, but he is also very logical and appreciates it. I grew up pretty poor and I have this horrible fear of not being able to pay my bills (and I don't have a family "safety net" to rely on), so I've always worked several jobs "just in case".


I've coined this mentality the "pattyb" syndrome. Instead of using her million to make another million she has an irrational fear of dropping below the million dollar mark so she only invests in CDs and rewards checking accounts. Similar to russ hannamen who sold his billion dollar stake in pied piper to remain part of the three comma club. Alot of FWFers suffer from this syndrome. I'm actively trying to get psychiatrists to adopt this term.

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717shylaylay said:   
 We both have good health insurance and expect our out of pocket for childbith to be around $600. 

  
If that's what you expect based on your good insurance, quadruple it to $2,400 to be on the safe side and then you might not be as angry when you end up getting billed over $2k.

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717shylaylay said:   

Look into the public service loan forgiveness program too. If the payments you are making now aren't qualified, see if you can consolidate so they become qualified.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellatio...

I refinanced/consolidated my loans right out of school before this program started and then only heard about it after 7 years (84 payments) into my loan as a public servant. I am afraid that my payments aren't qualified because of my type of consolidation, but I refuse to find out until I hit the 10 year mark after I've already paid for 8 years now. Maybe I'll get lucky and get the forgiveness and get to write off about $5k. Otherwise, I'm just writing a check for that balance and forgetting about it. I didn't have that much in student loans and got a great rate when I consolidated so I don't consider it too much of a loss if I did it wrong (especially since I didn't know about the program and didn't think I'd do 10 years of public service). But since you are probably a little younger, still have plenty of time left in public service, and have more in student loans, it's worth it to make sure you are making qualified payments right now.

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