How many jobs will you have in your life? If you are an average child boomer, you will have 12.3 jobs between the ages of 18.3 and 52, according to the US Bureau of Labor Statistics.
Teri Allen does not fit into this template. He is a child boomer who has worked for one employer since he was 19 years old.
Now at the age of 58, after nearly four decades of cleaning buses, changing bus oil, and planning bus maintenance, he is ready to ignore what’s under the barrel.
“I have been at my workplace since February 16“1982,” says Allen. “I’m ready to go now.”
He is ready to leave his job, but not Seattle, where his roots are deep. Allen grew up on Rainier Beach and still interacts with several mixes of his childhood. “My best friend, well, we were friends from South Shore Elementary School,” he says.
In 1987, Allen bought a home in the Hillman City area for $ 50,000. Allen says that the three-room cottage is for some renovation, in particular the transformation of the kitchen և bathroom. That’s part of what he wants to do when he retires. The other is travel.
“I have been all over Mexico. I loved ama america, antigua, hawaii. The Earth’s curvature could be seen in Hawaii. “
Can he afford tropical sunsets, new kitchen counters without pay? Will he have enough money to retire before the age of 65, the age at which the public transport agency he works for considers a full pension?
These questions prompted Allen to apply for Money Makeover, և our partner, the Puget Sound Financial Planning Association, called on a planner who wanted to lend a hand. Bellevue certified financial planner Lee Martin answered the call.
Martin began by asking for a lot of paperwork, impressed by how organized Allen was.
As a transit agency dispatcher, Allen earns $ 76,000 a year. That’s less than the average household income for Seattle, which, according to the US Census Bureau, is $ 102,000. But as Martin was about to find out, Allen could take a dollar to save a dollar. And finally, he can reach that $ 102,000 mark. How could he do that when he retired? Stay with us.
“I’m quite frugal,” says Allen. “I learned this from my father when we had our little conversations. Save money for a rainy day. ”
Or a sunny day off. Allen and his planner decided that the 63-year-old would be considered a possible retirement target. One of the first things Martin did was inform Allen about the cost of early retirement.
Starting with health care. “When you retire before you start Medicare, you have to pay for your own health insurance. This is a common problem for anyone retiring before the age of 65. ”
Martin says Allen will have to pay for his insurance either under COBRA, which will allow Allen to stay with his current plan for a while, or by purchasing a plan through the Washington Healthplanfinder. Both are known to cause a temporary increase in blood pressure, known as a “sticky concussion.”
Martin estimates that Allen will pay at least $ 1,200 a month or $ 15,000 a year for the cover, which will not be as gilded as it is now.
Another development that would increase Allen’s retirement expenses is the renovation of his home. He owes about $ 20,000 for a mortgage. “What I did was put an extra $ 75,000 into a mortgage,” says Martin. “I recalculated that after the refinancing, his new payment will be $ 1000 per month. He now pays $ 611 a month. ”
The planner thinks Allen can swing the transformation. But Allen says he’s on the fence now, because he’s already close to having no home debt.
Travel is indisputable. At retirement age, Allen wants to make at least one big trip a year in the winter. “Have a nice place where you can sit on the beach or go down to the pool and bring a drink to the waiter. Maybe J amayka. I would like to study it more. “
Every year for 10 years, Martin has donated $ 6,000 to Allen’s retirement plan. “I want to travel as long as I’m healthy,” says Allen.
The next planning task was to study Allen’s retirement savings. Turned as satisfactorily satisfying task as it turned out. Remember that Allen is a government employee who has been investing in the Employees’ Retirement System since he was 19 (PERS 2). In addition, he defers the advance cash in the deferred compensation plan.
“Here’s an example of how much Terry gets out of it,” says Martin, looking at his recent paycheck. “In January, he invested $ 541 in PERS 2 and his employer $ 890. The delayed computer is separate. He deferred $ 270 for his investment. “I have seldom seen anyone save as much as he did.”
“Nothing big,” says Allen. “It simply came to our notice then. You learn to live on your salary. I am alone. No children. I just have to take care. I do not eat rice or beans. “
Are caviar and champagne his future? Given what he put into the PERS 2 program, which is a pension, he would receive almost $ 7,000 a month. if: he worked until he was 65 years old. He will be slightly punished for retiring at the age of 63, for the rest of his life he will receive about $ 5,900 a month.
When he is 67, Allen will be eligible for his full Social Security benefit of $ 31,500 a year. Although he will not be working, he will hit Seattle’s current average household income of $ 102,000 a year.
In addition, he raised $ 212,000 in his deferred kit plan. He’s $ 54,000 in two Roth IRAs. As he nears retirement, Martin advises Allen to reduce his investment fund stakes from 64% to 54%.
After running the various scenarios through the planning software, Allen’s retirement roadmap shows a 99% chance of success.
“Terry’s main question when she turned to make-up was, ‘Am I on track?’ The answer is yes, ”says Martin.
Allen had no idea he was feeling so good. “I do not know much about squeezing numbers, looking to the future.”
After her make-up, she is confident that her decades of hard work will ensure future freedom. “I will no longer have to work for anyone.”
Are you going to spend less on retirement?
The most commonly quoted 80% rule states that people of retirement age spend about 80% of their annual working time.
This month’s developer, Lee Martin, is not buying it. In his experience, the pension is more about the individual.
“People who plan for the future rarely go crazy,” he says. On the other hand, people who are accustomed to spending too much will continue to do so at retirement age.
To avoid overspending, Martin advises you to evaluate your vacation dreams.
For example, this month’s transformation subject Terry Allen dreams of transforming his kitchen and bathroom. He claims it will cost about $ 75,000. But a recent report said that the Seattle kitchen remodel costs an average of $ 150,000.
Martin says retirees can count on higher health care costs. According to Loyalty, a couple will spend about $ 295,000 on health care in 20 years, even with Medicare.
A number of retirees plan to sell their home to raise cash. Again, Martin is skeptical. “People say they are going to reduce it. Then they sell a house worth $ 2.5 million and move into a house worth $ 2 million. The place has shrunk, but the numbers have not. ”
Why so negative? Martin says it’s good for you. “I’m making the pension less pink than it used to be. Build assumptions in your plan: high inflation, low profitability. That way you will be ready for anything. ”