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  1. #1

    35 year old teacher seeking solid retirement planning advice

    My name is Tim. I am a 35 year old teacher who's head is spinning about how to set up the best possible retirement for myself? I am really hoping your experience and knowledge will steer me in the right direction? Here is what I have going for myself so far and some personal goals I have that I think should be factored in:
    -I have a 403b worth $25,000 w/ Vanguard ($22,000 Wellington Fund, 3K in Target date Retirement Fund)
    -I am debt free (I just paid off my $95,ooo house)
    -I have no car payment (car is getting older however, it is a 1999).
    -I am single (strong chance I may be married in next 1.5 years)
    -I have zero children (but will immediately try to have kids if I marry)
    -I have 25k in the bank which I have been saving for a down payment on a new house if I get married. House will cost app $220k and she will pay for half. She makes same salary as me.
    -Annual gross income is 53k and will not rise anytime soon.
    -I plan on retiring at 55 if I can swing it. I will have a pension but will be penalized for retiring early. Unfortunately I dislike my job but don't think switching careers after contributing into teacher pension for 9.5 years is smart.
    Recently met w/ financial planner from Swarthmore Finance and he wants me to:
    -Roll over my 403b into a Roth IRA with him
    -Obtain some type of Life insurance
    I am reading different things online about annuities and different Roths and other things I can do but I am very confused. I do think a Roth IRA is a good idea but not sure about life insurance? Should I even do a Roth with him?? Should I just do a mutual fund w/ Vanguard instead? Can anyone offer solid advice? Thank you so much, it is most appreciative!!

  2. #2
    Hi, Tim
    There are people on these boards who are qualified to give the kind of advice you are seeking; they will likely respond in a few days. You may need to see a certified financial advisor - the kind who just charges a flat fee. But wait and see what responses/advice you get here.
    Congratulations on paying off your mortgage. That is terrific. What we did was live on one salary and banked the other. Most went for retirement, but some was saved for things like replacing the car (no car payments) and home improvements (new roof, etc.) Since you plan on having children, you will want to save for retirement and for college. Living below your means is always a good idea. Make sure your future wife is of the same mind-set.
    I think that what you have already accomplished at your age is awesome.

  3. #3
    Tim, also check the Household Finance forum. The Retirement forum moves pretty slowly.

  4. #4
    Congratulations on doing so well at your age! Your reward is a whole new set of problems (but honest, they're good problems to have)!
    This is long, but you did ask for advice, LOL. It's a complex subject.
    First: Is this advisor a fiduciary? If not, stop talking to him and find one who is. Check out the Garrett Planning Network for CFPs who work on an hourly basis. You'll want at least two names, and you MUST research them. The first free meeting is just to see if you two think you can work together as a team.
    Get references from each CFP of clients who are in similar situations to yours, and call those people up. Don't take a lot of their time; ask what the CFP's greatest strength and biggest weakness is. All references should have used the CFP's service for at least 5 yrs or longer.
    This is your money and your future. You want someone who can give solid advice as you go through life-changing events. Birth, death, marriage, divorce, and job change are important touchpoints that will mean big changes in your financial situation.
    You do NOT want a "yes man". You want a sounding board, someone who will honestly tell you if you're going off the track. You want a neutral third party for when you and your spouse don't agree (which will happen, guaranteed) on some future touchy issue.
    You will need a new car at some point, as you have said. Especially with kids! All the new safety features will be a whole lot more important to you, as a parent. Plus, once they're out of the child carriers, suddenly you're schlepping around half the Pee-Wee softball team. New or used are the only options, so figure out how much you can afford and start saving for that, too.
    Don't focus on early retirement. You don't make a lot and unless you're super-lucky to have bright talented children (meaning full scholarships and no graduate costs), they're a 20-yr drain on your finances. It takes a LOT of money to raise kids and still take early retirement. The ones I've known who did it are multi-millionaires, who earned more in their 40's during the boomtimes than they had thought possible.
    The average middle-class Joe and Jane are lucky to be keeping their heads above water in their late fifties, right now. I'm a retired middle-income Boomer and out of all the people we know, we're the only ones on a modest income who managed to retire early and are living comfortably. All our older family and middle-class friends are still working.
    If you don't like your job, network aggressively. Whether you do it through hobbies, PTA, part-time or volunteer work, you need good contacts to make a career change easier. LinkedIn should be your best friend, but personal follow-up still counts. Put the work in, it'll be worth it.
    If nothing else, find out if there are any other county jobs that use the same pension plan you currently have, and if transfers are possible. A lot of plans allow employees to switch employers who use the same pension fund managers. Your pension is then pro-rated between employers.
    Set your expectations realistically. It's almost a sure thing both Social Security and Medicare ages will be increased (pushed out) for your generation. They'll be there, but you do not want to be in retirement with a growing family but without any insurance protection. Medical insurance is not cheap -- most people have no idea what it really costs on the open market. For a family with two kids, an HMO in our area would charge $1400/month, not including co-pays or prescriptions.
    A Roth is a great idea. Does your employer offer 403b Roths? Many do, and if yours doesn't, shoot off an email to HR and the pension manager that it would be a great option for employees. Remember that a Roth has very low limits compared to the 403/401 plans! You're limited to $5K/yr with an increase to $6K after age 50. The limit for your 403/401 is 4x higher -- a HUGE difference.
    The rule is, fund a Roth first, then fund your 403/401 to the maximum possible. Pay the lowest fees you can find. Vanguard's an excellent company, but they have a lot of funds and some are better than others. There are analysts who cover only Vanguard funds; you can Google for them and read what they say.
    With such a low balance, keeping your money in just a couple of funds is smart. Wait until you've got a six-figure balance before you start a traditional allocation of five or six market sectors.
    Once you formalize a relationship (on the way to marriage), make sure you have a long talk about money and finances. With your income and plans, it's important you both be "on the same page" and honest with one another. What do you splurge on (and everybody splurges on something)? How much monthly does that cost?
    You don't want to take the fun out of budgeting. You just need to know where it's going. That means using Quicken, or Mint, or some other budgeting tool. Get into the routine and make it easier on yourselves.
    You need an emergency fund. Cars, house, kids are all 'black holes' at regular intervals. Figure out how much you can manage, and keep it funded by automatic monthly transfers from your checking.
    Make sure both of you are saving for retirement, and both of you are sensibly allocated for your age and situation. SmartMoney, the print arm of the WSJournal, has suggested portfolios by age/circumstances, and you can find them on their website. Other financial magazines, like Money, do the same. Check 'em all out and you'll see a general pattern to follow.
    Frankly, it's been shown that a portfolio of 80% stocks/20% bonds doesn't perform that much better over 20 years than a 60% stocks/40% bonds allocation. What makes the difference is the fees you pay for the funds you choose, and the market sector allocation (different types of funds) you're chosen for your investments.
    If you are both working, you BOTH need life insurance, unless one of you can pay all the bills if the other spouse dies. Level term life is cheap, assuming you're in reasonable health. The advantage of life insurance is that it's one of the very few tax-free benefits available to anyone. My DH gets three-quarters of a million tax-free if I die in the next ten years, which makes up for my not having much in the way of retirement savings.
    Sound like a lot of $$$? It isn't, actually. On a 5% draw that's $30K annually for about 25 yrs. At our ages that's just about the rest of our average life expectancy. And in 25 yrs, that $30K will only be worth what $15K is now.
    Forget annuities. You don't need them if you have a pension, even if it carries an early retirement penalty. Any advisor that knows you have a defined benefit pension employment but pushes an annuity, is a crook. Annuities have high commissions and big management fees, and are suitable only in specific instances. You don't fit those parameters.



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