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jebjebitz

Question about retirement contribution

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I’ve heard people recommend contributing anywhere from 10 to 15% of your income towards retirement.

Would you factor in what you contribute towards a pension in this percentage?

So, if you were contributing 7% of your income towards pension and 8% towards a 403b, would that count as 15% of your income towards retirement?  Or, would you consider pension contributions separately?

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Jeb

This is a personal decision. No one percentage fits all. With a pension IF  you plan to hang around teaching to reach your full payout, that would be one factor to consider. If you are going to exit the teaching profession early and receive a reduced pension that also is a consideration. If your wife/partner works and will also have a pension plan or other saving plan and you think you guys will stay together, that is yet another factor. 

Personally, We are  living comfortably on  just our pensions. Wife is 9 years younger than me so she can't collect Social Security for a while. I can collect now  but I haven't filed for it yet.

I think the article I  recently posted about not saving too much or too little offers some insight.  It never hurts to save more than you think you will need since no-one can predict the future. They say SS is not solvent and some states  have reduced benefits and or formulas  for teacher pensions. So personally I would save that 15% if not more in a low cost 403b plan and see how  the other things pan out.  Medical expenses keep rising so you want to consider that too.

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Thank you both for the quick response.  I teach in NJ so I pay into Social Security as well.  But, like Tony mentioned, some say it’s not solvent.  Our NJ pension is in rough shape too.  To be safe it makes the most sense to save as much on my own as possible.

Very helpful Krow and Tony.  Thank you.

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My 2¢:  I think that if your are deciding within a range of how much to save/invest for retirement, you should pick the higher number, or even push it a little further.  Even 30% or more is not too much, if you can manage it without depriving yourself of a decent standard of living and an available emergency fund.  Not only will the larger eventual nestegg allow for much more security and flexibility during retirement, getting used to living at a lower level of spending will make it easier to continue (or even increase) your "lifestyle" during your retirement years.  You'll get the immediate benefit of lower income tax payments, too.

I think the widespread fretting over Social Security is overdone: short of the US government collapsing, it is very unlikely to be slashed or go away.  It could be eroded a bit, though: more SS income becoming taxable, for example.  The slow rise of the "full retirement" age that has been going on for years is effectively a benefit cut, but not a draconian one.  It is hard to imagine any scenario in which congress pulls the plug on Social Security benefits.  Congress does have a tendency to put things off until the last possible moment; I expect at some point when it feels like a crisis they will enact some combination of tax increases and minor benefit cuts (probably by continuing to raise the eligibility age or cutting benefits to people with substantial income from other sources) to keep it stable for years to come.

The NJ pension system, on the other hand, does have a reputation for being in trouble (I read an article listing it as the least-funded of all the state plans about a year ago) so I don't know how much you can count on there.   I hope the NJ pols are able to build it back to solvency (which seems to be happening here in California, via higher contributions from all parties and a slightly less favorable pension promise for those hired after a certain year).

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Jeb

Whyme is right SS worry is overblown. It will still be there when you retire in some way or form. Didn't mean to create a false alarm by mentioning it  as possibly insolvent but changes do occur.

The other thing to consider is the inheritance factor and your health and projected longevity.

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SS will still be there and the solutions to increase its solvency are so simple. Did you know wealthy people only pay SS tax on their first $132,900 of income? Complete solvency can be obtained by doing things like eliminating the absurdity of rich people paying a lower effective rate than regular folks and perhaps asking rich people to pay a higher effective rate like we do for federal income taxes.

I hate the conventional “wisdom” that you should save % of your income. Often times is way too low and it gives people an excuse to not save as much as they can. You never know what life will throw at you, save as much as you can, reject materialism, and maximize your earning capability. How’s that for conventional wisdom?

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3 hours ago, EdLaFave said:

How’s that for conventional wisdom?

!

 I agree with Ed , forget the percentages, save all you can. We were saving 50% of our income but early on much less  than that but always more than 15% . We always upped the ante and never missed it.

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In my situation, I retired early so I need my investments as my pension is only 49% of my salary, and its only from me. Neither my late hubby nor my current partner have pensions, only SS. 

This is not exactly what you asked but to increase your % saved, get those salary points to increase your income. 

In addition to all of the good points above, I got to the top of my salary scale within a few years by taking every district workshop available. Then, I continued to look for district opportunities to increase my salary. Even though I am not administrative material, I got my administrative credential. This credential helped me get a position that required an administrative credential with more pay and what I wanted to do (educational technology coach), but was not going down the route of school site principal. The National Board Certification is another that would greatly increase your salary. 

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