Contributors to this thread:
Question about "hunt fund" investments
I am eligible to retire in January of 24 without a reduction in benefits. I don't plan to do so as I plan on doing another 5-6 years. Anyway, I am looking at a pension that will allow me to live comfortably. Much more comfortably than I ever envisioned when I started my career. Early on in my employment I started a supplemental 401K and a 457K and have contributed to these accounts for over 25 years. I just basically forgot about these accounts. I never did invest aggressively in these account, but over the years of just making continual contributions it has grown into something that will be of benefit. I looked at these accounts as gravy and that anything I made would be used for play when I retire. My question is, if a person contributed at a much more significant level for their last 5 years of work, would it be very beneficial? I know the principal amount is where you are actually making real gains, but will aggressive contributions make any measurable difference this late in the game? These accounts are not large, both are <$100K.
the short answer to your question is yes.
your statement 'I know the principal amount is where you are actually making real gains," is not necessarily true.
there are online retirement calculators as well as basic savings calculators. you can input the data including interest rate and see the outcome. i suggest you do this to give you some idea on how an investment can grow.
*edit. i would suggest you build-up your personal savings and retirement accounts and not rely so heavily on the pension. if it works out at the end, great! but, i would have at least a little concern with how and who is managing the pension.
I do have a slight concern, but it is the state of KY and not a private company. They have made some poor investments in the past but our fund is actually in decent shape.
Though, your point is well taken on relying on someone for retirement other than yourself.
As long as you're working, you're paying tax on your wages. Putting the money in a 401 defers the income tax until after you retire, when you'll be making less money, and are in a lower tax bracket.
Don't forget there's a tax benefit as well on those contributions.
Dana and I typing at the same time.
Good point Dana and Nick.
I can't believe I am even talking about retirement. LOL....it seems like I'm still 25. I don't feel 25 but it seems I was 25 just a few years ago.
If possible, you may want to move these funds to an IRA where you have more investments options and will also help defer taxes.
If you’re looking to have a fund you can draw a little from each year, it definitely matters. You can count on withdrawing 7% or so from an account every single year and never dwindling the principle so long as it’s invested in good mutual funds. On a 100k account, you essentially get a free $7k each year (assuming 10% gains and 3% inflation) to use as you wish. So yes, it would make a difference even though it wouldn’t “grow” as much as your earlier contributions.
If you’re gonna drop the account on 3-4 “big” guided hunts and not in the way I described which would be gas and food for drawed tags, then it would matter less since you wouldn’t be looking to keep the account “paying you” for years to come. I still don’t think you’d regret using it essentially as a high-yield savings account though
Sitting down with a financial advisor would probably be beneficial. They can help you get invest in appropriate funds that match your risk tolerance, give you a idea of what retirement will look like financially that includes your pension and how much you can realistically draw from your accounts after retirement. Some professional help that specific to you can help you understand if you need to tighten your belt the next few years or if you can relax on savings.
One more think to consider if you will be less than 59 1/2 when you retire is that your IRA accounts you mentioned can't be touch without penalty. You might consider future saving in a non qualified account.
Don’t assume you will be in a lower tax bracket when you retire. It depends on pre and post retirement earnings, and what the states/feds do on tax rates. You have zero control on the latter. Having said that, i did and I always encourage others to put as much as possible in their 401k and similar plans. I did for roughly 30 years. And I transferred all of it into a traditional IRA when I retired, so I had much more investment options than my company offered.
John, You can make withdrawals from a 457 immediately upon separation regardless of age.
Your scenario is more of my line of thinking. Just a little extra to pay for tags and travel.
"You can count on withdrawing 7% or so from an account every single year and never dwindling the principle so long as it’s invested in good mutual funds."
if youre looking to conserve principal...most professionals would disagree.
half that is more accurate (3-4%)...and even that isnt a slam dunk depending on sequence of returns.
That also is not really the way it works. The market takes downturns and then upswings. If that money isn't in there on the upswing periods, you probably aren't making that average return. Likely what will happen is that the fund will wind up dwindling down. As much as one thinks they might time it; good luck, because that is what it takes.
People consistently up contributions late-in-the game. Can help tremendously, especially in the case of a market going bull.
Once you have enough income Health is the only thing that matters. Unless you totally enjoy your job retire now and live free. Next month will be 15 years retired for me (55) and what a great run. I found I needed way less than I thought in retirement. Best always. C
Congrats on being in a position to retire. My thoughts: 1) it would likely be beneficial from a tax efficiency-perspective to invest as many pre-tax dollars as you between now and retirement because your tax bracket will very likely be lower once you retire, 2) Ricky has it right that many finance gurus use the 4% rule for annual distributions when trying to make a pool of funds last 30 years, 3) be mindful of the ages where you can start using the funds in the various accounts (401-K, 457-K) as it would suck to have a big hunting fund that you cannot access without penalties due to you being younger than the minimum age for withdrawals, and 4) sitting down with a financial advisor to talk through your situation would be a very good idea.
As Dale06 mentioned, don’t assume you will be in a lower tax bracket. A financial guy once told me that many think that way but when they retire and get SS and having to take required minimum distributions from retirement funds along with other sources that isn’t always the case. I’m not an expert so I welcome feedback on the matter. I’ve been contributing to a 401k for many years and always took pre-tax deductions, but within the last 2 years I switched to 401k Roth account my company offers.
"Ricky has it right that many finance gurus use the 4% rule for annual distributions when trying to make a pool of funds last 30 years..."
and thats if youre ok with exhausting the pool after 30 years. If your goal is to conserve the principal...it gets even less likely.
7% per year and maintaining principal is pie in the sky. not saying it couldnt happen...but its not very likely.
I retired in 2014 at 58, would have went earlier but wanted to sell a home first. Not a financial expert but from my experience stay away from the "Ameriprise" type investment help. The commissions they make from some investment products are large and at your expense. Managing your own accounts or using a fiduciary seems best in my opinion. Retirement is great, enjoy it when you can.
For some perspective on my timeline for retirement. I have two girls, the oldest is in her first year of college. The youngest is a sophomore in HS. Due to the age of my girls I plan to work 5-6 more years. I still may retire from my current position as I do have a soft offer to consult. Insurance for my girls is the main reason why I don’t plan to retire now. While my insurance after retirement is covered at 100%, it is considerably more expensive for family insurance than my current employer.
In short the answer is yes in my opinion. Pack in all the money you can afford even in the last few years. It does all add up. An example I started a retirement moose hunt account 25 year ago at $10.00 a pay check. Check was every 2 weeks. I know back then hunts were like $5000.00 for moose. But that little account with a couple bump on my part near the end is around $25,000.00 in a tsa. The end bumps helped. Going on my hunt one year four days from today.
I assume the 401k was earlier in your career while working for a private company, since governments don't have their employees participate in those (but rather the 457k you mentioned). It was suggested earlier that you move them to an IRA where you have more choices for investments. Since you would seemingly no longer be working for the company that sponsored the 401k, you could move it to an IRA as suggested, but I doubt that you could move the government plan until possibly after you retire from them (I'm not as familiar with such plans). As was also mentioned, it really depends on whether we are in a bull market or not for the next few years. Several of the past few years I have had 30-50% returns on my IRA and brokerage accounts (a little lower on the more limited investments in my 401k accounts), so you might be able to make a pile of money with deferred taxes in a relatively short amount of time. A lot depends on your risk tolerance. There are also some minor (in my opinion) downsides to reclassifying a 401k to an IRA, so make sure you understand those before you make such a decision. Congratulations on your retirement.
I’ve been out of the job market arena for awhile, but I think at age 50 or abouts, extra amounts can be invested into IRAs. I think it was call “make up funding.”
I’m like Charlie R., I’ve been retired a while and week is comprised of 6 Saturdays and a Sunday. Many days I don’t know what day it is and don’t wear a watch so I’m somewhat clueless on time.
“What is time to a hog?”