Public safety – Retirement Chat

Over the years retirement and retirement options have shifted, a statement that might leave you with a thought like, YEESS!  Counting down the days might be the words coming out of your mouth.  When I first started full-time work in public safety in 9-1-1,  I picked the field for work because it was stable with good benefits.  Although I grew up in the East where retirement benefits meant a bargaining unit fighting for a healthy paycheck, benefit time, and health benefits; many agencies in the West had migrated away from those benefits and were offering a 401K for pension.

I felt that the 401K I was enrolled in seemed like a pretty good idea.  My dad had worked in the construction field most of my life and when it was time for him to retire he would get a pension.  However when you are in your late teens and early 20’s, most often you are not considering the differences between a pension and a 401K.  Even if I had realized the difference, as a teenager in my early 20s, retirement was a long way off.  Or so I thought.

Four years into my career the biggest market crash in history occurred.  The October 19, 1987 stock crash left many people in crisis.  Dow fell 22.6% which caused a drop of 508 points in a single day.  Still, I was a new mommy at that time a 7-week-old and it didn’t really bother me.  I had my money in my 401k and I didn’t look at it.  It wasn’t until I moved to the mountains and started at my second agency that I began to realize that it might not be all sunshine and rainbows for retirement.

In 1999 the stock market experienced the dotcom crash.  Triggered by the rise and fall of technology stocks by companies with enough intelligence to raise money to go public but not enough business savvy to put together a solid business plan, product, or track record of profits. (Hayes, 2019).  One of the Lieutenant at the agency I worked for went “on and on” about how he was going to have to work until he was dead because he’d lost so much money in the crash.  It was then, I took notice because unless something changed significantly in the investment world or he “won the lotto” he had lost so much money that he was close to being right in his grief.

While life expectancy statistics for public safety personnel are less than non-public safety personnel, the average American, who has reached the age of 65, has a life expectancy of another 20 years according to the CDC and Prevention data.  A senior manager for TD Ameritrade added another 10 years to that by stating that “if you are a married couple, chances are that one of you will live into your 90s”.  The average 401K is typically not enough to sustain an income from retirement at 65 through the next 30 years.

How do you supplement that income with a little more?  The challenge with supplementing really is if you are managing “just enough” to pay your bills, raise your family, and make some memories traveling, how do you put away a little more?  The key is to start small.  Try allocating $50 per month while thinking about your long-term goals.

Investing in your 20s should involve an understanding that things will not go as planned (Adams, 2022).  The market will soar, and it will take a downturn. The goal is to grow wealth over time. Finding a trustworthy broker is helpful, one who will guide you through the investment process without charging you high monthly fees.

401 (k) plans through your employer, no matter what your age, is a great way to start investing.  Look for employers who offer a plan with matching or exceeding funds.  My last employer allowed for a 6% employee contribution and a 10% employer contribution.  For employees who wanted to invest more, there were employee contribution 457 (b) funds. These plans are offered only to public service employees and employees at tax-exempt organizations and let you contribute up to 100% of your salary or up to $20,500 per year (as of 2022 – the amount increases to $22,500 in 2023).

This is a nice option for employers to offer because the contributions are deducted from your paycheck on a pre-tax basis.  Interest and earnings are not taxed until the funds are withdrawn. This also lowers the amount of taxes you must pay each year.  For example, if you earn $4,000 per month and contribute $700 to a 457(b) plan, your taxable income for the month is $3,300 (Liberto, 2022).

Those strategies are helpful if you’re just starting.  What happens if you are now in your 40s and you need to do something?  First, check into your employer’s plans closely, start adding a little bit more each month, and add as much as you can to maximize your investments.  If you have a tax refund, take all or some of it and deposit it into your retirement accounts.

My parents were sticklers about doing that as well as focused attention on paying off their home, which they accomplished each time they bought a home.  They had their last home paid off by the time they were in their mid-50s, and while they are not wealthy, they do not lack housing, food, warmth, or occasional niceties (such as shopping, remodeling, and going out for meals).

About 10 years ago, I took a class through Dave Ramsey, a well-known personal finance expert, heard by 23 million listeners each week.  He has recommendations through what he calls baby steps to financial security. (Ramsey, n.d.)

BABY STEP 1

Save $1,000 for your starter emergency fund.

BABY STEP 2

Pay off all debt (except the house) using the debt snowball.

BABY STEP 3

Save 3–6 months of expenses in a fully funded emergency fund.

BABY STEP 4

Invest 15% of your household income in retirement.

BABY STEP 5

Save for your children’s college fund.

BABY STEP 6

Pay off your home early.

BABY STEP 7

Build wealth and give.

There are hundreds of websites to look for financial guidance.  The biggest and most important tip I can give you, and if you do nothing else I encourage you to do this – stay focused on your retirement plans.  Remember though, to take a little time and enjoy life.  In interviewing a retired couple, the husband sadly stated that they always planned to do a little more traveling and see the country “some day”.  Now look, he stated, we can’t travel anywhere because our health is poor.

Joe Mosed, CEO of and founder of Equature, sends out weekly emails to his employees with this phrase, “Do today what others won’t so we can do tomorrow what others can’t.”  There must be balance… but start small and do something different and it will make a difference for your tomorrow.

Cherie Bartram is not a financial planner.  Seek a professional, certified financial advisor when changing how you plan your retirement and financial future.

 References

Adams, R. (2022, September 27). How to Invest in Your 20s [Best Ways to Invest Money]. Young & the Invested. Retrieved December 19, 2022, from https://youngandtheinvested.com/how-to-invest-in-your-20s/

Hayes, A. (2019, June 25). Dotcom Bubble Definition. Investopedia. Retrieved December 19, 2022, from https://www.investopedia.com/terms/d/dotcom-bubble.asp

Liberto, D. (2022, September 11). 457 Plan – Retirement Savings Accounts. Investopedia. Retrieved December 19, 2022, from https://www.investopedia.com/terms/1/457plan.asp

Ramsey. (n.d.). The 7 Baby Steps. Ramsey. Retrieved December 19, 2022, from https://www.ramseysolutions.com/dave-ramsey-7-baby-steps?gclid=Cj0KCQiAtICdBhCLARIsALUBFcFJJtO5GTNf_7ZlGR2wVWIGFuHsIbievxWFfoVUIQjM4brRaNlYmxsaAirqEALw_wcB