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Railroad pension and 401k

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beechnut
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Railroad pension and 401k  Reply with quote  

Good day.

I'm 8 years away from an 30 year pension with railroad retirement. Railroad retirement pays a considerable more than Social Security and have always thought it would be enough. Now I'm 44 , and just started investing 15% of my 110k income into a company 401k. Several question here, the one most pressing is, is it too late. Retiring at 60, will only 14 be worth it? And should I go aggressive in funds or play it safe? Is there's another investment option that I can use to supplement my railroad pension?

Thanks in advance
Post Fri Jun 12, 2015 8:18 pm
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blixet
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Re: Railroad pension and 401k  Reply with quote  

quote:
Originally posted by beechnut
Retiring at 60, will only 14 be worth it?


To what does the number 14 refer?

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Post Fri Jun 12, 2015 8:46 pm
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beechnut
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Years  Reply with quote  

Aargh!!

14+ years investing in the 401k.
Post Fri Jun 12, 2015 9:17 pm
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oldguy
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I'm retired, I used the SP500 Index Fund for my 401k. If you invest $16,500/yr for 16 years, that would give you $720,000 on AVERAGE. Mine happened to do quite a bit better - yours might not. The issue is the shortterm. If you look at 30-year blocks, you'll see that the Index returns about 11%/yr. Ie, 30 years is long enough for the up/down years to cancel and converge on about 11%/yr. The 16-year blocks of time will have a wider spread.

http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html#.VXtMsEbmeUl

But that's what I would do - maybe you'll only average 8%, that's not so bad. Or maybe you'll get 18%, hard to know.

Why only $16,500/yr, no matching? Or is 15% a company limit?
Post Fri Jun 12, 2015 9:23 pm
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beechnut
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Matching  Reply with quote  

Company does kick in 2%, so that takes it to 17% . Which comes close the limit I can contribute to 401k (IRS 2015).

As far as aggressiveness, I don't wanna chase returns, but I am playing catchup here. So I battle with myself between the two options. Like you said, I don't have the benefit of long term. I can however max out 401k till retirement, God willing. Should I play this as If I had started earlier in life and just move to the safe funds a few years before retirement?

Sign,
Sleepless in Minnapple.
Post Fri Jun 12, 2015 10:06 pm
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blixet
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With 14 - 16 years until retirement and then 25 or more additional years in retirement, you have plenty of time to be aggressively invested in equities. But it really depends also on your need, ability and willingness to take on risk.

You might take a look at a few different target retirement funds and see how their glide paths proceeds over time to get some general ideas on allocations as you age.

If you envision your pension covering a significant portion of your projected expenses, that could increase your ability to take on risk while also lowering your need for risk. You should be able to find a balance that is reasonable and comfortable.

Information is more valuable sold than used – Fischer Black
Post Fri Jun 12, 2015 10:30 pm
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oldguy
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beech, the limit is now $18,000/yr, that applies to the "elected" contribution, the company match is on top of that. Additionally there is a catch-up provision at age 50, an extra $6000/yr.

At age 44, I certainly wouldn't back-off on the equities. I stayed 100% in equities all thru my working years, then started backing off at about 60, now at age 76, I'm 50/50 stocks/bonds.

In general, most of us are given about 30 years of wealth-building, followed by many years (hopefully) of wealth-preservation. I used the SP500 for my stocks and a bond fund for my 'safe' investing. Up thru age 60 I was 100/0. Over a period of about 10 years I transitioned to 50/50.

With that method, you can dial in whatever risk level that you want. Eg, 100/0 is about an 11%/yr return (risk level), 0/100 is about a 5%/yr return (risk level), and 50/50 is about an 8%/yr return (risk level). So if you're at 50/50 and you want to increase your risk, you just move your mix from 50/50 to 60/40 or 70/30.
Post Fri Jun 12, 2015 11:12 pm
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blixet
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There's also $5500 per yr available in a Roth IRA that could be used if possible.

Information is more valuable sold than used – Fischer Black
Post Sat Jun 13, 2015 1:46 pm
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Wino
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I'm 54, and I have 100% in equities. DW is less than 54, and she's in about 70% equities, with about 10% cash or equivalent.

Obviously, I have the higher risk tolerance. I figure that if the market crashes, I'm buying in a trough, which is perfect (buy low), and if it stays high, I'm also good (sell high). The whole "where should I put it" question comes down to your ability to sit tight as half of your paper value goes away. I see it as buying at a bargain, so I'm good with it.

If you can truthfully answer the question: What would I do if half my value disappeared over night?

A. Move everything into a money market, before I lose it all.
B. Sit tight, but not put any more into those accounts until things come back to normal.
C. Keep investing at the same rate I have been.
D. Sell my car or my dog to get more money to invest while the prices are low.

Your HONEST answer to that question tells you where you should be. Just so you know, my dog checks the Dow Jones every morning, and hides when prices are off by more than 3%.

Remember, though, that this strategy is while you're still in your earning and accumulation years. Once you hit your spending and withdrawing years, you might want to cut back like oldguy stated. Right now, my plans are to live until I'm 90, so I still have 30 years after retirement to keep earning. I figure I'll die holding all and only equities.
Post Sun Jun 14, 2015 10:28 am
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