For several years now, our retirement accounts have been growing at a decent pace...this year, however, the performance has been pretty anemic! I am still thankful that we are not losing money. But that is why our family has now decided to switch our focus towards building our Dividend Stocks Portfolio and P2P Lending Accounts so as to have optional income streams in retirement. Nevertheless, we will still continue to track these accounts as they are still part of our retirement plan.
Cash Value of Pension:2016
1st Quarter 2016 - $239,650
Current value of defined benefit (6/7/2016): $246,835. Based on 20.228 years of service (2.7% at 55 plan) = 54.6156% of my highest annual salary at retirement (provided I retire at 55 years of age). But since I still have approximately 11 more years until I turn 55, I am expecting that percentage to grow to approximately 86.4% at retirement should I decide to stay and retire at age 55. There are also more variables (remaining vacation and sick time, age of beneficiary, percentage of benefit to pass on to beneficiary, etc.) that goes into the overall calculation of my pension, but for the purpose of this blog, I figured I'd just keep it simple.
Total value of 457K:2016
1st Quarter 2016 - $112,765
457K portfolio reports: My balance is in the six digit range only because I had contributed close to the maximum allowed during my first years of my career. But now that I also maintain an investment account for dividend stocks, Roth IRAs, and P2P notes, I am currently only contributing up to my company match.
Total value of all Roth IRA accounts:
Roth IRAs: They are held with several investment companies because we just never took the time to consolidate them. For the purpose of this blog, I simply provided a grand total of what is in all our Roth IRA accounts.
PensionDecember 2015 - $234,175
January 2015 - $212,588
January 2015 - $212,588
TOTAL INCREASE (2015): $21,587
January 2015 - $118,401December 2015 - $119,961
TOTAL INCREASE (2015): $1,560
January 2015 - $54,349
December 2015 - $57,040
TOTAL INCREASE (2015): 2,691
TOTAL INCREASE (2015): 2,691
In 2015, our retirement accounts saw a total increase of:
January 2014 - $190,509December 2014 - $210,287
TOTAL INCREASE (2014): $19,778
January 2014 - $111,089
December 2014 - $118,660
TOTAL INCREASE (2014): $7,571
January 2014 - $48,508
December 2014 - $55,018
TOTAL INCREASE (2014): $6,510
TOTAL INCREASE (2014): $6,510
In 2014, our retirement accounts saw a total increase of:
The pension amount listed above is the value of my defined-benefit pension plan through CalPERS. For those unfamiliar with a defined benefit plan, it is just as it sounds. The payout, when its time to collect is fixed to a certain formula. The formula is usually the combination of years of service multiplied by a percentage of your average salary over the last few years of service. I am currently part of a 2.7% at 55 plan. Meaning, I am (almost) guaranteed to receive 2.7% of my salary for each year I've worked, provided I retire at 55.
The total shown is essentially the current cash value of my pension plan although the actual value is probably much greater since many individuals in the define benefit retirement system typically outlive their cash value. I imagine this is the primary reason why defined benefit plans are underfunded and thus a dying breed. Because of this dynamic, our family is also committed to building our dividend stocks portfolio so we have a safety net should something happen to my pension down the road.
The pension amount listed above is the value of my 457K. My 457K is also seen as a potential secondary safety net should something happen to my pension down the road. For those unfamiliar with a 457k plan, it is a deferred-compensation arrangement for employees of state and local governments and certain tax-exempt organizations. Most 457k plans have tax benefits similar to those in the 401k retirement plans that many private employers offer.
My current employer currently provides a 2-1 match for every dollar I contribute up to 3% of my salary. Needless to say, I am contributing 3% of my salary so I can get the entire employer match. So in addition to my pension plan, 4 1/2% of my salary is going to my 457k. Since I've been contributing to my 457k for the entire 13 years I've been a government employee.
The Roth IRA amount above is the value of both my Roth IRA as well as my wife's Roth IRA. Both my wife and I have been contributing to a Roth IRA for about 10 years now. Additionally, when my wife stopped working, we also rolled her previously 401K to a Roth IRA. The amount above is reflective of this decision. Although we continue to contribute a little each month to both of our IRA accounts; unfortunately, our currently budget does not allow us to contribute the maximum amount. Our goal, however, is to eventually maximize our Roth IRA contributions once my wife goes back to work.
There are many options that one can take when it comes to planning for retirement. And it can be hard to choose which one would fit your needs, as well as your budget at the moment. But looking at your plans, you’re doing quite well, despite some difficulty you’re currently experiencing. Hopefully you’ll able to find a solution for those problems, so it won't affect your plans for the future.ReplyDelete
Mandy Goodwin @ Appletree Financial Solutions
We know there will always be bumps in the road but also understand that it is how we rise from those trials and tribulations that make us better. I would be lying if I said I don't want success every month. But without market fluctuations we wouldn't have these great buying opportunities that we seem to have currently. :)Delete
Thanks for stopping by and for your comment. Best Wishes! AFFJ
We have very similar portfolios and thoughts on diversifying with retirement investments and dividends. I am looking forward to seeing where your investments go. Thanks for sharing.ReplyDelete
Financial Forager - thanks your comment. We hope to continue to stop by periodically to see our progress! 12yrs and 8mo til Financial Freedom (maybe sooner). :) AFFJDelete
Hi AFFJ, do you also contribute HSA? I am using it for tax advantage accountReplyDelete
We are not using a HSA...I looked into it but was told that my wife had to also be employed outside of the home. Thankfully, we don't spend much on medical costs throughout the year though. AFFJDelete
Retirement planning is necessary for everyone.sometimes the choiseis very difficult. you have beautiful planned the retirement plans. hope you will overcome from your hurdelsReplyDelete
Thanks Jenifer. We are happy with the progress but would still be nice to have that second income when my wife goes back to work one day. Looking forward to seeing that needle move at an even faster pace.Delete
Great Blog and thanks for sharing. We are in similar spot as you so I appreciate seeing what you are doing. The compilation of stocks that people have purchased is really nice to see also. I am still new to company analysis so I do look for other people's opinions to compare against mine.ReplyDelete
I have been buying during this recent drop and I'm partially hoping it continues.
Glad it appears you have enjoyed seeing and comparing our journey with yours. You are welcome to use the tools we offer on our blog but please make sure you still do your own homework when investing.Delete
If you made some purchases back in February, your likely up on many of those investments as the market has seen some nice gains since. :)
Best of luck and continued success on your personal journey! AFFJ
I have a defined pension plan as well and have only recently started to keep track of it. I'm in a similar spot to you and reading this is very encouraging. 'ReplyDelete
Thanks for sharing.
I know your based in Canada but it sounds like you are doing well. Defined benefits are rare these days so we feeling blessed to still be part of one. Although we do track our cash value, the reality is that our defined benefit package will likely be worth much, much more than the cash value. We would never choose the cash value at retirement but I track it simply because if something was to happen to me and I don't make it to retirement, my heirs would only inherit the cash value.Delete
Appreciate you stopping by and commenting. AFFJ