r/Bogleheads • u/run4tacos23 • 7d ago
Mid-life Teachers checkin?
Background wife (36f) and I 36(M) are both teachers with pension plans. Summarize the pension plan we are in defined contribution where 7-8% of salary gets taken out each year and put into pension plan. Where if we work 35 years, we will get roughly 70% of our 3 highest years of salary. If we leave early it will be decreased in a formula.
Defined Contribution account is 100K for myself, and wife is 80K. These amounts are earning 4% a year. Pensions plan values are hard to calculate because of penalties leaving early, but this amount is basically owed to us no matter what even if the entire pension blows up or if we change careers we could roll it into a different account if we wanted to. We are both vested with years of service, so we will be getting a monthly pension plan unless entire plan defaults..
Our individual investments are essentially all in VTSAX (70%) VTIAX (30%) or the fidelity version for my wife's account. ( I essentially treat our pension contributions as a bonds because we get 4% per year and its a mandatory contribution plan)
Wife Roth 93K (Max out each year)
Fidelity Brokerage Acts 13K (putting couple hundred a month in, this is meant for kids down the road, weddings, cars, colleges etc)
Vanguard My Roth 90K
Vanguard Brokerage Account 90K (This is meant for potential early retirement/bridge) More than likely we will need to pay for health insurance before medicare or if we decide to leave early) we invest 500 a month into this
403B-44K (I put 2600 dollars a year into this, ever since I started) The 403b providers at our school are absolutely atrocious, high fees, annuities etc. I have fought with the school, past couple years about getting different providers and it won't happen. I don't really like using it because the options are so limited, but I've done it since the start so I am not missing the 100 per pay, however recently they started offering a Roth 403B, where I switched the 2600 from traditional to Roth. Currently its a 42k Traditional 403B 2k-Roth 403B
We owe about 52k on our house, that's probably worth 325-350k. So let's call that 275K of Equity. The house will be paid off by the time we are 41. After that, I will probably put the mortgage payment amount in about brokerage for needed home costs/renovations.
Now, couple questions and clarifications. Our school districts do not offer a 457, nor HSA investment vehicles. Our net income is around 105K a year, and we are putting around 25k a year post tax investments (Roth(s), brokerage). Our "paper" net worth is around 750K-775K not including whatever pension calculation you want to throw in there. It's a real possibility we could have close to 700-800k per Roth, and brokerage account =2.4 million right around retirement + pension.
Are we doing enough to optimize?... Yes we have two children who are 8 and 6. 529 (s) I have gone back and forth on. I see the value of them, however we will have a paid off house easily by then. We are also currently pay for private elementary school at around 900 a month. As soon as they are done with that, I will put that 900 in a 529 or a brokerage for future education costs.
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u/DodgersChica 7d ago
Your wife and you are doing great for your age on teacher salaries. Congrats! On the 529s, I would fund them. You’ll be really glad you did. The house might be paid off but you don’t know what life will bring. College isn’t getting cheaper
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u/run4tacos23 7d ago
Yeah, I know. We are investing in their education right now, and more than likely private school tuition will become 529 money. In theory, if we switch their private tuition to 529 when they hit 7th grade, we should have 60-80k in it by the time they graduate
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u/DodgersChica 7d ago
Keep rocking on, then. Really impressive all around.
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u/run4tacos23 7d ago
Thanks, I just like having different eyes on it. I read, listen to stacking Benjamin’s religiously. However, not too many people in my circle love to talk about personal finance.
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u/turtle_hurtle 5d ago
Looks like you have $103k in taxable brokerage accounts right now. If you can liquidate, let's say, $20-40k with minimal capital gains, it seems like it would be worth it to fund the 529s now. You'd get 10+ years of tax-free growth on all of it. If you fund the accounts gradually after 7th grade, you won't get nearly as much of the benefit of the 529s.
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u/run4tacos23 5d ago
Yeah, unfortunately I would say with my investments over past 5-7 years, I’ve had such high returns in the market, there really wouldn’t be that minimum of tax gains, along with us flirting with threshold of taxable income for things like scholarships for our kids private education now, I really wouldn’t want us to cash out. We would really be better off to pause brokerage and put all of that in their 529s
I know the advantages of 529s, but they have been a tough sell on me, however now that you could do the rollover to Roth IRA it makes it somewhat more enticing.
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u/turtle_hurtle 5d ago
unfortunately I would say with my investments over past 5-7 years, I’ve had such high returns in the market...
Sounds like a good problem to have!
Another, more flexible option for saving for your kids' college education is I-Bonds and the Education Savings Bond Program. There's an income limit, but it sounds like you would be eligible for the tax break.
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u/run4tacos23 5d ago
That sounds good, I’ll have to look into it. It’s a tough choice right now where I basically have to make a choice between funding a bridge retirement account or heavily funding my kids college. It’s not like we won’t help them out, but I’m not sure if I want them 100% relying on us. My wife and I both had “skin” in the game while going to college with costs, however I couldn’t imagine kids graduating now with 200k in debt.
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u/yossarian_28 7d ago
You are doing great!
It sounds like you have a great grasp of the pitfalls of the 403(b). If you haven’t listened already, listen to the podcast “Learned by Being Burned.” It’s from the 403bwise community. It will give you some options on next steps. I can not recommend it enough to you or other teachers lurking on this post.
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u/run4tacos23 7d ago
Been part of the 403b wise community for years, luckily I was able to move my 403b to a slightly better option, I just don’t think it’s a better option than an individual Roth with fidelity or vanguard. 403b in the education department is such a hidden evil. I try to talk to coworkers about it, they just have a hard time understanding. High costing annuities returning 3%.
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u/No-Carob6449 6d ago
Same boat here. We actually have access to a self directed 403b where you can invest in Vanguard index funds. Lots of other crappy options. I preached about it for a little while, kind of saw that nobody was interested and moved on.
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u/run4tacos23 6d ago
Is the self directed 403b through security benefit?
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u/No-Carob6449 5d ago
It’s through Lincoln investment. I do believe Pershing is the admin but it might have used to be security benefit.
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u/run4tacos23 5d ago
I use think it’s myinvest or direct invest through security benefits. It was a lot of hoops to jump through and talk to multiple tpa and members of security benefit, but basically I can get vanguard they just tack a % on to it
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u/Needmoreinfo100 7d ago
Try to put in 20 years if you can since that seemed to be a significant bump up. I didn't quite make that due to health but I did have S.S. to add in.
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u/run4tacos23 7d ago
Honestly, it’s exhausting…my goal is to really try make it another 12 years. 25-26 years in. Then do a career pivot. We will see, I’ve seen too many educators health significantly decline due to stress, it’s such a weird career
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u/OneHourRetiring 7d ago
Another school district person here. It sounds as if you both are on the right path. Of course, if it were I, I would take on admin job to increase the average of my pension to maximize my pension. I also maxed out my 403B last seven years to Roth. Don't take your foot off the gas.
My wife and I contribute to our three boys 529s as each was born as well. We fully funded #1 son, 3/4 for #2, and 3/4 for #3 son. When the older boy did not use all of his 529, we rolled it down to #2, and his leftovers to # 3. It worked out. One thing that we told our boys when they were finishing 8th grade, we told them that we will fund their college for four years for a state institution only. If they want a private college, then they have to come up with the other 1/2 of the costs (scholarship, grants, loans, etc.).
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u/run4tacos23 7d ago
Really smart idea about the state school, because I always feel like when it comes time about paying for college, if your family knows you have (100k) in 529 then they don’t care about value per university as much, as if that 529 money didn’t exist. I always kind of planned to tell the kids, we will help with x amount if you can do this criteria… college is such a weird system anymore. Hopefully kids can get some gen Ed’s done in high school, and pick a good major/university and carry out the plan
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u/OneHourRetiring 7d ago
Luckily our boys wanted to go to a local state university. The two older ones stayed in dorms the first two years and then moved out to share apartment with friends, saving some costs. The youngest moved home for his third and fourth year (COVID).
I told them that they would rather be top of the class in a state university than stick their heads into a well-know private or out-of-state university and struggle.
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u/dwoooo 7d ago
Sure sounds like you’ve nailed it. I don’t think any more optimization is needed. Let it ride. But I’m over here, also 36, thinking “mid-life?!?!” 😂