by Mark T. Burnam
Editor’s Note: At the Ready exists to give a voice to responders everywhere. We believe that the information shared through At the Ready, by responders to other responders, benefits the entire responder community. We know too that information shared by others can be just as useful. In the case of this article, the information shared will help the responder community be prepared for the day when you turn in your badge and gun, or take-off and hang-up the turn-out gear for the last time. We asked Mark Burnam, State of Florida Financial Advisor/Director of Client Services for The Second Half Team at C/F/R Financial LLC, to write about a few of the simple steps you can take to ensure that when that day comes you are ready.
Retirement for most people usually conjures up thoughts of being 65 or older and not working anymore. However, most 1st responders we work with retire and begin their “Second Half of Life” as early as 48-56. Retirement for 1st responders doesn’t mean you stop working as it really means you have simply retired from your current job and pension system (city, county, or state). Your second half of life is now beginning. Will you be prepared? Will you be able to retire and never work again at such a young age? Do you have a plan? Will you risk depleting your retirement assets before your “day” comes? What about Healthcare? Social Security? Taxes?
I am sure you know some financial horror stories from your department. Don’t be that guy! After busting your hump for 25-30 years do you want to HAVE to work to make ends meet in retirement? Certainly not! Most may work in some capacity because they want to, not because they have to. Some may “decompress” for 3-6 months or so then continue working in some capacity either full or part-time just to keep busy, pay for healthcare, or to bridge the gap between retirement and Social Security. Again, a major component and a goal for your peace-of-mind retirement should be working because you want to -- not because you have to.
Ok, we get it – for some of you, retirement is years off and seems like a mythical pipedream. A Battalion Chief told me “there is a proverbial pot of gold at the end of the rainbow, but you have to make it to the end of the rainbow to get it.” 1st Responders retiring today may have had starting salaries in the $12,000 - $16,000 range way back when. What was your starting salary? It took many years of earning what felt like nothing before you ever climbed the ladder and started making $60k, 70k, 80k, 100k. So what are some basic steps you can do now and over the course of your career to ensure a sound retirement above and beyond your pension check?
In our travels and meetings around Florida, I have asked some of the better prepared to share their advice and in sum it comes down to 4 Basic To Do’s:
1. Save more
2. Spend less
3. Maximize your 457 deferred compensation plan and
4. Reduce and eliminate debt to become debt-free.
Sounds simple, right? Rome wasn’t built in a day and neither is a sound retirement plan. Maintaining a discipline in small bites over 20-30 years can make all the difference. Along the way you were hired and hopefully someone up the ladder took you aside and made you contribute to your 457 Deferred Comp Plan. You can retire with a fairly nice chunk of change in your Deferred Comp Plan which may help preserve or even enhance your lifestyle in retirement. Many we meet with have very little saved or even zero. Note: pension COLA’s or lack thereof may dramatically alter your need for withdrawals from your 457, DROP, and other assets over time. Maximize your 457 deferred comp plan, just do it!
You got a raise? Congrat’s! Great, now take half and increase your 457 deferred comp contributions – enjoy the rest! Or maybe you take half and increase your payment to your mortgage to cut years off the end so you are mortgage free after 24 years instead of 30 and so on. Pay bi-weekly vs. monthly or add a 13th payment per year. These are simple, yet relatively painless strategies to help you be debt-free or close to it when you retire. Say “NO” to credit card balances too.
Take $25-50 per paycheck and tuck it away in a savings account without fail. It adds up regardless of the interest rate on your checking account. This can be your liquid “toy” money, travel fund, or emergency fallback money when you retire.
Obviously there is a fine balance between work and enjoying life. Take baby steps: create and stick to a budget, start saving more, spending less, maximize your deferred comp, formulate a debt pay down or pay-off strategy, maximize your OT, enhance your education and promotional opportunities, fund pre-paid college plans for younger children, do not borrow from your 457 plan, and more. I know it sounds simple, but far too many people we know somehow blew it all and are now looking for their job back when they should be enjoying retirement. Don’t be that guy!
The first half was for them – the second half should be for you so you can retire one day and truly be able to say “so long tension – hello pension!"
In our next article we’ll address issues for those closer to retirement: Pension/DROP vs. Investment Plans, COLA’s or lack thereof, 175 $, sick/vacation payouts, catch-up provisions, pre-50, 55, and 59 ½ rules, healthcare, debt-pay off and income withdrawal strategies, taxes, and more.