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How does retirement work?

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  • How does retirement work?

    I have been doing some research about where in L.E. i want to go: FBI, Secret Service, Local Police ect.

    I have been looking at the different retierment offered by all three and by different PD's around the country - im not asking which is best but how does it work.

    I have seen alot of 80% at 25, and 50% at 20 - i assume that means after 25 years my retirement payment is 80% of my sallary - which means if I finish at 100,000 a year (just to make the math easy) my pay out is $80,000.

    From what i have been told law enforcement retirement packages are really good - but 80,000 doesnt seem like alot to retire with. Is that just me or am i missing something?

    Thx

  • #2
    You do know that's $80,000.00 per year don't you??? By the time you retire, your house should be paid off, you won't have to commute to work anymore, you can't put any money into a 457K anymore......In short, you should have at LEAST 20% less expenses than you did when you were working...Unless you waited until you were 40 to have kids....

    80% is a great pension in general.

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    • #3
      There are a lot of variations as well. Is your pension based on your Base salary, or your Net? If it's Net, is it your last year, or an average of your last 3,5 whatever?? If there's a differential for retiring at different times, is the payout worth the cost??? These are all factors that need to be taken into account, along with Health, family, ect. You need to talk to seneior guys on the job you're looking at, as well as retirees, to really get an idea.

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      • #4
        There's other posts which have covered this extensively, but here's some basics to understand in CA. We have a state retirement system that has several plans available to the employing locality. The best available is the "3% @ 50" formula, also known as the "CHP Plan" since that agency's officers subscribe to it. This plan (like all those in PERS) is a defined benefit plan. Defined benefit plans tell the employee what he/she will receive when they retire. Defined contribution plans (like IRAs, 401ks, etc...) only tell the employee what they must contribute. The return is based on the market and can be much more risky. In the 3% @50, the employee receives (upon retirement) 3% return for every year of service, up to a maximum of 90%. You may not receive retirement income until age 50 is reached and you must have 7 years of service to be vested (eligible). If you were hired at age 30, retired at 50 (20 years of service), you'd get 60% of your monthly salary (based on your last/highest year's average). If you retired with 30 years of service, you'd receive 90%. Just keep in mind that although the percentage is high (max), you will only receive at most about 2% per year cost of living increases. Making 90% of your pay for 0% work sounds good (and is), unless you live for more than 20 years after retiring and inflation becomes a factor. The last few years inflation hasn't been much of an issue, but I remember in the 70's when there was an inflation rate over 10%. If this occurs again, retirees will see their buying power be reduced rapidly.

        It's a good thing to look closely at and compare retirement systems before going in LE. It shows you want a career, not just a job. Your lifestyle, family's security and ability to enjoy things after retirement are all very important considerations. Remember too that where you work/retire from will also have a major impact on what kind of retirement you will enjoy. LEOs working in areas with poor pay and benefits can't afford to retire anywhere except those places with a low cost of living and low housing costs. LEOs retiring from areas with high costs of living (who receive higher pay/benefits) can usually retire near where they live or move to less expensive areas and live very well on their retirement. Good luck!
        "I'm not fluent in the language of violence, but I know enough to get around in places where it's spoken."

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        • #5
          Originally posted by nibroc View Post
          From what i have been told law enforcement retirement packages are really good - but 80,000 doesnt seem like alot to retire with. Is that just me or am i missing something?

          Thx
          I think you are missing something, especially considering that most families in the USA earn considerably less than 80k/year.

          The CHP plan is an excellant retirement plan.
          You can now follow me on twitter.

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          • #6
            How does retirement work?

            First of all, lets not use "retirement" and "work" in the same sentence.....

            For me, I have 20 years in now and 9 more to go to get my full retirement, which will be a nice 6-figure number. I've been told by my HR and state people that for tax reasons I should take a 50% lump sum payout when I retire. Then in addition to receiving a monthly retirement check, I will have money coming in from two annuities, and then eventually social security. If I were to pack it all in today, I would only receive 42%.

            So, is it enough? Who knows. One thing I would recommend is putting money back whenever you can. Find out how long you have to work until you're vested. Some places it's 5 years, some 10 years.

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            • #7
              Thanks

              Thanks for all your help - yes i was missing something,
              I was under the impression that the 80,000 was a one time payout - then your were on your own.

              Cheers,
              nibroc

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              • #8
                Originally posted by nibroc View Post
                Thanks for all your help - yes i was missing something,
                I was under the impression that the 80,000 was a one time payout - then your were on your own.

                Cheers,
                nibroc
                Oh, OK. Now I understand. At first I thought you were some super multi-millionaire, and 80k/year was peanuts to you.
                You can now follow me on twitter.

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                • #9
                  damn i think a lot of officers would be happy with an $80,000/ yr pension... and no officer would take the job if the retirement was a one time lump sum payment of $80,000... no one can survive on that retirement.

                  Comment

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