Sunday, February 20, 2011

Planning for retirement as a 25 year old

Without a doubt, I'm the oldest 25 year old I know.
I'm really excited about retirement! Not just because I want to sit around on my ass all day and do nothing. I'm excited because I get to plan for it. I'm excited because when I turn 57, if I'm still with my current employer, I can retire. At that point, I'd have more than 30 years of service under my belt. As creepy and intimidating as that sounds, 30 years isn't all that uncommon at BuCorps.
What does retirement mean though? When I turn 57, I can check out of work and still get paid. At 57, I will qualify to get 30% of my "high 3" salary. That means that if, assuming my average income works out to $120,000 a year (my "high 3"), I would bring in $36,000 a year for doing nothing. In addition to my annuity, when I turn 59 and a half, I can withdraw from BuCorps' IRA. BuCorps' IRA has a 5% dollar-for-dollar match for IRA contributions. If I were to make $80,000 a year for the rest of my 30 years of service and contribute the full 5% I'm on the hook for, that account would have $240,000 in it, without investment gain. Historically, the funds the IRA invests in earn about 10% interest a year. If those formulas hold, the IRA would have over $2,400,000 in it when I was ready to retire. At that point, if I were to cash out of the account I would earn $48,000 a year for the next 50 years before I depleted the balance.
In addition to those benefits, I'd also qualify for social security at some point. Based on a salary of $80,000 a year until I'm ready to retire at 57, I would pull in $1,100 a month.
So, where does all that put me? From those three programs alone, my retirement income from ages 57-62 would come out to about $36,000 a year. After age 62, when I can withdraw from my IRA without a tax hit, I would pull in $84,000 a year. That's all independent of whatever else I might have setup.
This is AMAZING! How are people not pumped about that? And, really, how much would you miss that 5%?

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