Tag Archives: pension

Strive for FI or Take it Easy?

credit: Link Hoang

credit: Link Hoang

One topic that I’ve been obsessed about is the concept of reaching financial independence (FI) at an early age. It’s not about not working. It’s about spending time doing things that you want to do with your time. One obstacle that I face is that I live in a high cost of living city in NYC. Yes, I realize this is a decision that my family has made as moving to a lower cost area would definitely speed up our journey to early FI. However, we have no plans to leave the area because our family and friends are here.

I’ve always been a frugal person and a good saver. When I got my first job, I immediately signed up for my employer sponsored retirement plan. I also opened an IRA account thanks to the encouragement of my father. However, after reading stories of regular people reaching FI in their 30s and 40s, I started wondering if I could do it as well. While I had saved a good amount in retirement accounts, especially when compared to my peers, I was no where close to FI. I had to turbo-charge my savings and investing rate if I wanted to get there. I started to max out my 457 contributions and I increased my wife’s contributions. I also increased our contributions to each of our Roth IRA accounts as well. My wife and I are naturally frugal. Always have been. We had no consumer debt and never did. We were living well within our means, but having an audacious goal like early retirement/financial independence really motivated us to go from ordinary savers to extraordinary savers.

Saving Fatigue

Brandon from the Mad Fientist talked about how there were some dark times in his road to FIRE. He wrote that he went from being frugal to depriving himself and isolating him and his wife during his pursuit of FIRE. I am not facing that dark time. I am just uncertain whether early FIRE is attainable. And if it is not, would I be better off loosening the purse strings and coast to semi-early FIRE at age 55. If I was certain that I could hit FIRE, then by all means I’d push to get there. It’s hard to keep motivated when a goal is almost 10 years away. It’s even harder if you don’t know for sure if you’re reach it.

I’m already on track for semi-early retirement!

In my previous post, I wrote that I will have a pension at around age 55. I have no doubt that I would retire at that point. Actually, as a frugal family, I think we would be able to retire on the pension alone. But I wouldn’t want to do that. We save a good amount in our 457 plans as well as in our Roth IRA plans. Even if we loosen the purse strings, we would still save for retirement in these accounts. There is a calculator on my 457 provider’s website which tells you whether you are on track for retirement based on how much you think you’ll need, how much you’ve saved, and what you’re contributing to your retirement accounts. It tells me that not only am I on track for retirement at age 55, our savings rate exceeds what we’ll likely need in retirement. Of course, these are only estimates and being a bit risk averse, I’d prefer to overfund. Chances are if I don’t hit FI in my mid 40s, I’ll likely stick it out until age 55. Those golden handcuffs get stronger as the lure of a fully funded pension and subsidized health benefits might be too hard to pass up.

What would change if we ditched the early FI goal?

Many in the frugal and FIRE blog space write about value-based spending and intentional living. They write that if they came upon some extra money, they wouldn’t change anything with their spending. I have written that living a rich life doesn’t have to be an expensive life. That still remains true. But I would be lying if I said, my financial choices wouldn’t change one bit if I had an extra thousand dollars coming in each month.

No, I wouldn’t suddenly buy a fancy car or go out to expensive 5-star Michelin rated restaurants. That’s just not me. I’m never going to be a spendthrift wasting money on frivolous things. I do think that I would like to move to a bigger place at some point as we will likely outgrow our 850 square foot apartment. Housing is expensive here in this high cost of living area. This is the main area in our budget which would expand if we decided to loosen the purse strings. I’d be more likely to take on a higher mortgage or rent payment if early FI wasn’t the goal. I’d also be more likely to splurge on travel and entertainment activities too. And we’d be okay financially. We just wouldn’t be able to reach financial independence in our 40s.

Will I still want to retire early in 10 years?

Of, course I would, right? At first, it sounds like a silly question, but something that still needs answering. The main reason I’m obsessed with FIRE is because I feel like I have no time. My work days consists of a long commute as well as driving the baby to and from grandma’s for childcare purposes. By the time, I get back, it’s dinner time, bath time for the kids, and some household chores. When we wake up the next day, it’s the same routine. On the weekends, we try to run some errands while also making sure we do something fun with the kids. We also try to visit our parents. Many parents with grown children tell me not to miss these precious moments. Mr. Money Mustache and his wife retired early to rise their son together without the shackles of the 9 to 5 job. I’d love to have that freedom as well.

A lot can change in 10 years. By that time, my kids will be in the pre-teen to teenage years. Will they even want to spend that much time with good old dad? I haven’t really fleshed out what I would be doing in early retirement as it seems still far away. Sure, I’d love to spend more time on this blog, but would this blog still even exist? I would like to volunteer, spend more time with my wife, and travel. But, I have a decent amount of vacation days from my employer and my job isn’t too stressful. Is the extra freedom worth taking off my golden handcuffs? Would I enjoy spending a little more in the present rather than saving a whole lot for early FI?

So should I put the pedal to the metal and strive for FI or just take it easy?

Related posts: Just as I was facing this dilemma, I read some blog posts related to this issue. The blogger at Bayalis is the Answer said that you can’t fail at fire, because no matter what, you’ll get somewhere that is worth going. Likewise, Matt from Optimize Your Life, wrote that he is saving for FI because it gives you options even if you haven’t fully reached financial independence.

The Pension: My Golden Handcuffs

Working in government for New York State, I am fortunate to have very good benefits. One of the benefits is having a pension plan (defined benefit plan). All of my co-workers talk about their retirement date in terms of how old they are and how many years they have in the “system.” It has nothing to do with how much they’ve saved and many save very little if anything for retirement. They are solely relying on the pension program. Some don’t retire even when they have enough time in the “system” and are old enough, because they live above their means and cannot live on anything less than their current income.

Many who don’t have pensions are understandably envious of those who do have it. I am very fortunate to have one and I don’t want to seem like I’m complaining about this wonderful benefit, but there are a few downsides of the pension for me.

With a 401k plan, the money is often portable. You save money in it. Your employer makes matching contributions. It might take a year or a few years to vest, but the money your employer contributes is yours to keep. The gold plated pension of older employees has been watered down for younger employees. For new employees, the pension plan doesn’t vest until you’ve worked for the employer for 10 years. So if you leave before then, you get no pension. They’ve also increased the retirement age from 55 years old to 62 years old. I don’t like someone else deciding when I can or cannot retire. I’d rather make that determination based on how much I’ve saved and how much I will need, not some arbitrary thing like how many years I’ve got in the system.

Another issue with pensions is that if the company goes bankrupt, it’s very likely retirees will lose the pension or get a amount that is a lot less than they were expecting. I work in government which has a slightly lower chance of bankruptcy, though you can never discount it. Some states’ pensions are in better shape than others. If you work for the State of Illinois, well then, I think you might want to worry a little more. Currently, the state constitution in New York explicitly protects pension payments. However, that doesn’t mean there will never be an amendment to the state constitution.

Having that pension also makes it hard to pull the trigger on other job opportunities currently. I can’t say that I’ve really been wowed by another job which tempted me to leave or that I’m actively looking. However, when I’ve checked out prospective jobs elsewhere, a part of me does think, “if I leave, I won’t get that pension!”

As someone aspiring to become financially independent and possibly retire early at age 45 , the pension makes the decision to leave a lot harder. So what will my pension pay? If I stay until I am 55 years old, after having worked 30 years, I will get a pension which pays a yearly benefit of about 60% of your highest three-year average salary. Let’s say my highest three-year average salary is $100,000, I will get a yearly benefit of about $60,000. Yea, I know I know…I am very lucky to have this pension. However, if I decide to FIRE at age 45 with 20 years of service and let’s just assume the same three-year average salary of $100,000, the pension would only pay $29,200 based on the online calculator. Note: I would have to wait until age 55 to collect the pension. If I decided to leave at age 50 with 25 years of service, based on the same salary, I would collect $36,500. If I waited until age 54 with 29 years of service, I would get $42,300. Obviously, if I stayed until 54, I would just go one more year to get the full amount! Yes, having a pension is a wonderful benefit, but it can also be a handcuff, albeit a golden one.

Is there a golden handcuff holding you back from leaving your job? Do you have a pension and would you take the penalty to retire early?

Are You (Financially) Better Off Than Your Parents?


This is a follow up to my previous post Is This Still the Land of Opportunity? From the comments, the general consensus was that you can come from humble circumstances and do great things. All you need is to work hard, sacrifice, and maybe a little bit of luck. It shouldn’t matter where you came from but where you are going.

One way that many determine whether they’ve improved their lot in life is by comparing themselves to where their parents were. I think all parents want their children to be better off than they were. How would I answer this question? Absolutely, yes. My father immigrated here with a student visa and put himself through college by working at a restaurant. Unfortunately, times were different in the late 60’s and 70’s, and he also did not have a network of people guiding him in his career so he was not able to apply his degree to his career. He graduated with a chemistry degree from Seattle Pacific College (now Seattle Pacific University). He worked as a waiter, a real estate agent, and then a shopkeeper before retiring. As with most immigrant experiences, the fact that I was born here has made it much easier for me to improve my lot in life. But sometimes I wonder, if my children and later generations can continue that trend.

Many who have been here for generations have had different experiences. Adam who blogs at Stop Worrying About Money made a pretty insightful comment on my recent post Is This Still the Land of Opportunity? Here is what he said:

I think it’s definitely possible to move up the economic ladder in America. Hard, smart work will always provide positive results.

I also think you have to be realistic. The economic world is so incredibly different now than it was when my father started his career 40 years ago. Many of the entry-level jobs that would have been available to a 20-something back then have now been outsourced to other countries or replaced with robotics. I have a college degree, my father doesn’t — but so does almost every other 20-something looking for jobs right now, which puts me (and them) in a position of having thousands of dollars of debt right out of the gate, but faced with tons of similarly-credentialed competitors for a limited pool of jobs. At the same time, those jobs are slowly dismantling the benefits packages that my parents are accustomed to — fewer of my potential employers offer retirement plans or health benefits.

Despite all that, I can still move upwards. I just have to do it in a different way, by pursuing nontraditional income opportunities like online work, reprioritizing my goals (I’m 28 and I likely won’t buy a house for several more years — my parents had already purchased their first home by the time they were 22.), and staying aware of the fact that my economy is not my parents’ economy.

Some of the factors which have made it harder to be financially better off than our parents:


Gone are the days where one works for the same employer for their entire life and receive a gold watch when they retire. Job stability is not what it used to be. Also, many of the manufacturing jobs that used to be here have now gone to other countries or made unnecessary due to technology as Adam mentioned. In addition, most jobs no longer offer the great benefits packages or pensions they once did, and are not as stable.

High Cost of Education

A high school degree is no longer enough to get jobs, even jobs which traditionally did not require anything more than a high school degree. A college degree was often not necessary for many career tracks, and for those that required a degree, it was not as problematic because tuition was much more affordable. Back when my father was attending Seattle Pacific College, it cost $400 per quarter. Yes, $400! That would barely cover textbook costs nowadays. For the 2013/2014 semester, Seattle Pacific University now charges $11,148 per quarter. That is a huge increase. During that time, the colleges in the City University of New York system were free. Yes, college was free.

Expensive Housing Costs

Buying a house is considered the American Dream. To many people, owning a house is a sign that they’ve made it. Back in our parent’s generation, housing was much more affordable. My father and grandfather bought a house together while they both worked as waiters in the NYC area. It would be almost impossible for someone with their income to afford to buy a house in this area now, with the high prices.

Even though I said that I am financially better off than my parents, I did have to take out a significant amount of student loans, and I am unable to purchase a house in this city, unlike my parents. We have to keep up with the changing times and try to find solutions to the obstacles of our generation.

Jobs aren’t as stable? Learn new skills. Find a side hustle. Be flexible in re-locating. And some may not agree, but maybe major in a field which is in demand. The internet has opened up a lot of opportunities to earn money as well as to gain knowledge which may lead to money making opportunities. Your job doesn’t offer a pension? Make your own. Higher education is expensive? Consider going to a community college for a few years before transferring to a bigger university. Look for scholarships and apply for financial aid. Work part-time while going to school. While this may be an oversimplification of the solutions available to the obstacles in this generation, it is much more productive to seek out possible solutions rather than to just complaint about the problems.

Are you financially better off than your parents? What do you think are the reasons why or why not?