I’ve been on my journey to financial independence for 8+ years now. It seems like a long time, but 8 years pales in comparison to the next 25+ years of working ahead of me. Recently, I’ve been thinking about how to model out the future.
I’ve been at my new job for 11 months. That’s nearly a year! One reason I was excited to take this job was the amazing benefits package offered. We have gold-plated Cadillac health insurance, a pension, and the ability to stay on the health insurance plan as a retiree if I stay until the age of 55. Health insurance is such a wild-card variable in the US right now with the Affordable Care Act up in the air and no national health care plan in the future at the moment. The pension is also difficult to turn down. How many Millennials will have pensions in their retirement? Let alone two!! Combined with my existing retirement account balances and I’m going to be doing extremely well for myself in retirement.
I attempted to model it out in OnTrajectory. I modeled it as though I wouldn’t get another raise beyond what I earn now, saving $1,000/mo into my 401k, working until age 55, and taking my pensions at age 55. This is the result I got.
OnTrajectory thinks I’ll retire with $1.25 million at age 55 and will see my net worth grow in retirement to $3.5 million when I’m 90. Obviously, there are a lot of flaws with this model. This assumes my spending won’t change at all, which means it doesn’t account for me potentially buying a house or any other major life changes.
Recently though, I’ve grown concerned that maybe my job won’t always have the cushy amazing benefits we have now. We got a benefits survey from an outside consulting firm Willis Towers Watson. Their website states they are a “leading global advisory, brokering, and solutions company that helps clients around the world turn risk into a path for growth.” A bunch of the questions on the survey asked us various scenarios on which benefits we value more, such as questions like “which do you prefer, having 5 more vacations days or a pension” and “which would you prefer, paying 20% more in health insurance premiums or having the retiree health care option”. Apparently, enough employees questioned the survey that upper management sent out an email that nothing was changing and there was no need to worry.
But I’m not sure I believe it.
Rumor has it that WTW is a firm that helps companies divest their pension liabilities. If the benefits change to more vacation days and not hiking the insurance premiums over a pension and retiree healthcare, I’m not sure how much incentive I have to stay with them. The golden handcuffs are pretty tight right now. The lure of early retirement is still pretty strong for me even after my stint at freelancing didn’t go so well. I have so many things I want to do that are limited by my 40 hours a week at work. If the golden handcuffs disappear, I might not be able to fight the appeal of early retirement until 55.
I first got started saving with the assumption I would retire at 35. That was roughly 13 years to save for retirement. Now that I’m working until 55, I have an extra 20 years of income to work with. At my current salary, that’s an extra $1.5 million that wasn’t in my original plan. Of course, my spending is also higher than I was expecting so it washes out a bit. I decided working a bit longer to be able to spend a bit more was a pretty good tradeoff. I’ve discovered I’m at my best mentally when I spend around $40,000/year, not $26,500 like I thought when I was 22. With the $250,000 I already have saved up, I’m technically already at CoastFI so I’ve loosened the reins on spending a little. But if I don’t get a solid pension and retiree healthcare, should I lighten up on the spending?
Further complicating the whole predicting the future thing (complicating in the best way possible, of course) is my relationship with my boyfriend. Things are turning serious and we’re discussing different paths to move forward. When do we want to move in together? Do we want to buy a house? What will that look like? When do we want to get engaged? What kind of wedding do we want to have? If we buy a house before we get married, how will we draw up legal papers detailing what happens to the house and money if we split up? What will our prenup look like? Do we want to have kids? How many? When do we want to have them? Will we save to pay for their college? When do we want to pay off his student loans?
Whatever the future holds for me and a potential Mr. Gwen, I can sleep soundly at night knowing I’ve got a solid cushion behind me that will lead to a low-stress life.…. at least regarding finances. If anyone’s got a spare crystal ball that lets them see the future, leave a comment below or send me a message! I like mystery just as much as the next person, but I wouldn’t mind knowing what the future holds for me!
Thanks for reading! How much do you bank on future benefits? Are you including or excluding items from your calculations? Sound off in the comments!