Should I Invest 15% Like Dave Ramsey Recommends? (I Have a Pension)
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LEARN MORE ABOUT: Retirement Annuities
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As someone who has a pension, you may wonder if you should follow Dave Ramsey’s recommendation to invest 15% of your income in retirement accounts. While this is a good rule of thumb for many people, it may not work for everyone. Here are some factors to consider when deciding how much to invest in retirement.
First, consider the details of your pension plan. What is the payout structure? Will you receive a fixed amount each month, or will your payments be based on your salary and years of service? Will your spouse or dependents be eligible for benefits after you die? Understanding these details will help you estimate how much income you will have in retirement and how much more you may need to save.
Next, evaluate your other sources of income and assets. Do you own a home or other property that could provide income or equity? Will you receive Social Security benefits or other government pensions? Do you have investments, stocks, or other assets that could appreciate in value? These factors will affect how much you need to save to maintain your standard of living in retirement.
Once you have a good understanding of your income sources and needs, you can set a savings goal that makes sense for your situation. If your pension will cover most of your expenses, you may not need to save as much as someone who has no guaranteed income in retirement. On the other hand, if you have significant gaps in your coverage, you may need to save more than 15% of your income to build a comfortable nest egg.
It’s also important to consider your debt and other financial goals when deciding how much to save for retirement. If you are carrying high-interest debt, such as credit card balances or personal loans, you may want to prioritize paying those down before increasing your retirement contributions. Similarly, if you have other financial goals, such as saving for your children’s education or a down payment on a home, you may need to balance those priorities with your retirement savings.
Ultimately, the decision of how much to save for retirement is a personal one that depends on your unique circumstances. While Dave Ramsey’s 15% recommendation is a good starting point, it may not be the right choice for everyone. Take the time to evaluate your pension, other income sources, and financial goals, and work with a financial advisor to create a plan that will help you achieve your retirement dreams.
I invest 40% and am never paying off my 2.999% mortgage.
I have pension plan form my earlier employer but l was worked 9 years and 9 months after my employer had fired me. Now l don't get any money from employer after my retirement? Any one experience is?
I say make the largest manageable contributions and then back off later if it’s evident that you are far surpassing your goals. But if you’re 30 and relying on a pension as your long term look ahead…maybe keep the pedal to the metal and pull of at 45-50 if it’s looking like you’re way ahead
I just increased my saving rate from 20% to 25%
Whether you save 15%, 20%, or 25% its way better than the national average of less than 4% or 0!
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I'm 48 years old single mother living in Hamburg. I'm hoping to retire at 50 if things keep going well for me. Bought my first house last month and I can't be more proud than I am right now. I'm so glad I made good decisions about my finances that changed me forever
My employer pays 100% of pension
What if you wanted an alternate route to the money guy steps. I.E:
1. Emergency fund
2. Purchase home, that you could later rent out once you outgrow it.
3. Purchase new home, rent old home, cash flow.
4. Contribute Cash flow into investment account…..
Somthing of that sort. Just something not so run of the mill.
Let's try a harder question: Would it be wise to contribute your bonus to a 401k or even 401k + Mega back door Roth to avoid paying high taxes on it?
Ramsey says save 15% toward retirement, then use any extra on your mortgage, then save more for retirement after paying off house. He doesn't say only save 15%.
I've been doing 10% towards my pension for almost 14 years (37 right now). The last 2 1/2 years I've been saving an addition 5% in a 457 and maxed out my Roth IRA 2 years in a row. I'll just focus on pension and 457 from here on out.
I'm targeting 20% after tax savings on top of the 8% I'm contributing to my pension. I try to ignore the employer match.
The biggest Ramsey mistake is Roth vs pre tax. Pre tax means you can buy more shares which leads to more dividends. Pre tax can also lower your income bracket.
Love the content, guys. Here is a question: Since a match is so valuable, as a contractor, should I take advantage of robinhoods 1% Match on IRA? I love Fidelity, but with no match from my employer, would it be wise to take advantage of robinhood?Would love to hear your perspective
Not always true that pension requires your contribution. That’s not the case where I work. We get a pension and have a >100% 401(k) match. (Today. I recognize this could change, especially the pension, so I disregarded it until I turned 40.)
Contribute to your pension and contribute to a 401k to minimize your taxable income.
I have a pension in the future, not depending on it. Save , save and save along the way. I’m 56 and have saved a lot later in life. I believe it is paying off, I don’t think I’ll need to work the rest of my life. Great content!
I am a 23 year old working for a firm with a 9% 401k contribution match.. Is it more beneficial to max out a 401k annual contribution or to just make sure I’m taking full advantage of company match and invest money myself into index/mutual funds?
Edit: I should add my plan is Roth and I definitely expect to be in a higher tax bracket.
Dave says 15% until you pay off the house then max it all out. That is something people miss. The 15% is just until the house is paid for.
In my 20s and 30s I was hell bent on paying off the mortgage early on a 4 percent interest rate, so for about ten years I stopped contributing to my 457b after maxing it out when I was 24
Invest what you can afford.
Ramsey says to invest 15% regardless of your employer. Money Guy show is 25% including employer. So, these aren't as far apart as they initially seem.
They also both say to invest more when you are far enough in their respective steps/operations.
Does the FERS Pension fall into this category? I'm not sure if it gets an annual statement
Why does this have the Covid 19 tag. These demons will never stop
My first employer had a pension and a 401k. The maximum that we could contribute to the 401K was 16% and the company would also add 3%. So for the better part of 20 years, I had 19% going into the 401K. The Pension was projected to deliver $3200 per month if I worked until 65 wth the company. Well I worked 23.5 years until the company was sold and we were let go. At that point, I determined that if my 401K was not touched for another 20 years(until retirement) and continued the market growth, I would be able to retire with $2.5 mil in my 401k. The pension was separate. 5 years after we were let go, the company plan gave us the option for a cash payout or maintain it in their bond based plan. At that time I had 16 years until retirement and the value was $275K, so to reach my planned pension pay out at retirement, my pension would have to double 1.5 times in a 16 year period. That would not be possible with bond growth, but might be possible with stock market growth, so I took the payout and rolled it over into an IRA. As of today, it has gone up 114% and I have 8 more years of potential growth to go. Then, the pension will be turned into an immediate annuity as it was always planned. The 401K plan was designed at age 25, and the pension plan was designed at age 51. Hopefully it will work out.
I pretend like my pension doesn’t exist. I would be surprised if I was there long enough to retire with it.
2.5% X yrs of service X best 36 month run.
75% for 30 years
So, for 27 years you made $45K as a janitor, then
3 years as a department head $200K
75%>>> $150K/yr for life
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I think the paying off mortgage vs investing decision should also take into account the 3 to 6 times monthly mortgage payment that is being held in the emergency fund vs if paid off could be invested. In most cases with low interest rates, waiting to pay off the mortgage and investing makes sense but not in all cases and I haven't heard folks talk about this being taken into consideration.
Go ask former United Airlines employees about their "guaranteed" pension.
Richest Man in Babylon = 10%; Dave Ramsey = 15%; Money Guy = 25%; Grant Cardone = 40%; most Americans = 0%