At age 38, Pope saves 15 percent of his pay for retirement, month in and month out, and his nest egg now totals $85,000.
Profile: Troy-Skott Pope, 38, credit-union executive, Seattle. Single, lives with partner of 12 years, J.R. Welden.
At age 38, Pope saves 15 percent of his pay for retirement, month in and month out, and his nest egg now totals $85,000. “Even [consumer] debt won’t deter me from saving for retirement,” he vows.
As a gay man, Pope feels he must be extra cautious in preparing for later years. “I have to save harder than married people, who get rights I won’t,” he says. Pope and his partner of 12 years, J.R. Welden, 34, share a West Seattle home and pool funds for a household income of about $85,000.
Since they can’t legally marry, their Social Security benefits might not be as generous as they are for many couples. In most cases, a married retiree receives his or her own benefit and a spouse of 10 years or more is entitled to half that amount regardless of earnings.
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Welden’s career as a freelance stage manager could yield a small Social Security check, possibly less than a legal spouse to Pope would receive. “That’s what keeps me up at night,” Pope says. Simply gathering financial information to fit unmarried couples is difficult, he adds; “brochures aren’t written that way.”
Retirement goals: maximizing his savings for a relaxed retirement that he dreams of having with Welden. “I want to travel and just enjoy my life, without pressure.” He hopes to retire in his mid-60s.
The advice: Howard Johnson, a Bellevue certified financial planner associated with American Express, rates Pope’s existing game plan a B+. “This is looking pretty darn good.” He offers several tweaks:
Shift from Roth
Pope should stop paying $50 per month into a Roth IRA and instead add that money to his 401(k), so he can realize both a tax advantage and a company match from Washington Credit Union League. An expected $2,000 bonus should be added to the 401(k) as well.
Save more early:
Pope already saves at a rate more than five times that of other 30-somethings. Is advice to save more realistic? Kent certified financial planner Brian Skaggs thinks so, especially if younger workers such as Pope want to enjoy long retirements.
“Working for an extra four years in your 60s may not seem to be that big of a deal, but if you had assumed you’d have a healthy, active retirement from 65 to 80, four years would be like giving up 25 percent of those active years,” Skaggs says.
Saving for retirement early in a career, as Pope has done, harnesses the power of compounded interest and also minimizes the chance he’ll need to work through his 60s.
Equity line for debt:
In the short term, Bellevue financial planner Johnson sees no reason for Pope to accelerate home-mortgage payments but recommends an equity line of credit to pay down higher-interest consumer debts within three years. Then swear off credit-card debt.
Disability: Pope, as the couple’s primary breadwinner, needs to increase his disability insurance sixfold to $750,000.
Pump up 401(k): Pope should increase his 401(k) contribution by $333 a month to meet his retirement goals with a high level of certainty, Johnson said. Because he can redirect $50 of that from the Roth account and he’ll get a tax break on the 401(k), he’ll only actually have to save $160 a month more to come up with the $333.