New York City firemen are one of the few groups of people left in the country that will retire with an employer sponsored monthly pension. However, there are a lot of different avenues for additional savings along the way. Firemen can defer extra money into the pension plan and/or fund for retirement through Deferred Compensation, since the FDNY offers both a 457(b) plan a 401(k) plan. Navigating the FDNY retirement system can seem overwhelming, but RMR can help pick the best vehicles to fund retirement. We consider everything from taxes and insurance to timing and restrictions. We want to support you in the decision-making process to create realistic, successful goals for your service retirement.
Make A Timeline
The most important thing to do is plan. We start by helping you draw up an income timeline using their pension. One of the biggest concerns here is that there is no cost of living adjustment on pensions. Often, retiring firefighters are just about 50 years old; this calls for different retirement considerations than a typical 67-year-old corporate retiree. Retiring service members have a lot more retired years to consider and plan for.
We know that FDNY members need to have a different mindset when planning for retirement. So, we do comparisons with take-home pay while you’re still on the job. This usually involves your static pension number and date of retirement, with an added inflation factor to predict and prepare for the future. Running these numbers out over five year increments can show you what contribution your pension needs today in order to keep the same lifestyle. We consider multiple factors, including family expenses, social security and mortgage terms, to help solidify your financial timeline. This way, we can best examine your current and future costs to determine how the FDNY retirement benefits will work for you.
Considering your FDNY pension plan options is no simple task. At times, we suggest you opt to take your full single life pension, as joint survivor options can be cost prohibitive. They can cause a significant decrease in your monthly pension. There is also no guarantee that it will pay off in the long run. Planning for FDNY retirement requires looking at all the factors in play, not just balances and deferred compensations. We take care to consider insurance and explore how we can insure the value of your pension. There is no one size fits all solution, each plan is carefully thought out and customized.
RMR Wealth wants to give retiring service members as many options as possible with which to plan their retirement. We approach the plan from a financial standpoint, but also consider different product options for wealth management and insurance that best fit your budget and lifestyle. Since we are product-and-market independent, we can offer retiring service members more flexibility and objectivity. We take time to explore your goals and future plans to get a full picture of your priorities, and work with you to choose what best suits your situation.
There are several myths and misconceptions surrounding firefighter retirement age. Although you can retire after 20 years, the numbers often don’t add up or benefit you in the long run if you retire then. You want to make sure you get a pay raise when you retire. So while it may be possible to retire after 20 years, it doesn’t make the most sense in most cases.
Some think that it costs a firefighter money to stay on the job longer, but that’s untrue. This is how it works: you’re offered a partial lump sum on the pension, but it actually reduces your monthly pension if you decide to take the lump sum and roll it over or invest. The spread on that number goes up incrementally each year. So when you're 55, the factor used to calculate your spread is higher than it was at 50. So the myth is only partially true; the spread does get higher, but the numbers get higher too. Not to mention, every year you stay, you get more longevity time and you get another year of deferrals in both your pension and your deferred compensation.
When To Start
As soon as possible! RMR Wealth can help anyone plan for retirement at any point-- but the earlier you start, the more we can help you. You can better reap the FDNY retirement benefits if you start planning fifteen or twenty years before retirement. We can tell you exactly what you need to do on a bi-weekly basis to get you where you want and need to be in retirement. Let us help make sure your retirement plan doesn’t go up in flames, and consider planning early.
RMR wants to educate firefighters about the options surrounding retirement. If you or someone you know is planning for FDNY or service member retirement, RMR can help. Contact Matt Levens, Director of Wealth Management at RMR Wealth Builders, for questions related to this article or other FDNY retirement options at 212.946.3921.