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Cheaper2000 t1_j2ctdnx wrote

Looks like you’re understanding is correct.

The DC most likely is a 401k (or 403b or 457 but they’re all more or less the same). You most likely can adjust the DC contribution even if it’s not immediately obvious, at the very least you should be able to adjust upwards (until you hit that accounts maximum contribution).

The DB is the more confusing part but there’s zero work to do on your end if you work with the state until retirement. That is what you’re contributing to a pension fund that all public employees in your state are paying into and will receive benefits from when you retire.

The 8% you are paying is really only relevant if you stop working for the state before retirement, as that’s the amount that they’d refund you (plus interest earned) if you withdrew your funds.

On your state’s retirement website there should be a formula that breaks down your pension calculation. It will likely involve your years of service and your highest average salary and some pre determined factor to give you a monthly payment that you’ll receive from retirement until you die. Usually you have to work for ~30 years to get this immediately when you retire. Typically that payment will amount to slightly less than your average pay (at 80k mine would be 72k).

So, when you retire, you’d have two streams of income, the pension (determined by your states formula), and your DC account (determined by your investments and their performance). Combined these should amount to comfortable living as is, but it’s never a bad idea to save more (either through an IRA or by increasing your contributions to the DC if it’s possible like I’m assuming it is).

The DC part can and will pretty easily be able to rollover to your next company plan should you stop working for the state before retirement. The DB part can get messy and I’m not person to give insight there.

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emmyloo22 OP t1_j2cul3e wrote

Thank you! Good to know I wasn’t too far off with my understanding… We have a handbook for with all the formulas for calculating pension benefits, and it makes me really nervous and unsure about the future... I like working here but who knows what will happen in 40 years! It’s a relief to know that in a worst-case-scenario, I should back my 8%.

Also, I just confirmed my DC plan is a 401(a), if that makes any difference. We had open enrollment this past month for benefits, and there wasn’t an option to adjust the contribution. I’ll have to look into it more because I’d definitely like to contribute additional money if possible.

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Cheaper2000 t1_j2cv0qj wrote

Employers do set the limits for 401a plans so looks like I was wrong and you won’t be able to adjust the contribution. Start with an IRA (through any financial company) and contribute as much there as you can (up to 6500/yr).

I’m not actually sure if you’d be able to contribute to retirement beyond the IRA through tax advantaged accounts, that’s a question for HR or somebody with more financial literacy than myself.

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emmyloo22 OP t1_j2cvt04 wrote

Okay, yeah, that stinks a little! Was hoping to put it in the 401(a) and just let it do its thing lol. Would you recommend a Roth or Traditional IRA? I don’t feel like my salary will get much higher than it is now tbh. I really lucked out with this last promotion — I think I’ve already hit a lofty ceiling for my line of work.

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Cheaper2000 t1_j2cw5sc wrote

Roth if you’re under 30. Give it a few years to make the call on whether or not you’ll make more in retirement and then switch to traditional if appropriate. Plus it allows you to contribute “more” since you paid the taxes already (6500 post tax>6500 pre tax).

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emmyloo22 OP t1_j2cwapr wrote

Points taken! You’re killing it with the advice, man. :) Thanks a billion.

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