Public Safety Retirement Tips (part 2)

This is part 2 of my video series short dedicated to the men and women in public safety with tips and advice for cops, firefighters, and paramedics to retire wealthy.

In the first video we covered how to get your budget in-line, get out of high-interest debt, and begin your retirement accounts, so if you haven’t already watched that video, please pause this one and watch video 1. 

Ok, finished video 1?  Ok, great, onto today’s content.

But first, please make sure you like, subscribe, and comment on my video.  Doing so helps with the YouTube algorithm, thanks.

To start I took the average national pay for law enforcement (patrol), EMT/Paramedics in the EMS setting, and Firefighters from the US Bureau of Labor and Statistics.  Of course, pay varies throughout the nation, this was the just national average, so slight adjustments will need to be made in your own personal calculations.

Nationally Emergency Room RNs make $73,000, LEO makes an average of $65,400, firefighters make $50,850, and sadly for my EMS friends you guys get the least at $39,400.  I think the EMS numbers are skewed as they average both EMT and Paramedic salaries, but that was the best stats they had.

For this video, I averaged all three of these industries together to get $57,237.50 and that is the number I am working within this video.  I am sure you are wondering why I didn’t include RNs, etc.?  Well, I love my nurses, but you guys make far more money and it messed with my averages. 

Then I took the average American household expenses of $5,102.  Don’t worry, this video will NOT be a ton of math, so even my firefighter friends can keep up.

So, let’s summarize, the average front-line public safety worker makes $57,237.50 a year, which is about $4,769 per month, yet the average American household spend $5,102.  Umm, Houston we have a problem.

Of course, the household expenses in many cases include a spouse also contributing to the monthly income.

For the rest of my calculations, I will presume you either have a spouse generating additional income, find ways to live below the average household cost of just over $5k per month, or you have a side hustle making extra money and you now have $500 per month to invest into your retirement.

With your $500 per month, what could, or should you do?  First off, if your employer offers a 401k or similar retirement account with matching funds, I would suggest maxing out whatever their matching offer is.

The employer’s contribution is a certain percentage of the employee’s contribution. A generous employer will match the entire employee amount, making a dollar-for-dollar, or 100%, contribution.

Other companies contribute 50% or less of what the employee pays in.

Let’s use a worker with a salary of $50,000 as an example. If she contributes 6% of her salary into the company 401(k), she will have $3,000 in the plan after the first year. If her employer does a 100% match, she will have $6,000 in the plan. If her employer does a 50% match (or 3% of the employee’s salary), she will have $4,500 in the plan.

Most employers have a max percentage they will contribute to, usually around 5%.  Find out from your HR department what the options are, whatever it is, max out the amount you get from your employer for free, but do not go over.

Sadly, many 401ks have seriously high annual fees and are poorly managed.  Yes, there are some great ones out there, but since they are selected by your employer, usually the employer opts for one that is cheapest for them to implement, which may leave you with a less than optimally performing plan.

Now that you have maxed out the 401k let’s focus on my favorite investment strategy ROTH IRAs.  I have already covered Roth IRAs extensively in a few of my other videos including “Is Meet Kevin Wrong? React: “3 Reasons I Won’t Use the Roth IRA.”  You should check out that video to get a better idea of a ROTH IRA.

In Summary, it is an investment account that allows you to invest money from your paycheck today, and when you retire all of your profits are tax-free.

Using Webull let’s open a ROTH IRA and set up automatic deposits to your account each month of $500.  First Webull is going to be awesome and give you two free stocks just for depositing $100, with one of those stocks being worth up to $1,400.

As long as you continue with your automatic deposits, after 40 years, yes, I know this sounds like a long time, but if you are in your 20s this is typically the earliest you can take from your IRA without early withdrawal penalties.  Anyways, after 40 years you will be invested $240k, but you actually have just over $1.5 million dollars in your IRA all tax-free!

The IRS does cap you at $6000 per year, which comes out to $500 per month you can put in your IRA without penalty.  Keep this in mind but pause on this thought for a moment.

If you can squeeze an extra $100 each month into your investment per month.  After the same 40 years, you will have deposited an extra 88k into your investments, but that 88k brought your retirement account up $300k to $1.8 million.

If you can somehow fight to get $1,000 per month into your investments, once again, after 40 years, your retirement account would now be worth over $3.1 million dollars.

500 – $1,565,201.37 ($240,000)

600 – $1,878,241.65 ($288,000)

1000 – $3,130,402.75 ($480,000)

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

Ok, remember how I said you have a maximum of $6000 per year in ROTH IRA.  This is true, so you are currently capped at your $500 per month, but that doesn’t mean you cannot put another $100 or more into a standard brokerage account, all part of the Webull platform you already opened.

Of course, this second part of your investment is taxable, and you do not get the tax-free benefits for this part of the money.

Now that you have your money deposited into your ROTH IRA and your traditional brokerage account, of course, you need to invest in something that will actually make you money.  Just putting cash into the accounts will not generate you any income by itself.

I recommend you invest in funds that track the S&P.  In general, I split my investments this way:

60% to Vanguard Total Stock Market Index Fund (VTSAX)

20% to Vanguard Total International Stock Index (VTIAX)

10% to Vanguard Total Bond Market Index Fund (VBTLX)

Fidelity and iShares also have similar funds that track the same basic investments.

This leaves me with 10% to buy individual stocks that I enjoy.  This also limits any “Stupid” mistakes that I make to only 10% of my portfolio.  For example, my investment in Boeing at $330 a share, which is now trading a $131 a share, I lost about $3,000 there in that one stock alone.  Oops.

A bonus tip, place stocks of funds that pay dividends into your ROTH IRA brokerage account instead of your regular taxable brokerage account.  As dividends are taxes at a higher rate, so putting those earnings into a tax-free account will save you the most.

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