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How to Maximize Retirement Income

The best way to provide yourself with a comfortable retirement is to chart a course and follow it.

June 09, 2016  |  by Bill Hubbard

Photo: istockphoto.com
Photo: istockphoto.com

With just a little bit of planning and strategy, you can retire with more income per year for the rest of your life than any year you ever worked in law enforcement.

You may not believe me. But I know this can be done, and it can be done very simply. I know this because I did it. And believe me I am no financial genius.

When you are in the middle of your law enforcement career, you are caught on the merry-go-round of your career, stretching and straining to reach the brass ring known as "retirement." But there is retirement and there is retiring well and in comfort.

Take Control

There's one great secret to retiring well. You have to start thinking about it before you are ready to retire. And the earlier you start working toward your retirement, the better off you will be.

All but a few law enforcement officers continue to come to work day after day, week after week, year after year, all the while being unsure what their retirement will actually pay when that fateful day arrives. To take control of your retirement future you have to plan and be strategic.

The first question you must ask in your planning is: "Am I working to make my retirement happen? Or am I just going along expecting that retirement will simply happen to me?"

If you are one of those people who expects retirement to just happen to you, then it's time to change your mindset. You need to make a plan for your retirement.

Double-Dipping

Like I said earlier in this discussion, I am not a professional financial planner. So I can't give you any advice beyond what I have witnessed and what I have experienced. So the only thing I can tell you about planning is how I approached it.

The foundation for my plan was to earn two full retirement pensions. That idea of double-dipping may be a big turnoff for you. You might be thinking to yourself that you don't want to be on the job for the rest of your life. But trust me, you don't have to wear the badge for 40 or 50 years to earn two pensions.

I policed for 36 years and am now collecting retirement benefits from two states. Added together, those two monthly direct deposits pay more per year than any year I worked. And lest you think that I was a career patrol officer who never advanced and never earned much of a salary, let me say that in my career I rose to the level of director of one of the divisions of my state's department of public safety.

Executing my strategy of earning two retirements will require some research on your part, and will likely require you to relocate once during your working years. Expect to do some homework and expect to leave your home or maybe go back home. In my case, I did exactly that; I went home. I began my career in a state that neighbors my home state with an eye toward ending up back at home.

The first step in earning two pensions is to get the first one. Know the retirement benefits that you are earning now, and if you haven't signed on with an agency yet, I recommend you follow my path. I started my career in a state with a very solid public employees' retirement system. Do your research and make wise choices.

The second part of this strategy requires maximizing the contributions allowed to your retirement fund. When I started, we were required to contribute 3% to retirement, though 7% was allowed after completing probation. The day my probation ended, I was at the chief's office, upping my contribution to 7%. And then I left it alone for the next 15 years.

Suck it up and do with a little less now, in order to have much more later. You are investing now to make your money grow.

My First Pension

The retirement system for the agency where I began my career allowed participants two options upon retirement or separation. You could either begin your monthly retirement income or could leave it vested, but if vesting was the choice, the money could not be touched until you were 60. Since my plan was to move to my home state and continue policing (with income and insurance from a new employer, as well as a new state retirement program), the wise choice was to leave my first retirement vested, where it would continue to grow with interest and roll over into itself for the next 18 years. Leave it alone and let it grow is a wise strategy when it comes to long-term savings and investments.

Here's how powerful that strategy can be. By upping my contribution from the mandatory 3% to the maximum allowed of 7% for a total of 16 years, and then allowing it to grow untouched for the following 18 years, that fund became the equivalent of a captain's full retirement, though I only attained the rank of sergeant at that first agency and left after only 16 years.

My Second Pension

The toughest thing about leaving my first job and moving back to my home state was that I was starting all over again. It was very humbling. No one knew or cared about my strengths, skills, and training or the fact that I had been a sergeant on my first agency.

But starting over again also had some pluses. I have to admit that it was pretty fun to hit the street again as a grunt, with 16 years of policing already under my "rookie" belt.
Gaining certification in my "new" state did not require a full academy, but was a matter of two weeks of intense instruction, followed by sitting for the certification exam. I graduated first in my class.

My home state did not have nearly as strong of a public employees' retirement system as the first state where I worked. What it did offer, however, was the ability to retire at age 61 with a minimum of 17 years of service, regardless of whether you worked for an agency with a 20- or 25-year retirement plan. This would allow the second retirement to happen without having to put in a full 20 years, or worrying about my agency's particular plan.

Then came that glorious year when I was still policing in my second state, but I had reached the age of 60 where I could begin to draw retirement from my first state. That was quite a year income-wise because I was still fully employed and covered by my current agency's insurance plan, but the first retirement began to hit the direct deposit at the end of each month. I could not keep myself from logging on to my bank account each month, just to reassure myself that it was really happening.

Payout Options

There are a number of important decisions that you will be required to make at retirement. Most public employee plans will require you to choose between different levels of payment and different survivor benefits.

The first will give you the largest amount of money per month, but when you die, all payments stop. Or you can choose another option that pays a lesser amount per month but will continue after you die until your spouse (or beneficiary) dies. In some plans, there is even an option for substantially reduced payments per month that will continue for your children after both you and your spouse have passed.

As I visit with officers about pensions and payout options, I love the look on their faces when they announce with great chivalry that they would take the lesser amount in order to provide for their families after they are gone. Which is noble. But I always reply, "OK. But what if your spouse dies before you? You have just taxed yourself to have that lesser amount for the rest of your life."

According to my financial planner, the wise choice is to take the largest amount offered, the one that will cease all payments when you die. The purpose of doing that is not to be selfish but to give yourself more options for providing for your survivors.

The additional money per month can be spent any way you want. Which means you can take that difference and insure yourself for as much as that difference will buy in term life insurance. If your spouse passes before you, you have the option of dropping the life insurance and having the original full retirement amount for your own living. You can also maintain the insurance policy and leave the funds to your children or other beneficiaries.
Don't let chivalry, family duty, and a sense of honor keep you from making a wise decision that actually makes more sense for your family and yourself.

Social Security

I would be remiss if I did not include a couple thoughts about Social Security. Forty years ago, I was convinced Social Security would not exist by the time I retired. Frankly, I am stunned that it is still around, but the point is that my wife and I planned our retirement without figuring in anything from Social Security. The income it will give me in a couple more years now looks like the frosting on the cake.

The other point that needs to be made about Social Security is that if you work for an agency that does not withhold Social Security from your check, you need to get yourself to a financial planner as soon as you finish reading this article.

I can tell you of a friend who policed with distinction for 20 years and began drawing his monthly retirement income at age 45. After he pays for health insurance, he has about $2,000 per month for he and his wife to live on. That's it. There will be no Social Security income when he hits his 60s, and he would not move out of state to continue policing. The bottom line is that this officer had to go out and get a non-police job in order to make ends meet, and he will likely work those mundane jobs until the day he dies.

That may not happen to you, even if you don't see a financial planner. After all, many officers today retire from single agency careers with pensions substantial enough to provide them with excellent retirements. But the thing about retirement is it sneaks up on you, and your best weapon against any unpleasant surprises is to have a plan and secure as many sources of retirement income as you can while you still can. Time is both your enemy and your ally.

It was a great day in my life as I neared my 61st birthday, "did the math," and realized that not only would my second retirement pay more than the police job I had at the time, but the two retirements together would pay more than any year I ever worked.

I retired for good at the end of the month of my 61st birthday. I have multiple sources of retirement income and I now carry LEOSA retirement credentials from two states. And I have to say the only downside to providing so well for my retirement comes during income tax time.

Fellow officers, I am nobody special. There was no silver spoon in my mouth at birth. Mom and Dad didn't leave me an inheritance. I'm just a cop who made a plan to retire, stuck to it, wore my badge with pride, stayed healthy, and followed good advice.
I would encourage you to take this article as a starting point. Go and sit down with a certified financial planner and get a plan in place so that your retirement doesn't "just happen." It's never too soon to get started. And even if you are at the end of your career, there are still steps you can take to make your senior years more satisfying.

Be the captain of your retirement ship. It will sail sooner than you think and only you can determine if it will be a fine vessel or a rowboat.

Bill Hubbard is a twice-retired former police sergeant, chief investigator, and department of public safety division director who lives in New Mexico. He is the author of "Substantial Evidence" (New Horizon Press, 1998 and 2007) and a contributor to "Stories of Faith and Courage from Cops on the Street" (AMG Publishers, 2010).


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