Author’s Disclaimer: The views and opinions in this article are based on my personal beliefs and experiences and do not represent the views of the United States Department of Justice or Federal Bureau of Prisons.
Yes, I love coffee and, yes, I know what I want to do when I retire! But, what will you do when you retire?
I will explain how coffee comes into the equation later in this article. For now, everyone should be asking, “What will I do when I retire” a few years before they leave a good paying federal position! Sadly, most people start thinking about issues such as these too close to their retirement date. Many would have a difficult time changing the course they have already set due to family, financial, or other personal issues. In my opinion, some basic decisions such as personal investments and the Thrift Savings Plan (TSP) need to be made early in your career. If not, you will find yourself in a position where you may not be able to retire when you originally planned.
I was fortunate to start working for the Department of Justice, Federal Bureau of Prisons in 1990 at age 25 and have worked with the same agency continuously throughout my career. Over the years, I’ve had a few mentors who stressed investing in the Thrift Savings Plan (TSP) and the possibilities of “becoming rich” when I retire. However, raising four children and all of the other issues of just living (house, cars, insurance, etc.), the numbers never added up to me. I realized years ago that although TSP will be a significant part of my retirement income, it would probably not be sufficient by itself. I was able to contribute 8% to 10% throughout most of my career and was surprised when it reached the $250,000 mark, a personal goal I set for myself years ago.
I am not an expert on retirement issues but since I have a vested interest in the subject, I tried to learn as much as possible about my income sources at retirement. As a Law Enforcement Officer, I can retire at age 50 with 25 years of service. Under the Federal Employees Retirement System (FERS), I’ll have three sources of income. First, I’ll have income form the FERS account, which is money deposited from my employer (the government). Second, I’ll have income from the FERS Special Retirement Supplement (SRS). The SRS is only for certain positions which includes law enforcement officers. Third, I’ll have income from my contributions to the TSP. My basis scenario (estimates) for all three incomes is as follows:
The first portion of my retirement income will be from my FERS retirement which consists of 1.7% of my basic pay for the first 20 years and 1% of my basic pay for any years beyond that.
- 1.7 X 20 years= 34%
- 1.0 X 5 years =5%
- Total of 39% of my basic pay of $90,000= $35,100 per year or $2925 per month
The second portion will consist of my FERS Special Retirement Supplement (SRS) income. For this calculation, the FERS “years of service” is divided by 40 years, which is what the Social Security Administration (SSA) considers a full career.
- 25 years of service divided by 40 years (estimated full career service)=62%
- My age 62 SSA** benefit (according to SSA) is $1627 monthly and is multiplied by the 62% figure above which equals $1008 per month or $12,104 per year
**Your SSA benefit can be accessed by logging into your SSA account at WWW.SSA.GOV
The third portion will consist of the money from my TSP account. There are many variables to this figure since each person will have a different amount and retire at a different age. We will use the following as an example.
If you have a $300,000 account balance, and want to receive $2000 per month, your money will last for approximately 17 years.
Now the fun part, adding up the monthly total. All of these figures are an approximate amount.
- FERS portion=$2925
- SRS portion=$1008
- TSP portion=$2000
- Total=$5933 per month
It is important to note that if you withdraw money from your TSP before the age of 59 ½, you may have to pay a 10% penalty in addition to income tax!
Is That Enough Money?
During my career, I was also fortunate to have other mentors who thought outside the box. One in particular piqued my interest when he talked to me about investing in the stock market, more specifically using internet based companies like Scottrade to purchase individual stocks. In 2008, right after the market dropped, I started investing in some major companies such as Pfizer, Cabelas, Starbucks and Ruger to name a few. Fortunately for many, the markets have been pretty strong since 2008 and stocks have done surprisingly well.
But how would I spend my time in retirement? How about purchasing a small business…..in another country!
Yes, that’s exactly what I did in Colombia, South America! I first traveled to Colombia in 1993 on a missions/humanitarian trip. I fell in love with the coffee, people, and Colombian culture as a whole but never dreamed of pursuing a business interest there.
That all changed in 2011 during a trip to the Amazon. While staying in Bogota, I had the chance of a lifetime presented to me by a Colombian friend of mine who suggested I purchase a small coffee farm or “finca” in the Andes Mountains in central Colombia!
When I talked earlier about investments in the stock market, here is where they come into play. Property in Colombia is “cash on the barrel,” a term we are all familiar with here in the U.S. Since stocks are liquid assets and can be sold when needed, I decided to liquidate part of my stock portfolio for this purchase and to not use funds in my TSP.
Surprisingly, Colombia now allows foreigners to purchase property and there are many small farms for sale between $50,000 and $100,000. Most of these “fincas” are self-sufficient with fruits, vegetables, and coffee trees and many have houses with them! Colombians love the American dollar and currently one U.S. dollar is worth $1790.00 pesos. You definitely get a big bang for your buck!
The process to purchase the coffee farm was relatively easy. The first meeting was with the seller and government officials where the seller is paid in cash. Your fingerprints and photo are taken and all of the forms are filled out. In our case, about four weeks later, we were notified that the Colombian government approved our purchase. The second meeting was with the local officials where the farm is located. The taxes were paid for the year and the farm was registered in my name.
Property taxes for the year cost $27.00 USD , water is $5.00 USD per month and electricity is $7.00 USD for two months.
The farm now has 5500 coffee trees, oranges, lemons, limes and sugar cane, all which are sold locally. We have a Colombian family who manages the farm and oversees all functions when we are not there. We maintain contact on a regular basis through e-mail, facebook and telephone and travel to the farm every few months. My wife and I love the simple Andes Mountains lifestyle and look forward to spending more time there in the coming years.
Foreign investment may seem risky to many but may be of interest to others. In my situation, it will be a great adventure to retire to an exotic place and do something I love to do, grow coffee and drink the coffee I grow! With a little planning and saving, you too could have an adventure of your lifetime and make some money living abroad!
Duane and his wife Rachel own Gobblers Ridge Bed & Breakfast located in West Virginia and recently purchased Finca La Despensa in Supata, Colombia as a retirement investment. If you have questions or comments, you may contact them the following ways:
- Web: www.gobblersridge.com
- Email: [email protected]
- Facebook: Gobblers Ridge Bed & Breakfast
- Facebook: Finca La Despense – Supata Colombia