Personal Finance: Ask the Experts: Looking toward retirement, should I buy airtime with CalPERS?

Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

July 30, 2012

Looking toward retirement, should I buy airtime with CalPERS?

I'm almost 53 and would like to retire at 60. Should I use my 401(k) to pay for an additional 4 years of PERS? Advice from others indicates that I will never make a guaranteed 6 percent with my 401(k) in the next seven years , so I should pay for additional PERS years of retirement time. -Need advice - Sacto

A. It's true that no one can "guarantee" a 6 percent return on your 401(k) assets. I don't have all the details of your specific situation, but on the surface, buying airtime that equates to a 6 percent return on your investment appears to be a good deal.

The only problem is that this assumes that California will be able to honor its commitments, e.g., pension payments. Given the state of the state, I'm not so sure this is a slam dunk. (Editor's Note: A proposal to curb the use of "air time" is part of proposed pension changes being negotiated by legislative Democrats and Gov. Jerry Brown. Talks are expected to resume this fall.)

A lot of folks say that when the California economy improves, everything will be OK. If you agree with this sentiment, buy the airtime.

I believe that you should consider taking control of your retirement nest egg:

Review the current asset allocation in your 401(k) plan to make sure that it's in line with your goals and risk tolerance.

When you retire, transfer your 401(k) plan assets into a Rollover IRA. You have many investment options available within an IRA, (ie. diversified portfolio of mutual funds/ stocks/ETFs, immediate fixed annuity with an insurance company, bond ladder, etc.

You didn't indicate if you're eligible for Social Security benefits. But if so, splitting your retirement savings between your pension, Social Security and a self-directed Rollover IRA, should give you peace of mind during retirement.

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Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

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