Gearing up for retirement in Olympia

How a Couple in Olympia Could Gear Up for Retirement

Ashley and Ryan are a fictional but realistic Olympia couple built from actual local salaries, housing data, and retirement options. Their story is meant to reflect a few areas to watch at each stage of life for a typical dual-income household in the South Sound region. If you see yourself in them, perfect, that's the goal.

Ashley is 30 years old and is a Environmental Policy Analyst making $57,000 in PERS 2 at the Department of Ecology.

Ryan is 31 years old and is a Retail Manager at Lowe’s making $54,000. He has access to a 401k with a small company match.

Age 30: Build the foundation

At 30, retirement feels abstract. It shouldn't.

The savings made in your 20’s and 30’s have more impact on retirement than any other decade, simply because of how long compounding has to work. A dollar invested at 30 is worth roughly four times a dollar invested at 45 at an 8% return.

A few things you should be considering at 30:

Emergency fund first. Before any retirement conversation, three to six months of expenses should be sitting in a high-yield savings account. Without it, any unexpected expense -- a car repair, a medical bill, a job gap -- gets funded by credit card debt at 20%+ interest, which wipes out any investing gains.

Capture every dollar of employer match. If your employer offers a 401(k) match and you are not contributing enough to get all of it, you are leaving part of your compensation on the table. This is the highest guaranteed return available to most people. Contribute to that before any other investments.

Understand what PERS actually is. If one partner works for the state, county, or a school district, they are in a defined benefit plan. Most people in their early 30s treat PERS as background noise. A good advisor would spend time explaining what it actually pays, when it vests, and what the difference between Plan 2 and Plan 3 means for their specific situation. The decision between PERS 2 and PERS 3 has to be made within 90 days of hire and cannot easily be undone.

Start a Roth IRA if income allows. At 30, most couples are still below the Roth IRA income phase-out limits. The Roth is especially valuable early in a career when you are in a lower tax bracket -- you pay taxes now at a lower rate and never pay them again on that money. If you make too much, a backdoor Roth should be discussed.

Get your insurance in order. Term life insurance is cheap in your 30s and expensive in your 50s. If you have a partner, a mortgage, or a child on the way, a 20 or 30-year term policy should be in place. Disability insurance is equally important and equally ignored -- your income is your most valuable asset at this age. Which insurance you get is dependent on your personal set up and should be explored.

Start thinking about housing intentionally. Olympia's homeownership rate sits around 48%. If buying is a goal, the gap between renting and owning in this market is meaningful and the window to buy at a reasonable price may not stay open. A financial advisor would want to understand the timeline and make sure saving for a down payment is built into the plan.

Age 35: Pressure test the plan

By 35, life is more expensive than anyone expected at 30. Childcare, a mortgage, two car payments, and a lifestyle that quietly expanded with income. This is the age where a lot of couples are financially treading water while believing they are swimming.

A few things you should be considering at 35:

Are retirement contributions keeping pace with income? The most common pattern is that people set a contribution percentage at their first job and never change it. If Ashley set her 457(b) at 4% when she was earning $58,000 and never updated it, she is contributing far less than she could be now at $79,000. A raise that does not result in a higher dollar contribution is a missed opportunity.

Is the 457(b) being used? Washington state employees have access to one of the best retirement tools available to any worker in the country. The 457(b) has no early withdrawal penalty unlike a 401(k), contributions are pre-tax, and the annual limit is $23,500. Many state employees are underutilizing it.

What is the actual household tax picture? At combined incomes around $130,000-$160,000, most Olympia couples are in the 22% federal bracket with no state income tax. Every dollar redirected into a 457(b) or 401(k) saves 22 cents in federal taxes immediately. This is the age to understand that relationship clearly.

Is high interest debt gone? Student loans, credit card balances, and personal loans above 7-8% interest should be prioritized ahead of investing beyond the employer match. The math is straightforward -- a 20% APR credit card balance is a guaranteed 20% loss on every dollar not paid off.

Review beneficiaries and estate basics. Most people in their 30s have never updated the beneficiary designations on their retirement accounts since they opened them. After a marriage, a child, or a divorce those designations matter enormously. A will and basic powers of attorney should also be in place by this point.

Childcare is temporary -- plan for what happens after. If $1,200-$1,600/month is going to preschool right now, that money becomes available in a few years. You should consider a written plan for where it goes when it does (see college savings below), before it quietly becomes lifestyle spending.

Age 40: Accelerate

The 40s are often the highest earning decade for professional couples and the most financially complex. Kids are older but more expensive in different ways. The mortgage is further along. Income is meaningfully higher than it was at 30. This is the decade to accelerate.

A few things you should be considering at 40:

Are you on track for PERS? For a state employee in PERS 2, age 40 with 12 years of service means they are more than halfway to a 25-year career. Try to run an actual pension projection at this point, using a realistic final salary estimate, to show what the guaranteed income floor looks like in retirement. For many state workers, that number is more reassuring than they expected, and it changes how aggressively they feel they need to invest elsewhere.

Max the 457(b) if at all possible. By the mid-40s, most Olympia dual-income couples have seen their incomes grow enough that maxing or near-maxing the 457(b) at $23,500 becomes realistic. Combined with a 401(k) at similar levels, the household is sheltering $47,000 per year from federal income tax. The tax savings alone at the 22% bracket are over $10,000/year.

Home equity is an asset -- but not a retirement plan. Olympia home values have increased significantly for anyone who bought before 2020. That equity is real but illiquid. A financial advisor would want to make sure the couple is not mentally counting their home equity as retirement savings in a way that reduces their urgency to invest.

College savings -- calibrate expectations. If kids are 8-12 at this point, college is 6-10 years away. A 529 account is worth considering, but not at the expense of retirement contributions. The standard financial planning guidance is clear: you can borrow for college, you cannot borrow for retirement. Try to find a balance rather than either ignoring college costs or over-prioritizing them.

Life insurance still matters. If term policies were taken out at 30, check the remaining term. A 20-year policy from age 30 expires at 50, right when the kids may still be in college. Review coverage levels and timing.

Age 45: Fine tune

By 45, the financial picture is clearer. Retirement is roughly 20 years away, which is close enough to model seriously but far enough that compounding still has significant room to work.

A few things you should be considering at 45:

Run a full retirement projection. At 45, it’s time to sit down with actual numbers -- PERS 2 pension projection, 457(b) balance, 401(k) balance, home equity, Social Security estimate -- and build a realistic picture of what retirement looks like at 62, 65, and 67. Most couples are surprised by how different those three scenarios are.

Roth conversion opportunities. If income fluctuates or one partner takes time off, there may be years where their marginal tax rate is lower than it will be in retirement. Look at whether converting some traditional 401(k) or 457(b) balance to Roth makes sense in those lower-income years.

Is the mortgage aligned with the retirement plan? If Ashley and Ryan bought at $400,000 in 2019 on a 30-year mortgage, they will pay it off at age 66. That timing is fine but worth examining. Some couples at this stage choose to make small additional principal payments to ensure the mortgage is gone before retirement. Others prefer to keep the cash and invest the difference. Model both and compare.

Revisit disability insurance. At 45, the risk of a disability before retirement is statistically higher than the risk of dying. Yet most people drop disability coverage as they get older because the premiums rise. Determine if coverage is still in place and adequate.

Kids driving and college on the near horizon. Car insurance costs jump significantly when a teen gets on the policy. Tuition costs are real. You will want to anticipated these costs in the budget so they do not derail retirement contributions.

Age 50: The power decade

The 50s are when catch-up contributions kick in and when serious retirement modeling begins. For couples who have been reasonably disciplined, this decade can dramatically accelerate the finish line.

A few things you should be considering at 50:

Use catch-up contributions. At 50, the IRS allows an additional $7,500/year in 401(k) and 457(b) contributions on top of the standard $23,500 limit. That's $31,000 per person, per year in pre-tax contributions. For a dual-income couple both over 50, the combined shelter capacity is $62,000/year. For anyone who started saving later in life, this is how you help close the gap.

Social Security strategy starts now. At 50, it is not too early to pull your Social Security earnings record and start thinking about claiming strategy. The difference between claiming at 62 versus 67 versus 70 is substantial. For a couple where one partner has a PERS pension, the Social Security calculation should be modeled carefully.

Sequence of returns risk becomes real. A major market downturn in the five years before and after retirement can permanently damage a retirement portfolio in a way that a downturn at 35 cannot. However, state workers who have the majority of their retirement income coming in from their pension are not subject to nearly as much sequence of return risk as a private sector employee who has all their retirement savings in stocks sitting in their 401k. Therefore, depending on your situation you may be able to keep a more growth oriented asset allocation to help fund your later retirement years or leave money behind after you die.

Is the retirement income picture clear? By 55, Ashley could retire from the state with a reduced PERS 2 benefit if she has 20 years of service. Since she started at 30, she is five years away from that option. She should model what that early retirement number actually looks like and whether it is viable given their other assets.

Healthcare before Medicare. Medicare eligibility begins at 65. If either partner plans to retire before 65, healthcare coverage becomes a real cost. Washington State's retiree health benefits through PEBB are available to qualifying state employees, but coverage and eligibility rules matter. Review your healthcare gap scenario in detail.

Age 55: Final approach

At 55 the finish line is visible. The decisions made in the next ten years will define the actual retirement experience.

A few things you should be considering at 55:

Formalize the retirement income plan. By now the conversation shifts from accumulation to distribution. How much will PERS 2 pay? What will the 457(b) and 401(k) generate at a sustainable 3-4% withdrawal rate? When does Social Security start? What does the monthly income picture look like and does it cover the actual retirement lifestyle they want?

The 457(b) advantage is most valuable here. If Ashley retires at 56 or 59, her 457(b) balance is accessible immediately with no penalty -- unlike a 401(k) which carries a 10% penalty before 59.5. For anyone considering an early exit from the workforce, the 457(b) is a great potential bridge account. If that is your goal, making sure it is well funded heading into this decade is a game changer.

Consider paying off the mortgage before retirement if possible. A paid-off home in retirement eliminates one of the largest fixed expenses and dramatically reduces the income needed to maintain a comfortable lifestyle. Heading into retirement with no mortgage payment can be a large needle mover when it comes to lowering how much taxes you pay. At 55, you should model what extra principal payments look like and whether retiring debt-free is achievable by 65.

Consolidate and simplify. Old 401(k)s from previous employers, multiple IRA accounts, scattered investment accounts. The 50s are a good time to consolidate into fewer accounts that are easier to manage and monitor. Review your account structure and make sure everything is organized before distribution begins.

Long-term care insurance window. Many people consider buying long-term care insurance between 55 and 60, before premiums become prohibitive and before health conditions might disqualify coverage. Consider this as it is one of the most commonly overlooked risks for couples approaching retirement. In 2023, Washington started the WA Cares Fund but it’s important to note coverage only goes up to $36,500 (will be adjusted for inflation). Depending on your situation, this may not be adequate. End of life planning is important to begin far sooner than anyone generally wants to.

Age 60: Lock it in

At 60, retirement is likely five years away. The plan should be largely set and the focus should shift to protecting what has been built.

A few things you should be considering at 60:

Run the final numbers. A detailed retirement income projection that accounts for all income sources, expected expenses in retirement, inflation, healthcare costs, and a realistic spend-down rate. No more approximations -- this should be a real model.

Social Security timing decision. For some people, delaying Social Security to 67 or 70 produces significantly more lifetime income if they have other assets to draw from in the meantime. Run the breakeven analysis and factor in both partners' benefit amounts, survivor benefits, and the PERS pension interaction.

Reduce equity risk gradually. For most people, a portfolio that was mostly equities at 45 probably should not still be mostly equities at 60. However, WA State employees are in a unique situation and you may be able to have a more aggressive asset allocation. Review your pension, social security amounts, and get an understanding of what you’ll be earning monthly in retirement. Reference that against your future expected expenses. This will help you determine how aggressive you can be with your 457b.

Know the PEBB retiree health benefit options. For Ashley as a state employee, understanding exactly what health coverage she qualifies for in retirement and at what cost is critical planning information. This is specific to Washington state employees and often not well understood even by people who have worked for the state for decades.

Have the retirement lifestyle conversation. What does a good retirement actually look like for this couple? Where do they want to live? How much do they want to travel? What does a realistic monthly budget look like without a mortgage, without childcare, without commuting costs? This is not a financial calculation -- it is a life conversation that you should have with your partner.

Age 65: The handoff

If Ashley and Ryan have followed something resembling this roadmap, their retirement picture at 65 looks something like this:

Ashley's PERS 2 pension at 35 years of service and a final high 5 average salary of $95,000: roughly $66,500/year for life.

Ryan's Social Security plus Ashley's, starting at 67: combined $40,000-$50,000/year depending on earnings history and claiming strategy.

Combined 457(b) and 401(k) balance at $30,000/year invested over 30 years at 8%: approximately $3.4 million,generating $102,000-$136,000/year at a 3-4% withdrawal rate. Mortgage: paid off or nearly so.

That is not a fantasy outcome. It is what consistent, boring, unsexy financial decisions compound into over 35 years.

A few things you should be considering at 65:

Medicare enrollment. Enrollment windows are strict and missing them results in permanent premium penalties. A benefits specialist would make sure enrollment is handled correctly. If possible, planning to reduce or remove IRMAA payments is wise.

Required Minimum Distributions planning. Traditional 401(k) and 457(b) accounts require minimum distributions starting at age 73. You should be thinking about the distribution strategy to minimize the tax impact of RMDs, including whether partial Roth conversions in the early retirement years make sense.

Survivor benefit election on PERS 2. When Ashley begins collecting her pension, she will choose a benefit option that affects how much Ryan receives if she dies first. This is an irreversible decision at the time of retirement and it’s important to make the decision thoughtfully rather than go with the default option.

Estate plan review. Wills, trusts, powers of attorney, healthcare directives, and beneficiary designations should all be reviewed and current. The estate plan that made sense at 40 may not reflect current wishes or assets at 65.

Enjoy it. The whole point of the last 35 years of decisions was this. The point of all this was not to just review accounts -- the goal is to feel confident that the number is real, the income is sustainable, and you have permission to spend it.

The specific numbers in this article are illustrative. Your PERS plan, your 401(k) match, your mortgage, and your timeline will all be different. If you want to map out your own version of this roadmap, please reach out to a financial advisor.