37 and near or at finish line...now what?

[GusLevy]

"An inch of time buys an inch of gold, but an inch of gold cannot buy an inch of time..."


Hello. Like most of you folks out there the daydreams of ER and a life reduced of the stress that accompanies the "company man" in his professional career has been intensifying as I have been approaching mid-life. While it's great to further shed myself of the Ego which characterizes the bravado and ambitions of the younger man out to conquer the World I find myself now confused a bit by the philosophical questions that arise when we seriously realize life is precious - but very short.

I am a typical American Dream story: grew up poor in an immigrant family and worked hard in school and career to better myself. Fortune smiled upon me as I lucked into a career in Wall St in a stimulating position that allows me to trade and manage institutional money. Having said that, the job entails sitting at my desk by 5am and not leaving the chair for the next 10 hours staring at the screens – not bad hours in the aggregate but after making the morning call for almost 15 yrs on a daily basis it’s beginning to physically and mentally wear on me. The job is decent but I can’t take the hours for too much longer.

The decision that I have to make is to figure out how/when to pull the trigger. There are basic issues such as being in a career that has compensation curves that are basically logarithmic shaped: each successive yr the money is progressively better such that the decision to walk away is almost penal in nature unless the p.a. is really in the F.U. zip code (unfortunately mine is not). I am a LBYM person so I suppose that I can retire tomorrow and not worry about going hungry ever again but clearly the ER decision is never truly that simple…we all want more security, more $ to help friends and family, freedom to be whimsical, etc.

For those of you out there that are or have been in similar situations where it is absolutely penal to walk away in the near term how did you determine this calculus – and honestly it really is sophomoric to say that “life’s too short!” or something in that vain to suggest the optimal life decision is to immediately pack for retirement – and also what are the truly difficult issues to confront at this point in preparing for post-retirement. On the last point I refer to stuff like health insurance, tax issues, etc. that I may be presuming are simpler than they in fact are once I do pull the trigger.

Thx again and I appreciate the overall tone of this message board – thk god for sensible posters in an anonymous world.


My financial/personal basics:
1) 37yr old single male (girlfriend who lives in own place)
2) 2.5mm broker acct (mostly placed in financial pfds during this current mkt meltdown – I believe this is a 1 in 20yr mkt for these investments)
3) 500m 401k – balanced fund
4) house worth 1.3mm (zillow) with 450k left in mtge
5) 100m in company stock
6) 50m in commercial real estate investment
7) 1mm+ deferred comp that is on the carrot-stick vesting cycle…worthless today but grows over time as long as I stick around (can collect some each yr)

 

[Olav23]

I'm sorry, I don't understand your abbreviations. Is m=k and mm=mil?

I assume if you had 500mil in a 401k this wouldn't be a question at all, correct?

 

[clifp]

Welcome Gus

Golden handcuffs are a mixed blessing, the gold is nice but the handcuffs suck.

I faced a similar situation back in 1999 in a high tech company at your age (39) with very similar assets. In my case sticking around for a couple of years would have meant an additional $1 million in stocks options.

There is no easy answer. One of the real difficult realizations is that financially it is pretty much a one way street. Once you leave the high-paying high-stress job, realistically there is no way you can match the compensation you are currently getting. You maybe able to get a comparable salary but the deferred comp, bonus etc. are very likely to been considerably less. Psychologically, the thought of working for a 1/3 or so of your former salary is really difficult unless it is a job you absolutely
love.

If there is something that you are passionate about that really can't wait, going around the world with girlfriend before you have kids, entering a contest, taking care of dying parent, I'd say quit to tomorrow.

In the (likely) absence of any compelling reason. First, I'd say set a pretty firm date, e.g. no more than 5 years. Second see if there is any way you can you fix the elements of your job that you just can't take 5 AM, 10 hours a day trading. Perhaps a training or staff position. If you've got a boss or an HR person that you can trust see if there is a "mommy", track that would let you collect your deferred comp, in exchange for giving up future pay raises or big bonus. I call this retiring in place.

If you can't do that then.... At some point, a light bulb will go off and you'll say, I use to really enjoy the job, now I am starting to really hate it.
The extra say $250K I might be able to save by working another year is another $10K a year I can spend, but I'd don't get a lot pleasure by buying things so... who cares.


One more thing stuff happens. I'm really glad I'd didn't stick around tech corp for several more years and have to hand out pink slips to my staff. The $1 million in stock options I thought I could collect by sticking around a couple more years a waiting for them to vest. Well the internet/tech bubble burst and they were worth nothing a few years later.

 

[explanade]

What is "financial pfds" and what do you mean by 1 in 20 yr mkt?

 

[clifp]

What is "financial pfds" and what do you mean by 1 in 20 yr mkt?

I think he is referring to preferred stocks issued by banks. It is relatively easy to find preferred stocks yielding 7-8 even 9% issued by too big to fail banks like Citi, BofA, Wachovia. The downside of these is pretty limited since in the event of bank failure/take over. Preferred stockholders get paid before common stockholders get any $.

A number of folks thing the fire sales on financial stocks is once in a generation opportunity (1 in 20 years). I am in that camp, but plenty of smart people think we are idiots... That is what makes markets.

 

[explanade]

OK, that makes sense.

7-8% dividend yields?

What are some of the symbols?

Preferred shareholders would still be in line after creditors, no? Bear Stearns creditors got bailed out but shareholders won't get what the stock was once worth?

 

[clifp]

BAC-J or BAC+J if you are a Schwab Customer
WB-D
C-V



Bear Sterns is a good example. BSC-X is a 7.8% preferred stock was issued at 25 back in 99 (I think) it is currently trading at 24.25, and AFAIK the holders have been receiving their dividend/interest payment on time, despite the BSC melt down.

I am not sure the rank of preferred shareholders vs. creditors I believe in general yes they rank behind creditors but I think it depends on lots of factors.

Disclaimer: I picked the symbols more or less at random. Quantumonline is your best source for researching bonds, preferred stocks etc. There are folks on this board who are experts in this stuff. I am not one.

 

[aaronc879]

Like they say, one persons trash is anothers treasure. I dream of working a job were i'm at a desk for 10 hours and home by 4pm regardless of the money. I'd do his job for 40K/yr. Try doing 4:45p-5a doing manual labor.

That being said, if you really can't stand the job anymore it seems you have more than enough to call it quits assuming you have control over your spending. Good luck.

 

[SecondCor521]

GusLevy,

Welcome to the boards. Fascinating first post.

I think the answer is that it's personal and subjective, so what others did isn't applicable to you except in the most general sense.

My own opinion is that you will intuitively know when the right time is and you can watch and observe yourself -- your words and your actions -- to answer your own question. To give you a simple example, take the words you used to title this post: "near or at the finish line"...that tells me that financially you think you're either there or close to there. You then say the job is wearing on you in your post...that tells me that emotionally you're there or close to there.

How much is "enough" and what you want to do with the rest of your life are both questions that require a period of navel gazing, assisted hopefully with your financial stats and reading up on safe withdrawal rates. For me, I know I can live on $15k per year because I track expenses; I also read about and believe in the 4% rule, so that means I know I can make it on a total nut of $375K. But then I need to decide if that's what I *want* to do.

The questions about taxes and health insurance and what not just require research and decision making on your part, skills you've no doubt developed in your day job or possess naturally.

2Cor521

 

[retire@40]

What is your:

a) current budget

b) post-retirement budget

c) worst-case scenario (aka bare bones) budget?

 

[Maurice]

Welcome, Gus.

I'm in a very similar situation. Also a Wall Street guy, very similar net worth, 39 years old. I put in my notice two weeks ago. Actually my boss talked me into taking a leave of absence (I initially had resigned), but there's a very good chance I'm done.

 

[clifp]

Welcome, Gus.

I'm in a very similar situation. Also a Wall Street guy, very similar net worth, 39 years old. I put in my notice two weeks ago. Actually my boss talked me into taking a leave of absence (I initially had resigned), but there's a very good chance I'm done.

I took a leave of absence also. Smart boss, it gives you and him more options and also extends COBRA while you are on leave.

 

[GusLevy]

Thx for the comments/replies. I suppose that I should be a bit more clear in that I am more concerned about the actual details with the process of retiring early rather than having concerns about actually arriving at the decision to retire: I have accepted that I am somewhat close to the day that I pull the trigger and am trying to get some perspective about how to optimize all loose ends until that day arrives. There are the basic stuff like how to actually switch over health insurance from company to private in a seamless manner, how to switch over retirement plans, etc. and more tricky matters such as perspectives on how much lead time to give the employer before the final day - I presume that giving too much time creates an awkward extended 'good-bye' period and giving too little time may be simply bad form for individuals like myself who have had a decent long-term relationship with the company. From those of you who have gone through the ER process in situations like mine I would love to get the perspective on what you would have done differently and also what was done properly.

For example, to Maurice and clifp, it seems like the 'leave of absence' sitch that you both mention could be a fantastic option to receive on Quitting Day but I can't imagine that you begin the conversation with your employer about quitting with that option originating from your side: How did that option arise? If it means one receives that option only by informing the boss that one intends to retire/quit then clearly that is not a reasonable gambit to take.

Other comments:
1) 1m = 1,000 and 1mm = 1,000,000.
2) Financial pfds are the preferred stock in a company's capital structure. Different opinions are what makes markets so I have no guarantees but imo pfds were as cheap as they will be in a generation back in March. They are up a bit since then but still are great relative value imo. Pfds are usually below senior debt but definitively above common stock in the cap structure: theoretically if a company is anywhere near book value then pfds will return most of principal in the nuclear scenario.
3) For the individual who made the comment about willing to work my job for 40k I would suggest that you have merely 2 simple variables (my hrs and sitting in a chair) of a multivariate analysis. Not that I am Tiger Woods but perhaps it would be very partially akin to a weekend golfer saying that he would be willing to do Tiger's job for free after watching a tv interview of Wood's saying how stressful his job is...my job is not literally just to sit in a chair for 10hrs and watch blinking numbers.

 

[Maurice]

For example, to Maurice and clifp, it seems like the 'leave of absence' sitch that you both mention could be a fantastic option to receive on Quitting Day but I can't imagine that you begin the conversation with your employer about quitting with that option originating from your side: How did that option arise? If it means one receives that option only by informing the boss that one intends to retire/quit then clearly that is not a reasonable gambit to take.

Indeed. If I had told him "I'm outta here, I'm retring early" he definitely wouldn't have offered a leave. My situation is more complicated, my mother has less than a year to live and lives 1000+ miles away, and I myself was diagnosed with an unusual genetic condition that has caused me to reevaluate things. I told him my plans were to resign, and that I'd probably find another job in a year or so when the situation with my mother is behind me and I've learned to deal with my own situation. He immediately said he'd hire me back whenever I was ready to come back to work. A day later after talking to HR he said I could just take a leave for an indeterminate length of time.

Having said all that, I think its likely I won't go back at all. Still its nice to know I have the option.


Re the particulars of ER you mention - switching to individual health insurance, etc. You will find loads of information on this board. Welcome again.

 

[lifeisgood]

One of the issues for me since I FIRE'd at 49 was getting used to the idea that my net worth is unlikely to increase much in the future, certainly not at the rate it used to. The lifestyle I live now is what I will have the rest of the way. I too had a high paying job that I won't be able to replicate. However, the stress level is much reduced, and there are lots of things in the world that need doing. So it's been good.

 

[Milton]

For example, to Maurice and clifp, it seems like the 'leave of absence' sitch that you both mention could be a fantastic option to receive on Quitting Day but I can't imagine that you begin the conversation with your employer about quitting with that option originating from your side: How did that option arise?

You might want to check out the book Six Months Off: How To Plan, Negotiate, & Take The Break You Need Without Burning Bridges Or Going Broke by Dlugozima, Scott, and Sharp [see review at Six Months Off].

If it means one receives that option only by informing the boss that one intends to retire/quit then clearly that is not a reasonable gambit to take.

Perhaps you shouldn't be quite so quick to rule out the possibility of a de facto ultimatum. Since you "can’t take the hours for too much longer", and are determined to ride off into the sunset one way or the other, you don't really have anything to lose, no?

The decision that I have to make is to figure out how/when to pull the trigger. There are basic issues such as being in a career that has compensation curves that are basically logarithmic shaped: each successive yr the money is progressively better such that the decision to walk away is almost penal in nature unless the p.a. is really in the F.U. zip code (unfortunately mine is not). I am a LBYM person so I suppose that I can retire tomorrow and not worry about going hungry ever again but clearly the ER decision is never truly that simple…we all want more security, more $ to help friends and family, freedom to be whimsical, etc.

A few suggestions for you:

(1) take a look at this thread: http://www.early-retirement.org/forums/f29/handling-just-one-more-year-syndrome-20091.html;

(2) figure out how your desired annual income in retirement, and multiply by 25. Then, double that amount to arrive at your savings target. When your liquid assets (not including your 401k: consider that additional 'insurance') reach that amount, you can retire knowing that you have more than enough security / 'pad';

(3) work on accepting that once you have 'enough' (however you define it), it's okay to leave money on the table. You're not greedy for the last possible dollar, right?

I hope this helps!

 

[clifp]

In my case, I had seen other people take long term 6-12 month LOAs for variety reasons, some came back to work other never did.

I was helped in the my boss was planning to leaving/retire soon (and did 8 months latter.) Her boss (the VP of marketing) left about 18 months later. Financially, it proved to be a huge win for me, it gave me an additional 12 months to exercise my vested options. This enabled me to exercise the option the Jan after I quit working, and I got a higher price and reduced taxes.

I told people the truth. I was burned out, I didn't financially need to work, so I was going to take some time off. I wasn't sure if I was coming back to work, but if I did elect to work Intel was much better place than most other places. A Leave of Absence was win win. I got zero resistance, but I had to ask. Now timing when you tell people is a tougher call.