49 year old, needs clarity on ER!

[HI Bill]

Quote:

Originally Posted by cfran ... what am I missing?

Retirement?

[cfran]

Thanks to the last few posters, just a few more questions:

The trust dollars due to me are taxed at LTCG rates, so I’m showing gross figures not net. Would that change your view of my situation?

A little better than half of my ESOP dollars ($650k)will be paid out in 5 annual installments, $130k per year once I pull the plug.

So you all think I’m ready? I’m nervous.

[HI Bill]

[QUOTE=cfran;2230265]A little better than half of my ESOP dollars ($650k)will be paid out in 5 annual installments, $130k per year once I pull the plug./QUOTE]I believe you can have the ESOP distributions transferred into an IRA if you don't want to use them right away...deferring taxes.

[cfran]

Actually I don’t think that’s an option, ie distributions pushed into an IRA. Appreciate the input however!

[HI Bill]

Quote:

Originally Posted by cfran Actually I don’t think that’s an option, ie distributions pushed into an IRA. Appreciate the input however!

You should check. An ESOP is a qualified plan, if the company is run as a Subchapter S corporation. If not, then likely taxable.

[cfran]

Thanks. I should have been more clear, about half of my value is qualified dollars, ie real ESOP shares. The other half is phantom or synthetic equity which is not qualified, same valuation as a ESOP share but paid out in 5 equal installments as regular/ordinary income. Does that make sense?

[DogGone]

Hi - see my “hi, I am ...”

We are nearly the same age and assets.

I just pulled the trigger and have 6 weeks or so left of work.

One calculator I liked most was NewRetirement. It allows very detailed inputs and time phasing expenses, one time expenses, multiple scenarios, etc. pay the $6 a month and get much more detail... worth it.

I could sleep at night once I simulated a 30% loss of assets followed by the worst 30 yr run of a balanced portfolio... I still was ok. Not leaving a gross fortune to the kids but still ok. If the Market is near average, they get a nice sum or we go bonkers spending.

[karen1972]

Also if you are not aware of i-ORP, that may be useful in figuring out how to be more tax efficient with your drawdowns. I know I had to adjust what and where I was taking out money based on my projections... it was rather scary to see what the tax bill could be once I hit 70 if I didn't change my plan.

[StuckinCT]

You can roll a qualified ESOP to an IRA- I would look at that.

I like your plan and I think you are more or less good to go; I am 47 with three young kids 9,8,6 and I have budgeted a lot of money separately for them for college, weddings, cars and I am going to also give them the option to go to a state school and then I'll pay for grad school. I have almost $1.4mm set aside for them, which is actually probably a little more than necessary, but not much! I guess max funding 529 in Minnesota is $350k?

Also, I think your 3.5% withdrawal rate will work as long as you keep at least 75% in equities and you are comfortable with short term volatility.

I live in CT so my spend rate right now is a little higher, about $240k, but I have thought about relocating to a lower cost area and I think $175k is a nice lifestyle with the house cars etc paid off. Also, I like your farm idea, be interested to see what you had in mind as I could see myself living on a farm- lots of lakes Minnesota. I like NC because we are all swimmers and great state schools!

[cfran]

Thanks for response. “Yes”, I will absolutely roll the qualified ESOP dollars into an IRA. Good suggestion.

What is unique about my situation is how the synthetic equity is paid. Essentially 5 annual payments received as ordinary income to the tune of $135k each year. Should help me manage sequence of returns risk I’m thinking.

In addition, if I pull the plug at 4/1/20, which is my current thinking, I can recognize a bonus of roughly $110k - $150k at 3/1. Figured I should hang around for this.

On the farm side it’s a dream, currently we have about 400 acres of woods in Northern MN, mostly timber. I’d like something that has a bit more AG land for income purposes. Plus I like to hunt, hike and build better habitat for the animals on the property, ie leave it in a better place than I found it. Happy to talk further about this.