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Being forced out
Old 03-19-2015, 02:44 PM   #1
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Being forced out

Getting laid off from big oil. At the end of the day we will have a little over $3MM. 2 kids starting college this fall. Only a mortgage, no other debt. Spending $120k per year currently. I'm 54, my wife 48. Figured in SS for me and my wife later. Included $200k for college for 2 kids.

cFIRE says 95% at $125k/yr spend
Financial Planner says about the same using a fixed 5.5% return
EarlyRetire Pro says 99% at $123k/yr spend. It uses historicals and includes all taxes
My FP says about $120k/yr at 6% fixed return

Scared crapless. Doubt I can get another job right now.
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Old 03-19-2015, 02:49 PM   #2
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You need to cut your spending.
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Old 03-19-2015, 02:55 PM   #3
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Getting laid off from big oil. At the end of the day we will have a little over $3MM. 2 kids starting college this fall. Only a mortgage, no other debt. Spending $120k per year currently. I'm 54, my wife 48. Figured in SS for me and my wife later. Included $200k for college for 2 kids.

cFIRE says 95% at $125k/yr spend
Financial Planner says about the same using a fixed 5.5% return
EarlyRetire Pro says 99% at $123k/yr spend. It uses historicals and includes all taxes
My FP says about $120k/yr at 6% fixed return

Scared crapless. Doubt I can get another job right now.
^^^ What he said too!

Retire if you want to, but pre-college kids are an unknown. State colleges here in TX are a bargain and community college time is directly transferrable to a big U. Maybe go into stealth mode for a while and watch the job market.

Hang in there if you want to go back to work. Sharpen up your resume, start networking. It may be a while but the oil patch will come back and those who hang in there will get a new job.
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Old 03-19-2015, 02:56 PM   #4
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I would be OK with your numbers providing theres some fluff in your budget that you cut out if the market takes a hit. I'd like to know how a financial planner figures $120K at 6% fixed return? If you could get a 6% fixed return, which you obviously can't, you could spend 6% of whatever your portfolio was (give or take).
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Old 03-19-2015, 02:59 PM   #5
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You're probably better off than 95% of the others who will be forced out, too, but I know it's darn scary pulling the plug on a paycheck- I just did it myself last year.


Are you sure you'll NEVER get another job? Not even something in an unrelated field that pays less? What about your wife? Can your kids get scholarships or other aid? Can they do a Co-Op Program like the one my alma mater offers (University of Cincinnati) where after the first year they alternate quarters going to school and working at a co-op job in their field? Can they commute or go to a community college for the first couple of years?


This sounds like an issue the whole family needs to work together to resolve.
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Old 03-19-2015, 03:00 PM   #6
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State colleges here in TX are a bargain and community college time is directly transferrable to a big U.
+1

Community colleges in TX are a great way to cut costs with virtually zero negative impact to the quality of degree obtained. Your world has changed and your kids need to share in that change. They will likely be better off in the long run and it is a great opportunity to make for a stronger, closer family.
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Old 03-19-2015, 03:02 PM   #7
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People manage all the time with less than $3M. So, I think your family will figure out a way and be OK too, even if you do not work again. But you need to be proactive and make the necessary changes early enough. Do not wait until it's too late.
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Old 03-19-2015, 03:03 PM   #8
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Originally Posted by athena53 View Post
You're probably better off than 95% of the others who will be forced out, too, but I know it's darn scary pulling the plug on a paycheck- I just did it myself last year.


Are you sure you'll NEVER get another job? Not even something in an unrelated field that pays less? What about your wife? Can your kids get scholarships or other aid? Can they do a Co-Op Program like the one my alma mater offers (University of Cincinnati) where after the first year they alternate quarters going to school and working at a co-op job in their field? Can they commute or go to a community college for the first couple of years?


This sounds like an issue the whole family needs to work together to resolve.
My wife will work at least part time, but not make much. I'll be looking for another job. We'll be cutting where we can of course. One kid has a big scholarship, we won't qualify for aid.
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Old 03-19-2015, 03:03 PM   #9
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Sorry to hear this, but agree with others that you will be fine, especially if you thrift the kids' educations. Nothing wrong with community college and most kids have no idea what they want to study anyway. Why pay dorm expenses and college tuition while they study basic topics?
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Old 03-19-2015, 03:12 PM   #10
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yeah sorry to hear this but I think you might be selling yourself short on the job front. And you will be able to do with less that you think ...once you start thinking about it.

Good luck
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Old 03-19-2015, 03:29 PM   #11
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bulbar,

It might be interesting to see a breakdown of how the 120k/year is spent.

There may be obvious savings that we could collectively see and suggest that would not impact your quality of life too much.

If you could go from 120k/year to 80k that would be from a 4% wr down to a quite safe 2.6% wr. Also please remember that you will have SS available too in the future and that can be very valuable especially if you are concerned about living a long time and/or outliving your money.

Have you ever used quicken or a similar to tool to track your expenses by category? This was a god-send to me having done this over the years and having a record of how much I was spending when I was unconstrained.

Once the passive income was able to support our unconstrained level of spending and I started to get jacked around at work, it was goodbye to the job for me with not much anxiety (other than the awkward social situations of being retired in my late 40s).

FWIW -- Our retirement budget is 80k per year and includes taxes,travel, frequent entertainment (dining and drinking) with friends, 1800 sq ft suburban home for two, fairly high property taxes, multiple vehicles, throwing parties, HS internet, Android smart cell phones, season football ticket etc. etc. Also thinking about taking private pilot lessons.

Don't be scared of changes like this (well I was at the time, but have grown to see it as a wonderful life changing opportunity in retrospect).

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Old 03-19-2015, 03:42 PM   #12
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I say embrace the challenge. You should understand your spending and see where the required vs discretionary costs are. Obviously a lower total spending makes the risk go down and odds for success increase. I think you are just being a bit too risk averse, many survive on less than $120k/year without any real sacrifice in their quality of life.

Agree college expenses can be a lot, but the good thing is they are short term. Assuming your kid is not a professional student!

Also don't forget SS can supplement once you get there. Only 8 years until that can kick in at minimum.
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Old 03-19-2015, 03:44 PM   #13
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You need to cut your spending.
What he said.

That said, many retire on less and do just fine. The biggie is being able to control expenses and reduce them if/when needed. Here's a checklist of things to consider:

Some Important Questions to Answer Before Asking - Can I Retire?
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Old 03-19-2015, 03:48 PM   #14
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Does the $120k of spending include income taxes? mortgage payments? If so, then you'll probably be fine as your taxes will likely be lower in retirement and if you have a mortgage it will eventually go away and mortgage payments don't increase for inflation like other expenses do. What are you doing for health insurance?

I figure that carving out $200k for kid's college you have $2,800k so at a 3.5% WR that would be $98k, but that doesn't factor in any SS so realistically you can have a higher WR and still be safe.

But I agree with others that things will be more comfortable for you if you look through your expenses and see if there are any opportunities to reduce them. We did a lot of easy things to reduce ours.... we cut our landline and use a VOIP provider (Ooma in our case) for our home phone... we had more modest needs for cellphones in retirement and went with a pay-as-you-go, bring your own phone plan, etc.
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Old 03-19-2015, 03:51 PM   #15
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Does your 125,000 include projected taxes when you draw assets out? (I assume that much of your pile is in tax deferred accounts upon which you will be paying ordinary income tax rates at withdrawal.) That could be an important point to not overlook.

Otherwise, I'll twelfth (or whatever!) the recommendations to get a handle on the spending by category and strive to slim it down while maintaining a nice comfort level.
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Old 03-19-2015, 04:01 PM   #16
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Sorry to hear you had this happen .

That said. Lemonade from Lemons. Let's assume you consider not finding another job that will also then cause you stress of potentially losing it among other things. Can you tweak your life and never be scared crapless again (about losing a job I mean). If so what is that worth?

Without details it's hard to make specific suggestions but...
Kids going to college. Hmm perhaps a smaller or cheaper house is possible? Less stuff to fill it with, less to clean.

Not working means less gas, clothes, coffee, eating lunch etc. In my own plan this is about 400-500/mo.

Food. My food budget is about 1000/mo (2 kids), but if I changed my eating out habits, I can drop it about 30-40%.

Cable, phones, internet, etc. Those add up... And do I REALLY use them? You have time to find cheaper alternatives.

Do you have interests or hobbys that can generate SOME income?

Also... make the situation non binary. I think getting psychological balance is super important.

In most situations with 3m and 120k/year you will be ok. In some cases you will EVENTUALLY run out of money. In any case (other than a zombie apocalypse) you have many years to adjust. If you saved 3m I'm pretty sure that you are a flexible spender and probably like almost everyone else on this board have this horror moment thinking about the 3 going to 2.9.

Maybe you can put a year or two of money aside to live on. Give yourself a year of deliberate time off. During that year you try and figure out how to either bridge whatever gap in income you need or adjust spending. This way you won't take a job in desperate psychological mindset which may cost you more in the long run.

Instead of a job you have to be scared to lose your new job ensures you never have to worry again and you can assign yourself any task you want, cancel any meeting you think is stupid and set your KPI to be whatever you like.

Sure... Your new job pays a bit less, but those perks seem pretty good to me.

Maybe you can run the numbers the other way. Adding taxes, healthcare, etc. and subtracting work related expenses, How much does your new job safely pay . I also bet your family will be very supportive if they knew you would be less stressed and have more time with them.

You may look back and post in 2 years that this was a gift instead of a curse.

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Old 03-19-2015, 04:02 PM   #17
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OP,

I have similar asset and 2 kids in college right now. I am few years older. I have recorded the last 2 years of bank statement, CC statement and put in spreadsheet. I see that we spend $55K annually.

There are expenses obfuscated from this number though. Taxes are paid from payroll; Healthcare premium is paid from payroll and DW's HRA account; so they are not accounted for.

When I started to estimate the ER true cost, I find that I have to include these extra:

1. Tax ---$9K (try to maintain below 15% tax rate)
2. Healthcare --- $16K
3. Travel ---- $16K
4. Retirement home --- $13K

The true ER estimated expense for us is then: $110K. This is about 3.8% WR. And we are stuck with OMY...

If you are already spending $120K, your will then need to look into detail and see what extra expenses incurred when there is no payroll deduction anymore.
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Old 03-19-2015, 04:06 PM   #18
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Also... How much is the financial planner . That might be something you can now do and if it's % of total assets, you could be well on your way to filling any gap.

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Old 03-19-2015, 04:18 PM   #19
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One of my kids had a quite large scholarship from a private school. That brought our cost down to about 20% more than a public school. She went to a public school and, in my opinion, got a better education.
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Old 03-19-2015, 04:20 PM   #20
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......Your world has changed and your kids need to share in that change. They will likely be better off in the long run and it is a great opportunity to make for a stronger, closer family.
This is very wise counsel.
Everyone needs to be in on the budget changes. I am guessing much of your community is going to be in layoff status. Your kids are old enough to be above keepin up with the Joneses and this will make it even easier. There are so many more important things in life than money!
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