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Old 12-12-2014, 05:09 PM   #101
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A most enjoyable thread . . . made my day of w*rk more tolerable. Take the severance and run . . .
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Old 12-12-2014, 05:11 PM   #102
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Why would it? Not everyone who has proved to be good at accumulating assets has necessarily yet become knowledgeable and comfortable in the practice of drawing down those assets.

In the absence of any other sources of income, Firecalc shows that a 3.1M portfolio (with the default AA) can support a yearly withdrawal in the region of $100K for a 100% success rate. If bulbar's income requirements were 100K or below, a 3.1M portfolio should be able to support that. If his income requirement is higher than that (as it currently is), then he might well need to look at increasing his portfolio, or reducing his spending, as other posters have said.

I just don't understand why any of us would want to make fun of anyone for asking a simple "Can I retire" type question. Making fun of people (unless it really is light-hearted and carries no suggestion of a put-down) is not exactly the kind of thing that will encourage others to post and participate. We're supposed to be here to help each other aren't we?
There were enough quasi-mocking comments to his original post before I made mine. I was pointing out what had already happened. I was not trying to be ugly and don't think anyone else was. The focus of most comments was the size of his budget in retirement.
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Old 12-12-2014, 05:19 PM   #103
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Agreed... my son is looking at engineering and TAMU.... but is also talking architecture.... I have told him to find the best schools for the major he wants which he has not yet done... he is a junior in HS, so has a bit of time...
The architecture department at TAMU as of a couple of year ago is not accredited. That means he can never be licensed. Architecture is a tough major to make it financially and professionally rewarding. Without a license your son could be doomed to a permanent drafting role.

The architecture department at UT is accredited. Both programs are very difficult to get into and I've heard they work your butt off. If he can't get into UT, I suggest he go somewhere else that is accredited. I've also heard that this degree has an overall low financial payback for the majority of graduates. Just because they get a degree they don't get to design buildings.

My comments are subject to rebuttal without comment by someone that is personally involved in the architecture profession.

An accredited program is required to become a professional engineer but the professional impact is very small if not licensed for most engineering functions. I am a PE so I'll argue this.
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Old 12-12-2014, 05:21 PM   #104
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Yeah, we bought our house for $155k. Worth maybe $225k now. Owe $75k. Makes no sense to sell it at least until the kids get out of college
Your earlier post that your insurance is $4,000/yr is crazy. You are definitely being ripped off.
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Old 12-12-2014, 05:24 PM   #105
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Yeah, but my income wont be high anymore right? I'll be retired.
When you get the severance, you'll still get a pretty good income. After that you'll have control somewhat. The year after I got layed off my son got a $7,000 finacial need scholarship from TAMU in addition to his $1,000 mechanical engineering scholarship.That was over half the cost of his/my costs.
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Old 12-12-2014, 09:56 PM   #106
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.....But my medical insurance I think will go up. We pay about $1200 a year in premiums under my company. Retiree medical would be $10k per year.....
Does the $10k/year for medical insurance include all the costs for a family of 4 (eg, co-pays, deductible, and co-insurance) or is that just the cost of the premiums? It all adds up quickly, as I'm sure you already know!
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Old 12-13-2014, 07:18 AM   #107
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our investments wouldn't have been able to sustain our CURRENT level of spending either. What we did was try to forecast what our spending would be when the kids were 1) off to college 2) completely on their own 3) when social security/medicare kicked in. Our spending/withdrawal needs are very different in each phase. When kids leave, we downsize our home which reduces costs substantially for us (insurance, property taxes, propane, etc.). We also stop paying one private school tuition and as others have said, our taxes are MUCH lower both because of smaller "income" needed and some of it being from selling investments (low/no tax capital gains or no tax principal).

Taxcaster (quick and dirty) or Turbotax to estimate future taxes is a great investment for us.

Good luck!


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Old 12-13-2014, 08:32 AM   #108
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The architecture department at TAMU as of a couple of year ago is not accredited. That means he can never be licensed. Architecture is a tough major to make it financially and professionally rewarding. Without a license your son could be doomed to a permanent drafting role.

The architecture department at UT is accredited. Both programs are very difficult to get into and I've heard they work your butt off. If he can't get into UT, I suggest he go somewhere else that is accredited. I've also heard that this degree has an overall low financial payback for the majority of graduates. Just because they get a degree they don't get to design buildings.

My comments are subject to rebuttal without comment by someone that is personally involved in the architecture profession.

An accredited program is required to become a professional engineer but the professional impact is very small if not licensed for most engineering functions. I am a PE so I'll argue this.
I'm married to an architect and my brother was an architect. You are right that it is not as lucrative as many would think. When you graduate you have several years before you can take the licensing/registration exams. During that time firms often pay very poorly. The exams taken 5 years out - have a very high failure rate (I believe even higher than the PE exam). You can't seal/stamp drawings till you have passed these exams. California adds an additional oral exam layer on top of this which is highly subjective (vs objective)... you get an unfriendly panel and you're screwed.

My brother got frustrated with the process and switched careers to IT - which paid a lot more. My BSEE from a lesser rated school (SDSU) paid off a LOT more than his Masters in Architecture from UC Berkeley.

Also - the high brow aesthetics that people associate with architects is not the reality. Some of DH's big projects include wonderous things like airport bathrooms, hospital elevators, nursing home break rooms/hallways. Not the type of thing you imagine when you decide to go into architecture.
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Old 12-13-2014, 09:51 AM   #109
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My mega energy company says I could get severance and retire early at 53. If I did that, I would have $3.1MM total. I'd get $23k/yr SS at 62 in today's dollars and my wife would get $9k/year SS when I'm 67. We have twins who go to college next year and assuming that will be $200k over 4 years. We spend $140k/yr right now and my retiree medical would add another $8k/yr on top of that. I ran cFIRE and I think it only had a 70% sucess assuming we could get it back to $140k spending.

The thing is that, if I stay, it takes me 1.5 years here to get to the same $3.1MM I could get right now with the severance. So I'm thinking maybe leave now and have that time for myself?

What do you think?
Sounds like you need to work until age 60 and get your pile of cash to 5 million or maybe more depending on the markets.

If you were forced into retirement you have enough at 2.9 million but you are a spender and live on the high maintenance side.

Working to age 60 gets you to broke proof and a no worry retirement.

It's not like age 60 is old.
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Old 12-13-2014, 10:06 AM   #110
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I'm married to an architect and my brother was an architect. You are right that it is not as lucrative as many would think. When you graduate you have several years before you can take the licensing/registration exams. During that time firms often pay very poorly. The exams taken 5 years out - have a very high failure rate (I believe even higher than the PE exam). You can't seal/stamp drawings till you have passed these exams. California adds an additional oral exam layer on top of this which is highly subjective (vs objective)... you get an unfriendly panel and you're screwed.

My brother got frustrated with the process and switched careers to IT - which paid a lot more. My BSEE from a lesser rated school (SDSU) paid off a LOT more than his Masters in Architecture from UC Berkeley.

Also - the high brow aesthetics that people associate with architects is not the reality. Some of DH's big projects include wonderous things like airport bathrooms, hospital elevators, nursing home break rooms/hallways. Not the type of thing you imagine when you decide to go into architecture.
Thanks for confirming my past information on Architecture.

From what I recall, about 60% of the people that take the PE exam in Texas pass. However, about 80% of the people that take the exam pass it on their first try. The obvious conclusion is a lot of people take it over and over and don't pass. These are primarily people with non-US engineering degrees that are trying to increase their credibility. Buying grades outside the US is not uncommon from what I've heard so there is always a question mark in some people's minds. Most US hiring managers also don't know what the better schools are in Asia.

I will amend my earlier comment on the value of a PE. You definitely need one if you are going into any type of structural engineering. Various disciplines get involved with structure work so I can't just say one type. Structural drawings are almost always stamped by a PE. Companies strongly prefer hiring PEs in this area.
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Old 12-13-2014, 10:21 AM   #111
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I would take that severance and run...in a heartbeat. You are essentially getting a free 1.5 years of your life paid for while not working. Worst case scenario, you get another job or a part time gig, but I imagine you'll find someway to live on a sub 4% withdrawal rate -- kudos for being a multimillionaire living in a $250 k house.

And if you stay at your job there's no guarantee that you make it to your 1.5 yr break even point.

Someone else mentioned that you should take your free year and a half and spend it with your kids before they go to college. That time you spend with them is probably going to be worth a lot more to you than the 5-10 % additional uncertainty of retirement success.


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Old 12-13-2014, 10:31 AM   #112
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.

I will amend my earlier comment on the value of a PE. You definitely need one if you are going into any type of structural engineering. Various disciplines get involved with structure work so I can't just say one type. Structural drawings are almost always stamped by a PE. Companies strongly prefer hiring PEs in this area.
As an EE I didn't see the value in the PE... But two of my peers got them. One was designing power systems for chip fans and the other worked for UL. Not really necessary in embedded software which is what I did.

Its totally necessary in structural though.




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Old 12-13-2014, 10:47 AM   #113
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From what I recall, about 60% of the people that take the PE exam in Texas pass. However, about 80% of the people that take the exam pass it on their first try.
Interesting numbers
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Old 12-13-2014, 12:47 PM   #114
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I would take that severance and run...in a heartbeat. You are essentially getting a free 1.5 years of your life paid for while not working. Worst case scenario, you get another job or a part time gig, but I imagine you'll find someway to live on a sub 4% withdrawal rate -- kudos for being a multimillionaire living in a $250 k house.

And if you stay at your job there's no guarantee that you make it to your 1.5 yr break even point.

Someone else mentioned that you should take your free year and a half and spend it with your kids before they go to college. That time you spend with them is probably going to be worth a lot more to you than the 5-10 % additional uncertainty of retirement success.


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+1

If the OP is being told about the possibility of a severance he is probably at a high risk of being laid off. The decision would then be made for him as to whether to take the pension or not. The question then becomes whether to look for another position. In the engineering business it's not usually wise to take an extended amount of time off because it becomes hard to be taken seriously when trying to find another position.

What was not mentioned was whether mega corp offered a pension or not. The OP may have a defined contribution plan which would be included in the $3.1MM.

I have trouble figuring out what the OP spends $140k/yr on since it obviously isn't going to feed a McMansion which was my original assumption. He lives in a cheaper house than I do and my basic expenses are way under his. My next guesses are private school for the twins and expensive school activities. Even two teenage boys can't eat that much. I don't know if I could spend $140k without just buying a couple of new cars and ramping up the vacation spending. I think that DW and I live pretty well and our expenses ex income taxes and heath insurance are ~$50k/yr. Next year with HI, I'm looking at ~$60k until Medicare kicks in.

This is one of several posts where people in the O&G business are talking about lay offs and severance packages. I definitely see the contraction in work where I am at. Our Upstream business is getting slammed pretty hard but there haven't been any major lay offs. We're seeing a trickle of people leaving and many are going to other companies. Unfortunately, there are no severances at my place so the best anyone can look forward to is the ~$430/week the State of Texas distributes. I'd take it but I doubt I will be so lucky.
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Old 12-17-2014, 01:43 AM   #115
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OP probably won't qualify for a ACA subsidy since he plans on spending well over 60K per year.
He also should not worry about disability insurance, as there will be no job earnings to replace. Same with life insurance.
His financial planner will be sad to hear that.
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Old 12-17-2014, 03:56 PM   #116
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Our family also has teen twins and high expenses, but I would not be comfortable with that asset to spend rate. Consider using ESP planner to refine your projections. I found it very useful in helping me estimate how my spend rate might change as the kids went to college and how expenses might drop after they left home.
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Old 12-17-2014, 04:42 PM   #117
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....and good luck with your decision! If it helps, our expenses are higher than yours. They have gone up a great deal in the last four years, mostly remodeling and family travel. ESP planner modeling might indicate that you don't have to cut as much as you think.
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Old 12-19-2014, 08:08 PM   #118
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Yes, You Can Retire Now!

Congratulations! $3.1M is plenty. You have money. Now you're likely realizing that time is far more valuable. I wouldn't spend another minute trading common money for priceless time.

I retired 5 years ago at age 52 with no IRA, 401K or retirement account. I just bought already existing, 95% passive income properties that generated enough to pay all their expenses, their mortgage, a manager to run them and all my personal bills too. Today, I just manage my managers for a few hours each week.

I bought one large property with just $1,000 down and another with 30% down. Specifically, I bought mobile home parks. The best ones rent lots only so there are no dwellings to repair, and virtually no turnover because trailers are expensive to move.

I like physical income properties because most paper assets (including retirement accounts) are losing purchasing power despite your account statement showing a gain. Low interest rates, high inflation and unfair taxes are a toxic brew that make most paper assets losers today.

Most retirement accounts are earning 4% or less. REAL inflation is nearly 10% (ShadowStats.com) because the feds keep changing the formula to make it look better. So unless your "gain" is 10%, you still have a large purchasing power loss. Worse, the IRS doesn't recognize inflation so you are taxed on your "gains" that are actually still purchasing power losses. See DanielAmerman.com for a full and great explanation. He says not one in 10,000 investors realizes what's happening.

So with your huge $3.1M nest egg, you can easily buy a 95% passive income property that will generate $140K a year. Better yet, due to legal depreciation deductions, you'll be taxed at far less than this amount. Many income properties pay very little or even no taxes due to depreciation. That solves the unfair tax problem.

If you buy your income property with borrowed money at a fixed rate, you'll repay that loan with cheaper and cheaper dollars each year. Inflation hits your lender far more than it hits you. And remember that your tenants are paying that loan for you. You'll also be able to raise rents each year to help offset more inflation. This solves the high inflation problem.

Finally, because you control the income stream, you can increase your profits by raising income, cutting expenses or buying another income property. This eliminates the low interest problem.

With this plan, you never have to spend your $3.1M unless you want to. You may use some of it for a down payment (20% to 30% down on an income property is typical) or if you get creative, with your net worth, you could likely get it all financed 70% to 80% by a bank and 20% to 30% by the seller. Or, if you're very conservative, just buy the property outright with cash. But inflation will eat you alive if you pay cash.

In today's world of financial repression, low interest rates, high inflation and unfair taxes make saving and investing a loser for most people. I realize this is against conventional wisdom. But if you keep following the herd, you'll go over the cliff with the rest of them. Become your own expert. The math shows that most people's savings are melting, not growing.

It's also wise to remember that until you actually collect that $3.1M, it's just a promise to pay, not the payment itself. You've given them real money, but so far, they've only given you a piece of paper with big numbers on it. If you can't touch it, you don't own it. That's one more reason to own an income property that you can touch and control. It generates real, tangible income that goes into your pocket each month for providing a service people willingly pay for. You're in control. The risk is low if you buy an existing, profitable income property with a good track record.

A final reason to consider income property is that it sells for about 10 to 14 times annual net operating income (NOI). This means that every dollar you improve profits makes the property worth $10 to $14 more. So you gain the benefits of high appreciation (capital gains investing) AND high monthly income (cash flow investing).

If the value of your park goes down due to economic conditions you still have your high monthly income stream. If your paper investments go down, you just have to take the loss.

Congratulations on amassing the nest egg. Hanging on to it, however, is going to take more work and self-education. In today's volatile world, we can no longer just set it and forget it.

For me, I think 95% passive income is a good enough retirement plan. I'm willing to use 5% of my waking time to protect my investments. Income property also greatly compresses time. I did not have to work 40 years to amass a huge nest egg to live off the earnings. I just bought the passive income streams others tell us we must work decades to earn. By buying just one large enough and profitable enough income property, anyone willing to self-educate could retire within 12 months rather than working for decades. And as I started with, once you have money, you realize that time is by far your most valuable asset.

Good Luck!
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Old 12-19-2014, 09:45 PM   #119
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OP, I have to respectfully challenge your belief that you can't reduce your expenses. You sound like you've decided to be helpless about how much money your family spends. This helplessness is learned, and I strongly encourage you to un-learn it. The more you're convinced that you "need" a certain level of spending, the more someone else has control over your life.

Otherwise, you need to work longer. Those are pretty much your only two options.

I recommend Googling "frugal living" - you'll find a TON of ideas, some of them actually useful.
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