Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Escape Plan
Old 03-05-2011, 12:22 PM   #1
Recycles dryer sheets
INTJ10's Avatar
 
Join Date: Feb 2011
Location: Tampa Bay Area
Posts: 52
Escape Plan

Hi, long time lurker here. I appreciate the information and advice on the forum. I thought I would introduce myself and ask a couple of questions.

I am 53. I was laid off from megacorp about 4 years ago. Fortunately, I was able to reinvent myself into a consultant and pretty much matched my previous income. The problem is that I just don't like it anymore. It isn't bad work, but I have been doing the same sort of thing for over 30 years and enough is enough. So I am trying to figure out an escape plan.

Wife and I have enough money put away to get the kids through college. We figure we need ~$45k per year to cover the essentials and $120K per year to match our current lifestyle. I included $12k/yr for health insurance. We have a couple of million stashed in 401k/IRA's. Wife works, makes plenty and likes the work. Unfortunately, the company is not stable enough to count on and the local job market is very tight so that adds uncertainty to our plans.

According to Firecalc, if we could both hang on for 4 more years we are all set. So that is option 1. Firecalc also says we could with draw out $60k per year until SS kicks in and draw out enough from then on to reach the $120K per year goal. I call this option 2. Option 2 means that one or both of us could get by with a much lower paying job. That leads me to my question.

I have an MBA, engineering degree, have taught college courses and I am fairly handy in manual skills so I am pretty open to a variety of jobs. Ideally, I would like something part time or with a lot flexibility of hours. I haven't figured out exactly what job I want but I have some ideas.

Have others found that the ability to work for a lower salary ($30K/year) has enabled them to find a vocation that is somewhat fun? Has anyone else successfully implemented this "escape plan"? Are there other escape plans you can suggest?

Thanks in advance.
__________________

__________________
INTJ10 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-05-2011, 12:41 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,983
This site might be helpful Civic Ventures :: Home.

Or here's a 28 page summary http://www.encore.org/files/PDFs/guide/encore_guide.pdf

I thought the book Encore (same people) was a good read...
Attached Images
File Type: jpg 1586484834.jpg (17.3 KB, 511 views)
__________________

__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 03-05-2011, 09:03 PM   #3
Recycles dryer sheets
OrcasIslandBound's Avatar
 
Join Date: Mar 2010
Location: Poway, CA
Posts: 441
Congrats INTJ10 on being so far ahead of the game! You're significantly ahead of me, but we hope to retire on a lot less per year (~50 - 60K). If I read correctly, your goal is $165K per year.

I too would like to dabble after "FIRE" (in about 3 years). However, I don't have any interest in doing a $30K/year part time job for yet another megacorp, and I'm a little surprised that you would like this. I suspect, being the go getter that you are, you wouldn't stay with some sort of part time position for junior megacorp for more than a year before you got bored with it. Unless, by some miracle, it was a tiny nitch part time job in a start up that you are suddenly in love with. Of course, while being totally fun, this would quickly develop into a 60 - 80 hour "part time" job.

I suspect that you would have a lot of fun being a bit of an inventor out of your garage, or some other kind of entrepreneur besides consulting. And, I also suspect, there are lots of ex-engineers-MBAs out there who are similar. Does this sound even remotely interesting to you? It certainly is to me, but with an expectation of zero income forever. I'd love to be pleasantly surprised though.
__________________
OrcasIslandBound is offline   Reply With Quote
Old 03-05-2011, 09:40 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Quote:
Originally Posted by INTJ10 View Post
So I am trying to figure out an escape plan.

Wife and I have enough money put away to get the kids through college. We figure we need ~$45k per year to cover the essentials and $120K per year to match our current lifestyle. I included $12k/yr for health insurance. We have a couple of million stashed in 401k/IRA's. Wife works, makes plenty and likes the work. Unfortunately, the company is not stable enough to count on and the local job market is very tight so that adds uncertainty to our plans.
The numbers appear to say you are there.
Can you post your detailed budget for the 120K/yr in expenses and more details for your financial situation - home value, mortgage remaining, net worth.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 03-05-2011, 10:00 PM   #5
Full time employment: Posting here.
 
Join Date: Apr 2008
Posts: 702
Hi,

Welcome to the forum. I work P/T at a lower paid job that I once had at a rate of 35k per year working 4 morning a week. I started doing this about 5 years ago when I was 53.

It has worked out well for me as I still get FT benefits including health insurance. I am starting to think more seriously about pulling the plug altogether, however, the computer software development work that I do is fairly easy yet challenging at the same time.
__________________
FreeAtLast is offline   Reply With Quote
Old 03-06-2011, 12:21 AM   #6
Full time employment: Posting here.
urn2bfree's Avatar
 
Join Date: Feb 2011
Posts: 711
As I read your post I had to double check and make sure I had not written it...Well not exactly...I am in another profession and a little younger but the other details are pretty close as is the desire to get out but maybe not completely....I was contemplating learning to be a travel agent....Anyone know how that has worked out for people? Chances to travel at a discount? Part time options? I do a lot of travel planning for our family and advise others. I read about travel and am a good student. I think I could pick up the license fairly easily. I would be taking a huge pay cut--like 90%--Is this crazy?
__________________
urn2bfree is offline   Reply With Quote
Old 03-06-2011, 04:33 AM   #7
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
Hello INTJ10 - I am pretty much in the same situation. Bored with my job, and planning to retire next year (age 47), do a lot more volunteering and maybe find a part time teaching position for 20-30k / year. It is very difficult to make the mental jump though.
__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Old 03-06-2011, 09:08 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Quote:
Originally Posted by INTJ10 View Post
...
Wife and I have enough money put away to get the kids through college. We figure we need ~$45k per year to cover the essentials and $120K per year to match our current lifestyle. I included $12k/yr for health insurance. We have a couple of million stashed in 401k/IRA's. Wife works, makes plenty and likes the work. Unfortunately, the company is not stable enough to count on and the local job market is very tight so that adds uncertainty to our plans.

...
Are you sure you need $120k/year for your lifestyle? Did you do a thorough job of analyzing your current expenses? There is a cost to working, you stop paying FICA, etc.

Plus, you should do a thorough analysis of each of your current expenses to make sure you are not over paying for certain expense today (e.g., lower cost substitutes).

If you have really tackled the expense side and it take $120k/year... the next step is to determine if there is any part of you current lifestyle that really do not make a big difference to your happiness (i.e., continuing to buy stuff that is not really needed or perhaps even wanted). Next, are there any services that you pay for around the house that you would not mind doing in retirement. For example, if you have a yard service.... can you do it yourself (since you have the time) and save a few shekels?

You will need to "balance the books" somehow... there are only a few ways to do it (that do not depend on luck).... reduce spending, increase you resources, or a combination of the two. I would not recommend relying on luck!


The decision is different for everyone. I am conservative... I would rather work 1 more year to make sure I am really done with w*rk rather than stop w*rking now and assume some risk that I might need to go back to w*rk later.
__________________
chinaco is offline   Reply With Quote
Old 03-06-2011, 10:18 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,627
The discrepancy between essential $45K and actual lifestyle $120K is extremely large IMHO. As others have written, you have to get a handle on that. If $50K of lifestyle is to pay a year of private college or is donated to charity that's one thing, but if you are leasing BMW X5s or Porsche Cayennes for you and every family member and playing golf 3 times a week, then that's another matter.

In our case the essentials would cover housing, utilities, autos, all insurance, food, clothes without having to move to a lower cost of living area. Discretionary would be eating out, pets, most travel, most entertainment, charity, hobbies, most gifts. Maybe we need a poll to see the ratio of essential to discretionary that folks typically have?

As for working for a lower salary: I semi-retired when I was age 50. I worked at the same pay rate, but cut my hours in half for the same company. It made my job much more fun as I dumped some buckets. So perhaps you don't need a part-time job in a completely different vocation?
__________________
LOL! is offline   Reply With Quote
Old 03-06-2011, 10:35 AM   #10
Recycles dryer sheets
 
Join Date: May 2010
Location: SW Ohio
Posts: 360
I also entertained the idea of doing something else after 30 years in the same profession. However, most jobs that you have little experience in start out at entry level salary, so you still need to work 40/week to show up with anything meaningful in your take home pay.

You are on the right track with consulting in your chosen field. You/I still want to get the highest hourly wage any time you/I leave the homestead.
For me this is accomplished via working in the profession I have the most knowledge and experience in. Pick and choose the jobs and time frame you want. There are a lot of companies that could use your experience and productivity for 3-4 months then would be just as happy if you go away for 3-4 months until they need you again. Drop down to 3-4 days per week. Present it as a cost savings for the company.

My escape plan was figure out the least number of months a year you need to work (3 for me) based on your wife working, your expenses, and fixed income from my stash. I also do this assuming $8-10/hour for my 'dream job' so I can compare the opportunity cost in lost free time.

So far, in my case, the highest hourly rate with the least time working
trumps my dream job.
__________________
jayc is offline   Reply With Quote
Old 03-06-2011, 03:31 PM   #11
Recycles dryer sheets
INTJ10's Avatar
 
Join Date: Feb 2011
Location: Tampa Bay Area
Posts: 52
Wow, thanks for the responses. The different perspectives are very helpful. The encore career website has some good information.

A couple of people asked for more details about the budget. We looked at our fixed monthly bills including taxes, insurance (home, auto, life, health), food, clothing, utilities (gas, electricity, cable, telephone, cell phone, internet), car gas that comes to about $48k/yr. The difference between $120K goal and the $48K is discretionary/variable stuff like income taxes, car maintenance/replacement, eating out, vacations, gifts, health club, home improvement and charities. We make about $200K now and save about $65K so I guess we live on about $135k now. We don't have any debt. We do spend a fair amount on the kids (private colleges).


There are a lot of moving parts in a retirement plan so we decided to settle on $120K/yr as the income target and build our plans around that. We could get by with less but in my mind there are some pretty big uncertainties in health care costs and social security so I will sleep better with a bit of a cushion. We are counting on about $20k/yr apiece for social security when we hit 62 in 2020. Given $40K from SS we need about $80k/year from assets.

We live on a farm in a renovated farmhouse which is paid for. I am not really sure what it is worth (maybe $300K). We don't want to move and the taxes are reasonable. I would love to figure out a way to make some money "off the land", that is one of my retirement projects.

Like I said, according to firecalc, I can draw out some money until I hit 62 and still make my plan work but I can't quite call it quits yet. So I am wondering if a career transition/downsizing would make my last few years more fun. The advice so far seems to be leaning towards just reducing the hours in my current field rather than a transition. That makes a lot of sense. I had the notion that a fairly dramatic career change would energize me but it doesn't seem that anybody has had the experience.

Again, greatly appreciate the opportunity to kick around my thoughts on this with others.
__________________
INTJ10 is offline   Reply With Quote
Old 03-06-2011, 03:58 PM   #12
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,677
Buy a copy of turbo tax and see what your taxes will be if you stop working. They may drop substantially. Good spot to be in. All the best.
__________________
walkinwood is offline   Reply With Quote
Old 03-06-2011, 04:02 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,627
With your portfolio, you should probably spend it down and not start SS until age 70, or at least at FRA and not at ages 62. It may also be possible for you to convert 401(k)/IRA funds to Roth IRAs at a low tax rate between early retirement and age 70 when you start SS.

You should really figure out your tax situation at various ages. You should be surprised to find that your taxes might drop to under $5K most years in retirement. I'd guess today that you pay under $20K a year in taxes.
__________________
LOL! is offline   Reply With Quote
Old 03-06-2011, 04:38 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
I think you need to work on a detailed budget.

Track you actual spending then adjust up and down for post retirement lifestyle.


Quote:
Originally Posted by INTJ10 View Post
A couple of people asked for more details about the budget. We looked at our fixed monthly bills including taxes,

Quote:
Originally Posted by INTJ10 View Post
insurance (home, auto, life, health),
Check on the need for life ins. Most of the time life ins is needed to replace the income of the person who died. If one of you die you have enough assets for the remaining person.

Life ins 5K??

120K to 115K

Quote:
Originally Posted by INTJ10 View Post
food, clothing, utilities (gas, electricity, cable, telephone, cell phone, internet), car gas that comes to about $48k/yr.

Quote:
Originally Posted by INTJ10 View Post
The difference between $120K goal and the $48K is discretionary/variable stuff like income taxes,
Taxes on your earned income should be eliminated. If you are earning 200K apx 40 - 50K (?) can be eliminated. 115K now 75K?

Quote:
Originally Posted by INTJ10 View Post
car maintenance/replacement, eating out, vacations, gifts, health club,home improvement and charities.
How about taking care of charities in your will? 5K?
75K to 70K


Quote:
Originally Posted by INTJ10 View Post
We make about $200K now and save about $65K so I guess we live on about $135k now. We don't have any debt. We do spend a fair amount on the kids (private colleges).
Are you double counting the kids' college costs?

From your first post:

Quote:
Originally Posted by INTJ10 View Post
Wife and I have enough money put away to get the kids through college.
10K for the kids ? 70K to 60K?
Add money back for retirement activities?


What do you think?
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 03-06-2011, 07:09 PM   #15
Recycles dryer sheets
INTJ10's Avatar
 
Join Date: Feb 2011
Location: Tampa Bay Area
Posts: 52
Dex and all, good thoughts. I really haven't done any tax forecasting. I do use TurboTax and we are paying about $38K between State and Federal taxes so that could make a difference. Last year I put about 1/2 of my 401K contributions as Roth 401K so I am paying the price now in terms of taxes. I thought it would be a good idea to have some tax exempt money in the portfolio but I am questioning that decision now. Maybe LOL!'s approach is a better way to do that.

My life insurance premium is $32/mth so that won't make much difference. Your right though it is not really needed.

That is an interesting approach to charities, hadn't thought of that.

Somehow we spend a lot on the kids even beyond the college. It would be a good idea to plan it better.
__________________
INTJ10 is offline   Reply With Quote
Old 03-06-2011, 10:41 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,627
I've been working with TurboTax today. Our gross income is above $200K this year, but our Federal income tax will be under $20K. I thought you wrote that you are self-employed, so you should be able to have a nice self-employed tax-deferred retirement plan going ($49K) and your wife should be able to put $22K away tax-deferred. Besides state income taxes, I guess you are including FICA/medicare taxes in your $38K?

By deferring so much and other tricks, you should be eligible for Roth IRA contributions as well.
__________________
LOL! is offline   Reply With Quote
Old 03-07-2011, 07:13 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,490
As others have posted your taxes will likely be much lower. If you use TurboTax of similar software, do a "what-if" of your taxes taking out your consulting income and your wife's earnings but leaving in dividends, interest, etc and adding any IRA or 401k withdrawals (where applicable). I suspect thay you will see your taxes decline dramatically since much of your "income" in retirement will be principal withdrawals. I know my taxes will be a small fraction of what they are now when I retire.

Have you considered dialing down your consulting to 50% time? I currently work 50% time and the flexibility makes a huge difference. Might be worth a try for a while. But it is still work.

Like others, I agree that the non-discretionary spending/discretionary spending seems a bit out-of-whack compared to what I would have expected so you may want to scrutinize the budget.

You mention that you have a small farm. We have friends who have a large garden that provides much of their food during the spring/summer/fall. If you enjoy gardening that might be a possibility. BIL has a small farm with chickens and some beef cattle as a hobby that provides much of what they eat - they also sell hay and deduct the costs of fuel, equipment, repairs for taxes. Or you might consider boarding horses.
__________________
pb4uski is online now   Reply With Quote
Old 03-07-2011, 09:33 AM   #18
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
For a second career, consider teaching. Shorter work weeks, 2-3 months off in summer, paid health care, and possible a pension added to income depending on how long you stick with it.

For the expenses, I would get detailed (as others have mentioned). I would also boost taxable savings over next 3-4 years. This will lower taxes in retirement any year the taxable accounts are used for income.

I would also learn more about Roth conversions as a way to "save" on taxes over next 40 years.

I would also look into ideas to tap land for income- could be running a business or similar. I have a friend with 25 acres and he liked some of my ideas, but he did not have the time to pursue them. It depends on what part of country you are in and how the land is set up as to what makes sense.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 03-07-2011, 11:11 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,627
Quote:
Originally Posted by pb4uski View Post
As others have posted your taxes will likely be much lower. If you use TurboTax of similar software, do a "what-if" of your taxes taking out your consulting income and your wife's earnings but leaving in dividends, interest, etc and adding any IRA or 401k withdrawals (where applicable). I suspect thay you will see your taxes decline dramatically since much of your "income" in retirement will be principal withdrawals. I know my taxes will be a small fraction of what they are now when I retire.
This is very true. This is also why a Roth 401(k) probably does not make sense. You are paying at a high marginal income tax rate on those contributions now. However, if you did not use the Roth 401(k), you would contribute pre-tax (i.e. 0% tax) and then in retirement withdraw at an average rate of say 10% or less. So if you are in the 25% marginal income tax bracket now, that's a savings of more than 15%. You need to run the numbers.

See also: The Case Against Roth 401(k) - The Finance Buff
__________________
LOL! is offline   Reply With Quote
Old 03-07-2011, 11:57 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by jIMOh View Post
For a second career, consider teaching. Shorter work weeks, 2-3 months off in summer, paid health care, and possible a pension added to income depending on how long you stick with it.
Unless you're talking about teaching at the post secondary level, there are a lot of barriers to entering the teaching profession. The main one, of course, is getting a teaching certificate which requires taking several courses and doing student teaching. Rumors of school districts snapping up anyone with a 4 year degree and sponsoring them for a provisional certificate are greatly exaggerated. More likely, you'd be hired as a minimum wage laborer to help move around the mountains of resumes they have from highly qualified certified teachers looking for the same job you are! The competition is fierce.

Perhaps you have the necessary credentials in place and connections to get yourself hired. But generally, for the average citizen, teaching K - 12 is hard to get started in and rarely happens for older job seekers.

OP mentioned past experience teaching college courses already on his resume, That's a more likely possibility. Here in the Chicago area, pay levels for adjunct faculty aren't impressive and the work frequently involves teaching evenings or weekends, but it would have to be better than flipping burgers or other menial work.
__________________

__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Escape Artist dead? Ed_The_Gypsy Life after FIRE 8 07-07-2008 09:30 PM
U.S. Will Escape Recession in 2008 Retire Soon FIRE and Money 38 03-16-2008 05:09 PM
New Vehicles ? Escape Hybird & Fusion, Input Wanted frayne Other topics 12 05-07-2007 10:53 AM
Real estate escape question queeneev FIRE and Money 16 02-04-2007 10:26 AM
Lucky Escape Last Week, and then some. ShokWaveRider Life after FIRE 27 04-07-2006 11:28 AM

 

 
All times are GMT -6. The time now is 08:53 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.