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Hi everyone...
Old 02-23-2007, 03:02 PM   #1
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Hi everyone...

Hi everyone…

My DH (age 46) and I (age 37) are hoping to retire in about 4-5 years. We are both IT professionals working for MegaCorp, (both for the same company). We are paid decently and are big believers in LBYM – so we’re able to save almost half of our after-tax income for the future, plus doing all the good stuff like maxing out 401(k)s and saving for two children’s college funds. We have no debt on cars and have finished paying off the house this past year (woo-hoo). We are about half-way to saving to the magic number that, in our minds, represents financial freedom. In short, I think* (disclaimer) that we are doing most things right financially.

So, what keeps me up at night? (Mind you, this isn’t all that bad a problem to have, but it still worries me). About 30% of our wealth is in MegaCorp stock, in the form of unvested stock options and unvested stock grants. So, it is money I count on for the future, but am also a little afraid to count on, because it’s a lot of eggs in one basket – and we can’t diversify it. MegaCorp is currently considered a solid company and is in a regulated industry, but still… if it slips, our portfolio goes with it. We plan to keep working there until we retire. Hopefully MegaCorp plans to keep us, in this time of IT off-shoring, one can’t always be sure.

My other big question for the future is health insurance. While MegaCorp currently offers its retirees the chance to participate in their group health insurance plan (at the retiree’s full expense, of course), I’m just waiting for them to yank that like so many other benefits that have gone by the wayside. Somehow, I expect that health insurance will be my biggest expense in the early retirement world, but I haven’t been able to quantify it. I’ll be looking to that section of the boards a lot, I think.

Thanks all…
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Re: Hi everyone...
Old 02-23-2007, 03:34 PM   #2
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Re: Hi everyone...

Start looking for your own health plan now. If you're healthy, you could likely save money over your group plan that you're paying for now. Lots of good info. on high deductible health insurance policies & HSA accounts on this site, without going into the details I think you'd be wise to consider one. Any chance you're in MN ? If so I could point you where I have mine.
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Re: Hi everyone...
Old 02-23-2007, 07:54 PM   #3
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Re: Hi everyone...

Welcome to the board, Charlotte!

Sounds like you're in great shape. Not much you can do about unvested assets except to divest & diversify as soon as possible.
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Re: Hi everyone...
Old 02-23-2007, 08:54 PM   #4
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Re: Hi everyone...

Hey Charlotte,

Welcome aboard. We look forward to many posts from you in the future.
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Re: Hi everyone...
Old 02-24-2007, 04:40 AM   #5
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Re: Hi everyone...

Theoretically, you could purchase "insurance" on your Megacorp assets by buying put options on the company stock. If the company share price falls, your puts rise in value, offsetting your loss. Of course, if the share price rises, which it is likely to do on average, your puts lose value/become worthless. So you reduce both risk and return. And you pay transaction costs and have to roll your puts over every nine months or so. I suspect hardly anyone does this, except maybe folks on this forum.
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Re: Hi everyone...
Old 02-24-2007, 05:21 AM   #6
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Re: Hi everyone...

Empty pockets - I live in NC, and currently pay (through my employer) a about $275/mo. for a pretty comprehensive health insurance plan with a $300 annual deductible (that's for 2 adults and 2 children). Of course, the company is putting in about $400/mo. towards the health insurance, I think its full cost is around $700/mo.

After we reach the "rule of 60" (age plus years of service), we can retire, and still participate in group health with Mega at the full price of .... presumably $700/mo. But I read somewhere on the boards, that sometimes retirees form a separate pool from the employees at some companies, and pay higher rates to reflect that. I will have to do some research about how it works at my company.

Thank you all for your welcome. I'm certainly glad to have found these boards, there's a wealth of info & opinions out here.
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Re: Hi everyone...
Old 02-24-2007, 06:40 AM   #7
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Re: Hi everyone...

Well, it looks like you've got a better health plan than you could get on your own. But, don't let that stop your ER plans, you can get health ins. on your own, start looking a year or so in advance. I'd still recommend the HSA option. My wife & I are in our 40's with two kids, we pay $408 a month for a $4,300 family deductible. Also contribute the max. to a HSA. Since I'm self employed this is all deductible. Even if not self employed, the HSA is deductible. I'm hoping that Health Ins. premiums will be deductible for everybody by the time I ER.
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Re: Hi everyone...
Old 02-24-2007, 08:02 AM   #8
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Re: Hi everyone...

Quote:
Originally Posted by Lifeisgood
Theoretically, you could purchase "insurance" on your Megacorp assets by buying put options on the company stock. If the company share price falls, your puts rise in value, offsetting your loss. Of course, if the share price rises, which it is likely to do on average, your puts lose value/become worthless. So you reduce both risk and return. And you pay transaction costs and have to roll your puts over every nine months or so. I suspect hardly anyone does this, except maybe folks on this forum.
I'd second the suggestion to buy put options. Depending on the company, you could do current-year puts, or even buy long-term puts (to try and match up when your options expire/vest). The only problem is, I think long-term options expire on January of each year, so you can't get exact...but it's definitely cheap 'insurance' given your exposure to company stock.

The only problem is, put option price movements aren't perfectly correlated to stock price movements (given the time value). So, if your options vest/expire in June 09, and you were to buy a Jan 10 put, the stock could drop 10 points, and your put could only move 5 points (depending on how far from the strike price the stock price is). But, as my grandfather used to say, "it's better than a zero".
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