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I've got 2 million in an ESOP, I hate my job
Old 12-16-2007, 11:41 AM   #1
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I've got 2 million in an ESOP, I hate my job

But I like making the $$$:confused:

I'll be 39 in January, things are going very well for my company.

If I stay there all of next year I can expect to make at least $100,000 in salary and bonuses. And possibly another $500,000 to $800,000 in stock

The problem is I'm gonna have to work my ass off for 55-60 hours a week at a job Im truely beginning to hate

I know cry me a river

Lately I think more and more about quiting and moving down south somewhere.

Id get a decent house with a good sized lot, near water.

Id need a big pole barn to put all my toys in. Im into dragracing, and boating two VERY expensive hobbies

I think i could live pretty comfortably on $60,000 to $80,000 a year in a house that was paid off though...

Im also pretty sure Id get another job, but something a lot more light duty/part time/flexible and with some kind of health insurance...

I cant see me doing this job much longer, it will be 18 years in march.

Im at the point now where Im trying to figure out investment and tax strategies.

First of all the nest egg is all tied up in an ESOP, when I quit all of the stock gets sold back to the company.

They hold the $$$ for a year before Id get it.

I also have a 401 k with the same company, they deposit the ESOP $$$ in the 401 k when I quit.

I would have control over the investments in the 401 k while Im waiting.

I also have and IRA I've been funding, I'll need some $$$ to live off of while Im waiting for the ESOP $$$

I have $48,000 in there now in a 3.2 % money market account, Im gonna look into something safe with a better return for the quit fund though...

I would then assume I should do a direct rollover into an IRA

One thing that sucks is I will pay a 10% penalty on anything I withdraw from the IRA

Another thing thats got me worried is buying the house.

Lets say I find the dream castle somewhere for $250,000 and I pay cash for it...

Im thinking Im gonna get SCREWED on taxes:confused:

$250,000 + another $45-$60 K in income in one year, plus the 10% penalty...

I have a house I will sell most likely after I move to the new place

I could sell it before hand and use the proceeds Im guessing $90,000 for a down payment and a mortgage instead of paying cash for a house

Im thinking If I work one more year I could make enough to pay for the house plus the taxes

That leaves me with $2,000,000 to invest and withdraw a max of $80,000 a year...

Am I missing something here, or do I have it made allready
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Old 12-16-2007, 11:56 AM   #2
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One thing that sucks is I will pay a 10% penalty on anything I withdraw from the IRA
Not necessarily: search on SEPP.
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Old 12-16-2007, 11:59 AM   #3
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Besides your salary, and small savings, all your funds are tied up in accounts held by your employer.

You're correct that once the money becomes available you look to be in a pretty decent financial position -- given the info you've provided. But not right away.

You're worried about where you will get cash to live on, and how you will buy a house.

You're worried about what to do with the 401K once you leave.

You're funding an IRA, but know that you'd probably want to draw on it for living expenses, but it will be subject to penalties.

So, time to make a more detailed plan.

*Start with how you can build up emergency funds in taxable accounts in order to fund your new life. >>This is the most important thing you have to do right now.<<

*Think about the asset allocation you need for all you're investments (IRA, 401K, Savings, etc.) long-term to fund the costs of your new life, should you decide to work in the future.

*Should you rollover your 401K? It depends on the rules your company has set and the investments available to you in the 401K -- if they are more limited than you like, then yes, you'll want to roll it over at the appropriate time.

Putting some focus on this may help with how you feel about your current job. You're making plans to take you past your current employer.
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Old 12-16-2007, 12:07 PM   #4
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If they're putting the ESOP into a 401K, you'll get hit with 10% on anything you withdraw out of it too.

If it were me I'd be trying to save as much as possible outside of retirment funds to bridge the gap until you hit 59 1/2 to avoid the 10% hit as much as you can.

Try to come up with a firm retirement budget. If it's really $80K (and it could be more if you haven't considered everything, like health insurance, periodically replacing cars, home repairs, etc), you are looking at a 4% SWR. While that's in the guidelines, at a young age retirement age there's probably some risk in that. (OK, I just reread and see that you are talking about a part-time job, perhaps with health ins, so you'd probably be ok).

If you're truly looking to quit because you don't like the job anymore, make a list of what is bothering you the most and see if you and your boss can come up with a plan to fix it. I think you need to weigh what another year or two at the current job is worth compared to maybe 10 years in a lower-stress, lower-paying job.
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Old 12-16-2007, 12:28 PM   #5
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You post you "think" you could live on 60 - 80 K/yr. If you've followed this forum for awhile you should realize that you need to "know" just how much you need per year. Please take the time and do an honest assessment of your projected retirement expenses. Once you have a number that is well grounded move on to figuring out if what you have will last for the rest of your life. If so bail and enjoy
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Old 12-16-2007, 12:40 PM   #6
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Also, if there's any possible way to do it, get that money out of your company stock and into something more diversified!!!

Your retirement is FAR too dependent on one company's stock price. If something unexpected happened and the stock price halved, your retirement suffers a severe setback.
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Old 12-16-2007, 01:02 PM   #7
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No way to get that $$$ out until I quit...

I forgot to add Im not married (And I never plan too!!!) and I dont have any kids yet. It's ALL MINE!!!

My current girlfriend cant have kids, she has her tubes tied.

I might want kids someday, maybe...

I've seen too many men ruin themselves having kids and getting married only to get divorced and get screwed by the ex. NO THANKS!!!

Never knew about the SEPP, thanks

BTW that IRA is funded entirely with yearly distributions I get on the stock I own. I have ZERO actual savings except for a small amount I put in the 401 k.

If I put $1000.00 in in a year they will do a 100% match of $1000.00 It's a no brainer, its really done well in the last few years. I put about $20.00 in a week with the match and the returns. In five years its grown nicely!!!

Never really thought much about any of this and I just figured Id end up working there forever, it is a good place to work.

But these last few years have been unbelievably good for us. The company has lost a lot of good people and there gonna lose a lot more soon if the company stock keeps going up the way it has been.

This year its up about 35% in the last three years the stock price has quadrupled

If you would have asked 5 years ago if I thought Id be in this position now Id laugh at ya

The company is forecasting another 5 good years. Im almost 100% certain next year will be at least as good as this year was and maybe better.

The upcoming presidential election could hurt a little...

I cant see me being there much longer than one more year though.

The company is 100% employee owned, the stock price is reported quarterly. Also get 2 nice bonuses a year paid in July and December.

A distribution on the stock I own is paid yearly in December, so Id have to stay at least one more year or miss out on another $45 K

They seem to have it worked out pretty well, they hang that carrot out there pretty close and that makes me stay there

I've about had it with Illinois though, I need to go somewhere with no winter...

The IRA with the $48 K would be used to live off of for the 1 year Id have to wait for my $$$

It would be most of my reported income for the year because I would most likely quit in January, but possibly April. Then Id get the second quarter stock price

Id spend that year getting my house ready to sell, and traveling looking for a new place to live and possibly work...

I really dont wanna work hard anymore though

So I would roll it all over from the 401 K 1 year after I quit into an IRA with a SEPP

I think I need an accountant

These days it seems there's a forum for everything, just google what your looking for and you will find a forum on it LOL

Early Retirement sounds good to me

Great forum!!!
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Old 12-16-2007, 01:44 PM   #8
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Okay, here is TickTock's Analysis And Blunt Advice (tm):

Analysis
  1. You're working 55-60 hours a week at a job you're beginning to hate.
  2. You mention more than once that you can't see staying much more than one year.
  3. You have $2mm in a single company's stock.
  4. You think you can live off of $60-80k/yr with a paid-off house. (Before or after taxes? Is health insurance included in that total? What is your current spending level?).
Blunt Advice

Quit.

Quit the day after you receive your December bonus. If you've already received it, quit tomorrow. Immediately move the money in the 401(k) to a balanced fund.

Tell them the truth when they ask you why - that your net worth is too concentrated and you won't take the risk. Maybe they'll make you some kind of deal. Maybe not. Who cares - you weren't planning to stay there much longer anyway.

You mention possibly making $500k - $800k next year in stock. The closest thing to a law in finance is that if an investment can go up that fast, it can also drop that fast. Suppose you end up with a net worth of $1.2mm at the end of next year? A bunch of folks from Dell are very happy that they had company stock. A bunch of folks from Enron, not so much.

EVERY DAY THAT YOU KEEP WORKING FOR YOUR CURRENT COMPANY, YOU ARE MAKING A HUGE BET WITH YOUR NET WORTH!

(*whew* Okay, I feel better now.)

Use COBRA for health insurance. Use the money in your IRA for interim living expenses. (What are your current monthly expenses? You mention $100k in salary and bonuses next year and thinking you can live on $60k - $80k / year with a paid-off house.) Find a job that you don't hate going in to every day. Chart your expenses and learn by experience what level of spending makes you happy. Read Your Money Or Your Life and do some heavy thinking about the concepts in it. (But don't take their investment advice.)

In a year or two, check your actual expenses and how they might change in retirement. In the meantime, figure out a strategy for tapping the 401(k) money to minimize or eliminate penalties.

Good luck!
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Old 12-16-2007, 02:26 PM   #9
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The bonuses account for $40 k of that $100.000 pre tax in salary.

I actually live on the $60 K and use the bonuses to buy my toys...

All of that $60 k is spent right now on my mortgage and and everything else...

Id think if I moved south to an area with a much lower cost of living, had no mortgage and possibly worked Id be OK on $60 k after tax...

I will add that in the 20 year history of the ESOP the stock has only gone down once...

It was during a slow period in the mid 90's, it didnt go down much either.

But it does make me nervous having it all tied up in one place...

I can't wait to quit, but I don't wanna leave too much $$$ on the table either...

I wish they would fire me
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Old 12-16-2007, 03:09 PM   #10
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get a decent house with a good sized lot, near water.

Id need a big pole barn to put all my toys in. Im into dragracing, and boating two VERY expensive hobbies


Another thing thats got me worried is buying the house.

Lets say I find the dream castle somewhere for $250,000 and I pay cash for it...
I hate to burst your bubble but a house near the water is going to cost you a lot more than $250,000 even if it's a tear down .
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Old 12-16-2007, 03:47 PM   #11
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Look at property in northern Louisiana and get back to me
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Old 12-16-2007, 04:22 PM   #12
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I will add that in the 20 year history of the ESOP the stock has only gone down once...
[Devil's Advocate]Then it is about due Remember, past performance is no gaurentee of future returns[/Devil's Advocate]
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Old 12-16-2007, 04:35 PM   #13
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I will add that in the 20 year history of the ESOP the stock has only gone down once...

It was during a slow period in the mid 90's, it didnt go down much either.

But it does make me nervous having it all tied up in one place...
You should be nervous. It's one hell of a concentrated bet.

Okay, I've hit the same point three times in a row now. Shutting up about it now, unless asked for more information.

What company? Most stocks lost money sometime during 2000 - 2002.
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Old 12-16-2007, 04:36 PM   #14
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Virtually all your investments seem to be in a single company stock. This is fantastically risky. Is there any way you can diversify?

You mention if you stay another year, you have prospects to make a bonus of $500,000 to $800,000 for a year. Unless you mean that this is your estimate on the gain from the stock you already have, but is instead additional stock to be awarded - then "Make Hay While the Sun Shines" staying that year and being paid over $500,000 in stock and salary will make your retirement assets grow like crazy.

If what you mean is you expect the concentrated company stock position you already own to grow 25-40 percent in a year, then I fear you are taking a huge huge risk.
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Old 12-16-2007, 05:03 PM   #15
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No way to diversify until I quit...

It is a steel forging company... In the mid 90's we were slow, there wasnt much work...

The Iraq war and rising oil prices, and a weak dollar help us.

We make a lot of parts for the military, oil and gas drilling, and mining equipment.

Right now the company has ZERO debt, and a huge well diversified investment portfolio that makes up a large percentage of the company stock price...

If the stock market crashed that could lower the stock price.

We have all the work we can handle right now and the company has made some investments in expanded capacity and increased efficiency that should pay off in the stock price.

Assuming the stock price rises another 30-40% this year I will make that much more $$$ on my stock.

Since the stock price is refigured quarterly Id think Id have some warning before I lost a lot of $$$

The company has been in business for 114 years and the last three years have been record years getting better every year.

I have no reason to believe this year wont be even better...

But I really cant do this kind of work much longer, time to start LIVING soon
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Old 12-16-2007, 05:53 PM   #16
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My CEO once told me it was not wise to tie-up my net worth AND my career in the same company. In other words, he was telling me that I should not be overly greedy in hopes that the company was going too keep going up forever...and to diversify. Wise advice, that was...I should have remembered that earlier this year...I would have been better off to the tune of $500,000 after tax, had I remembered that sage advice. Who knows, maybe we'll rebound before I'm FIREd...maybe not. But I won't make the same mistake twice!

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Old 12-16-2007, 06:04 PM   #17
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No way to diversify until I quit...

It is a steel forging company... In the mid 90's we were slow, there wasnt much work...

The Iraq war and rising oil prices, and a weak dollar help us.

We make a lot of parts for the military, oil and gas drilling, and mining equipment.

Right now the company has ZERO debt, and a huge well diversified investment portfolio that makes up a large percentage of the company stock price...

If the stock market crashed that could lower the stock price.

We have all the work we can handle right now and the company has made some investments in expanded capacity and increased efficiency that should pay off in the stock price.

Assuming the stock price rises another 30-40% this year I will make that much more $$$ on my stock.

Since the stock price is refigured quarterly Id think Id have some warning before I lost a lot of $$$

The company has been in business for 114 years and the last three years have been record years getting better every year.

I have no reason to believe this year wont be even better...

But I really cant do this kind of work much longer, time to start LIVING soon
I would start tracking expenses to know what you really spend....

I would look at how you will get health insurance including any help that your state gives like a high risk pool and if you need it...

I would try to estimate your expenses in FIRE....

I would come up with a plan to withdraw money tax efficiently in FIRE....

I would also really look at your job to see if there isnt some way to make things better or another opportunity in the company or someplace else...

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Old 12-16-2007, 06:07 PM   #18
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Have you watched the movie "The Smartest guys in the room " ? It is a documentary about Enron .
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Old 12-16-2007, 06:12 PM   #19
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Originally Posted by TickTock View Post
Blunt Advice

Quit.

Quit the day after you receive your December bonus. If you've already received it, quit tomorrow. Immediately move the money in the 401(k) to a balanced fund.

Tell them the truth when they ask you why - that your net worth is too concentrated and you won't take the risk.
+1 TickTock has it right. You already hate your job and are thinking of going next year. Screw that -- go now. Your company could take a beating next month -- you would probably be the last to know (you didn't say you were the CFO did you?). Get another job and spend some time sorting out your options and your needs.
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Old 12-16-2007, 08:10 PM   #20
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Since the stock price is refigured quarterly
Refigured quarterly? Is this a publically traded company?

Never mind; I see where you posted that the company is 100% employee owned.
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