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Job in danger -- balancing act
Old 03-13-2008, 10:28 PM   #1
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Job in danger -- balancing act

Hi everybody,


First off, I'd like to throw out a compliment to how helpful the people here are, and how well behaved for an internet forum. It's a breath of fresh air compared to a couple of other forums I frequented in the past.


Iím fifty, single, no kids, and employed in a segment of my company thatís in a tailspin (budgeting for and placing newspaper advertising). Back in the days when my job was fun and my career was on the upswing, I never imagined retiring early. But the reality is that my job could disappear in the next few years, and itís pretty miserable waiting for the Titanic to hit the iceberg. Iím hoping to hang on until I turn 55 in four years, four months, and 18 days (not that Iím counting).

At 55, Iíll be eligible for a pension of about $36K annually. Iíll qualify for continuing medical coverage (CMC) through my employer (although Iíd have to pay the full premium), plus at 65, full medical benefits kick in. I just learned about the CMC, and itís a huge relief that I wonít have to worry about potentially being denied coverage. Thatís assuming I donít get laid off before my target date.

If I make it to 55, I should have about $300K in personal savings and investments, about 500K in a 401K, and about $325K in home equity. I plan to work part time in a low stress occupation mostly to keep a healthy social life and structure, but also to help pay for health care and incidentals. Iím estimating a salary of about $15K a year for the part time job. I ran my numbers through Fire-Calc, and it appears that Iíd be okay if I retired at 55 even without the part time job.

I live a ďreasonablyĒ frugal lifestyle, currently saving close to 50% of my take home pay between my savings and 401K. But hereís my question: I have a couple of (what I consider) luxuries, a housekeeper and a gardener who come every other week. Theyíre not hugely expensive, but I keep wondering whether Iíd be better off saving the money in light of my precarious job situation, or hold onto them as long as I can. My job is stressful and itís the best feeling in the world to come home to fresh cut grass and a clean house. On the other hand, financial security is a huge hot-button issue for me. Oh, what to do? Deny myself the luxury and stress out that I donít have time for the chores or stress out that I could be spending money that might be better saved?

What would you do?

Of course, all of my obsessive planning (spreadsheet projected out until age 95 with multiple scenarios) could be moot if I get laid off in 4 years, 4 months and 17 days or less.

Thanks for reading!

Zan
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Old 03-14-2008, 01:53 AM   #2
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Welcome Zan! These days I can afford the housekeeper but do my own anyway because I need to clean the house up before she even gets here!
Seriously, I believe I'd keep the gardener, but maybe you'd feel only half as guilty if you had the housekeeper once a month instead of every two weeks - if she will work that way? You could think of it as a nice birthday present to yourself. Good luck with your job!


Life is what happens to you while you're busy making other plans.
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Old 03-14-2008, 09:31 AM   #3
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Welcome to the board.
You are already saving a very admirable chunk of your pay so I would not feel guilty about keeping the housekeeper and gardener. You obviously have a saving strategy that works for you which includes that expense. Some things in life are worth paying for (I have had a housekeeper for 25 years and have never regretted it for a minute) and since it makes you feel so good, go for it!

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Old 03-14-2008, 09:56 AM   #4
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Hi Zan! I'm glad you've joined us.

It sounds to me like your housekeeper and your gardener provide additions to your quality of life in excess of their cost. So I'd say, keep em!

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Old 03-14-2008, 10:18 AM   #5
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Saving almost 50% of net pay? Keep the housekeeper and gardener. Have a plan for the scenario that you get laid off before age 55.
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Old 03-14-2008, 11:38 AM   #6
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Quote:
Originally Posted by Zantastic View Post
Hi everybody,


First off, I'd like to throw out a compliment to how helpful the people here are, and how well behaved for an internet forum. It's a breath of fresh air compared to a couple of other forums I frequented in the past.


Iím fifty, single, no kids, and employed in a segment of my company thatís in a tailspin (budgeting for and placing newspaper advertising). Back in the days when my job was fun and my career was on the upswing, I never imagined retiring early. But the reality is that my job could disappear in the next few years, and itís pretty miserable waiting for the Titanic to hit the iceberg. Iím hoping to hang on until I turn 55 in four years, four months, and 18 days (not that Iím counting).

At 55, Iíll be eligible for a pension of about $36K annually. Iíll qualify for continuing medical coverage (CMC) through my employer (although Iíd have to pay the full premium), plus at 65, full medical benefits kick in. I just learned about the CMC, and itís a huge relief that I wonít have to worry about potentially being denied coverage. Thatís assuming I donít get laid off before my target date.

If I make it to 55, I should have about $300K in personal savings and investments, about 500K in a 401K, and about $325K in home equity. I plan to work part time in a low stress occupation mostly to keep a healthy social life and structure, but also to help pay for health care and incidentals. Iím estimating a salary of about $15K a year for the part time job. I ran my numbers through Fire-Calc, and it appears that Iíd be okay if I retired at 55 even without the part time job.

I live a ďreasonablyĒ frugal lifestyle, currently saving close to 50% of my take home pay between my savings and 401K. But hereís my question: I have a couple of (what I consider) luxuries, a housekeeper and a gardener who come every other week. Theyíre not hugely expensive, but I keep wondering whether Iíd be better off saving the money in light of my precarious job situation, or hold onto them as long as I can. My job is stressful and itís the best feeling in the world to come home to fresh cut grass and a clean house. On the other hand, financial security is a huge hot-button issue for me. Oh, what to do? Deny myself the luxury and stress out that I donít have time for the chores or stress out that I could be spending money that might be better saved?

What would you do?

Of course, all of my obsessive planning (spreadsheet projected out until age 95 with multiple scenarios) could be moot if I get laid off in 4 years, 4 months and 17 days or less.

Thanks for reading!

Zan
I would concentrate on what you can control.

4.5 years to retirement. Do you have 4 years of expenses in cash accounts?

Your worst case scenario is getting laid off tommorrow. If you have enough in cash to weather a 4.5 year earlier retirement, that is what works best. The rest of your actions should be planning for worst case.

In the mean time, keep the house keeper and gardener. Maybe keep a diary and sell it to writers of desperate housewives (in case they need new ideas and you need to make money).

At same time get the taxable investments invested moderately (I suggest around 30-70 allocation) and when the account hits 4 years expenses, I would increase risk profile of the new funds invested.

You said at 55 you would have 300k in personal savings- this would be 80k of expenses for 4 years... but the phrasing makes me think you have a lot less NOW and the 50% savings rate would be providing much of this money for ER.

You said at 55 you would have 500k in 401k. I assume most of this is in 401k now.

Summary:
1) set aside 4 years expenses in a taxable account
2) increase taxable account size to cover ER from age 55 to 60
3) contribute to 401k and let 401k grow until age 60 (if possible)
4) research what happens to pension if you do not make it 4 more years (is there a partial payment?)
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Old 03-14-2008, 12:03 PM   #7
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Zan I say keep the housekeeper and gardener. I'll bet they don't want to be out of a job either! Try not to worry too too much about the potential job loss for you. Most likely it will never even happen and you will have fretted needlessly. Best of luck to you!
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Old 03-14-2008, 01:15 PM   #8
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Zan, welcome to the forum.

I say keep the housekeeper and gardner. We had both for many years and it was well worth it. It sounds like you are already in good fiscal shape and if these small luxuries make work easier and less stressful, don't even consider getting rid of them while you are doing so well.
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Old 03-14-2008, 03:20 PM   #9
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Thanks everyone! I come from a family that didn't have much money growing up and I sweat these decisions like they're life and death.

I would say the worst case scenario is that I'd get laid off in early 2009, but more likely 2010 or later. As long as we're still advertising in the NY and LA Times, I still have value to the company. It's depressing though, watching the decline of newspapers. When I first started in the business almost 22 years ago, we ran advertising in over 300 papers. Now we're down to a fraction of that number.

Using the worst case numbers, I would have $180K, in savings and investments (35% money markets and CDs, and the rest split about 70/30 in stock mutual funds/bond mutual funds), $345K in the 401K (62% stocks, domestic and foreign) $300K in home equity. But I'd get close to a year of severance plus the 9 weeks of vacation I have banked. Not counting Unemployment compensation, that should get me through 2 years with no other income coming in.

If I get laid off at the beginning of next year, my pension decreases to $23K at age 55. It would be so much better to retire at that age, especially since I wouldn't be eligible to stay with the company health insurance plan if I have to leave before then.

jIMOh, when you suggest a 30-70 allocation for the taxable account, does the 70 include bonds or just cash? I have a lot to learn about investing. Right now I'm using the financial adviser at my Credit Union, but I'm not sure I trust that's he's making the best choices for me as opposed to lining his own wallet.

Thanks for everyone's help!
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Old 03-14-2008, 03:44 PM   #10
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Quote:
Originally Posted by Zantastic View Post
Thanks everyone! I come from a family that didn't have much money growing up and I sweat these decisions like they're life and death.

I would say the worst case scenario is that I'd get laid off in early 2009, but more likely 2010 or later. As long as we're still advertising in the NY and LA Times, I still have value to the company. It's depressing though, watching the decline of newspapers. When I first started in the business almost 22 years ago, we ran advertising in over 300 papers. Now we're down to a fraction of that number.

Using the worst case numbers, I would have $180K, in savings and investments (35% money markets and CDs, and the rest split about 70/30 in stock mutual funds/bond mutual funds), $345K in the 401K (62% stocks, domestic and foreign) $300K in home equity. But I'd get close to a year of severance plus the 9 weeks of vacation I have banked. Not counting Unemployment compensation, that should get me through 2 years with no other income coming in.

If I get laid off at the beginning of next year, my pension decreases to $23K at age 55. It would be so much better to retire at that age, especially since I wouldn't be eligible to stay with the company health insurance plan if I have to leave before then.

jIMOh, when you suggest a 30-70 allocation for the taxable account, does the 70 include bonds or just cash? I have a lot to learn about investing. Right now I'm using the financial adviser at my Credit Union, but I'm not sure I trust that's he's making the best choices for me as opposed to lining his own wallet.

Thanks for everyone's help!
30-70 would be 30% equities and 70% "other". Some would use bonds, some would use cash, some might use a balanced fund like Wellesley (which I think is 40-60?) to actually manage the whole allocation.

Two funds I use are RPSIX (an income fund which is really 20% equities and 80% diversified bonds-including foreign bonds and real estate holdings) and PRPFX (a moderate fund with 30% equities-15% natural resources, 15% aggressive growth/foreign stocks; 20% gold; 5% silver; 10% swiss francs and 30% US bonds).

RPSIX is used in retirement accounts and PRPFX is used in taxable accounts (it is a tax efficient moderate fund).

I think your take on your situation is better- if you think you are stable for another 12 months, just make an emphasis to get 3 years expenses set aside. Then as time passes and the risk of layoff is lowered, you can probably orient investments towards more growth.

If worst case hits, you have an income shortfall from pension, lower savings and would need a backup plan. Maybe take a year off, using banked expenses, and w*rk another job for 4-8 years to allow 401k more time to compound.

I am guessing the primary issue with the layoff will not be "current savings rate", but be more of "how can I buy enough time for what I have saved to compound and be enough to start drawing down".

My opinion, anyway.
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Old 03-14-2008, 08:29 PM   #11
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Consider moving to another part of the company that's not in a tailspin.
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