Layed Off at 58 and Going For it

[Bocco]

Just got layed off from $100K IT job (the very day I returned from my father-in-laws funeral). Decided I am done with the cubicle life and now its our time. We think we can do this though healthcare cost trouble us. Fortunately, I got a descent severance that will cover all our living expenses through the end of this year and healthcare coverage through mid October. After that we are on our own and will have to start drawing down our tax deferred savings. No pension. My wife "retired" a few years back and does collect a measly pension. We think our fixed expenses (mortgage, utilities, food, etc. (sans health ins.)) are about 3K/Mo. We live fairly modestly. Much of our entertainment here in Colorado is low or no cost (hiking, biknng, golf, etc.)

Here's where we are.

Wife's Pension : $650/mo
My 401k: $135,000
My std IRA: $620,000
Wife's std IRA $180,000
My Roth: $25,000
Wife's Roth: $16,000
Cash on hand: $20,000


So nearly a mill in mostly deferred accounts from which we will need to begin drawing on in 2014. So looking for gross income of around $60K while maintaining some growth in the portfolio. I should get about 2,000/mo from SSN in about 3.5 years and my wife should get about 1200/mo in 6 years.

 

[obgyn65]

Welcome, Bocco.

 

[Lazarus]

Looks like its doable to me. Since you are close to SS. Welcome.

 

[Major Tom]

I ran your figures through Firecalc and it looks like you will have no problem generating a gross income of 60K from your investments, taking you and your DW's SS into account. Will you be able to tap the 401K at first for income until you reach 59 1/2 and can begin withdrawals from the other accounts? I think you can start withdrawing penalty-free form a 401K at 55 if the account remains with the same custodian after you leave the company, IIRC. It would be a shame to have to start a 72(t) when you're so close to 59 1/2.

Welcome to the board and congratulations!

 

[Unpaintedhuffhines]

Congrats, Bocco. One door closes and another one opens.

 

[Bocco]

Here we go....

Thanks for the welcome everyone. Tom, my plan is exactly as you suggest: tap the 401k first. I should only need to do so to support the first quarter of 2014. By the start of the 2nd qtr, I will have attained 59 1/2. After the 1st qtr withrawal, I thought I'd then roll the remaining 401k dough into my IRA where I will have a wider variety of income producing options. This is gonna be fun! Thanks again folks.

 

[Golf cruiser]

Check with your 401K custodian to see if they will allow you to withdraw and how often etc. if not you will need to transfer to an IRA and set up the 72T plan to avoid a 10 percent penalty. Last i heard it is based on 120 percent of the fed mid rate. Which I believe is close to a ten year treasury rate...which is abut 2 percent..so it is not that much..but there are 3 different accounting methods, but the highest payout is the one i described..So i hope your custodian can do the 401K withdraws for you without a penalty. Good luck to you.

 

[comicbookgujy]

at 58, he can start withdrawing in 1 1/2 without penalty.

Congratulation! I and many people at my work place are hoping for the layoff "lottery" with 1 year servance!

 

[Aiming_4_55]

Congrats!

Don't forget, you might qualify for unemployment benefits and access to your Roth account contributions without penalty.... these might get you to 59 1/2 a little easier.

 

[foxfirev5]

Welcome Bocco. Keep us posted on your progress. At 57 I'm planning on taking ER next year at 58, hoping for severance but that's unlikely. Your numbers look good and I wish you well.

 

[Midpack]

I also did a quick look at FIRECALC (solved for income at 95% success using assumptions ** below) and got:

A spending level of $73,095 provided a success rate of 95.2% (104 total cycles, of which 5 failed). This spending level is 7.34% of your starting portfolio. (Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)

Of course the OP should try FIRECALC scenarios, and decide on what assumptions, success rates, etc. are appropriate. And FIRECALC doesn't factor in taxes, so all this is before taxes - though it appears the OP could hold taxes down to the 15% bracket.

** Assumptions:
Portfolio = $996K
Years = 37 (OP to age 95)
Her pension = $7800/yr non-cola now
His SS = $24K/yr 2017
Her SS = $14.4K/yr 2019
Left all other inputs as FIRECALC defaults (investment AA, etc.)

 

[JBmadera]

Awesome!!

 

[Bocco]

thanks for running the firecalc tool for me. I need to learn how to use that. My brokerage has a similar tool and it seems to correlate closely with firecalc's prediction. And my allocation IS pretty close the 60/40 equity/fixed mixed. Though my fixed portion is composed of etf's in junk, preferreds, and mlps. Not a treasury in the mix at all.

 

[gardenfun]

Welcome, Bocco. I had a similar situation to yours. Wasn't thinking about early retirement until my job was reorganized away 3 years ago when I was 56. My first thought after learning this was "I never want to work in a cubicle again." I made a half-hearted attempt to find another job and then stumbled upon the early retirement literature and felt so liberated!
Can you claim unemployment at all? I was able to when I lost my job in 2010, even with a severance package. And they kept extending the benefits.

I was also lucky enough to get in during the time when companies paid 65% of the COBRA payments, so my health insurance was reasonable for 18 months. I'm self-insured now, and need to find out what the health care act will do for folks like me.

For me one of the most interesting things about ER is becoming anti-consumer. It's actually a lot of fun (most of the time!).

Cheers!

 

[Bocco]

Yeah your sitch sounds very similar. I am gonna stop by my local unemployment office tomorrow and check but I was under the impression that I would not qualify until my severance ran out. But I will go talk to them to be sure. I too need to figure out what to do about health care ins. for the 2 of us since mine runs out by mid October. Any advice in this area would be greatly appreciated.

I think once we get into a groove with spending and withdrawals, we'll feel better. Its still a bit unnerving going into an new and unknown pattern. But not so much that I'd rejoin the cubicle world again.

 

[youbet]

My situation was very similar to yours Bocco. Canned at 58 with a decent severance, I looked for work (half-heartedly) and collected unemployment until deciding I was FIRE'd (not fired). That was in mid-2006. Haven't looked back.

FYI: Severance does not affect unemployment benefits here in Illinois. Check with your Colorado office and I think you'll be pleasantly surprised.

 

[rodi]

Welcome.

Check your 401k plan to find out if you can tap those funds before 59.5. It varies from plan to plan. (Mine does not, unfortunately).

Check your state rules about unemployment. CA lets you collect unemployment even if you're on severance. They didn't in the past (back in the late 80's/early 90's). This varies from state to state.

And as mentioned above - you can withdraw the *contribution* portion of your Roth, without penalty. (Not the gain, just the original contributions.)

You should compare COBRA rates to private health insurance for your post October coverage. Some large companies negotiate very good benefit rates - and that might make COBRA more attractive than private coverage. You'll have to do the analysis.