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Looking at the Offramp - should I take it?
Old 09-11-2013, 11:58 AM   #1
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Looking at the Offramp - should I take it?

I've been planning to retire at 55 for some time and at 53 am close enough to have a pretty good idea of what my resources will be at that time:

Assets: $2M (evenly split between 401K/IRA and taxable accounts)
Pension: $30K/yr (no COLA)
Home Equity: $500K (fully paid mortgage)

While I'm on track to achieve that I've just been "offered" an offramp at work (translation, given a layoff notice). The question is whether to take the layoff (and a significant severance benefit of ~$100K) or attempt to find additional work at my firm, avoid the layoff and continue for the remaining 2 years.

If I were to stop now both my assets and pension would be about 10% less than my estimates for age 55 given above. In addition, since the pension doesn't commence until age 55 I will have to live very frugally for the next two years or else partially drain the nest egg for living expenses. The question is whether the financial impact of leaving work early is worth more or less than 2 extra years of relatively youthful retirement.

More info:

My spouse still works at a secure job with compensation sufficient to cover all household expenses (and healthcare benefits for both of us). She expects to remain there for the next 5+ years.

As an aggressive saver my whole life I've kept my expenses low and rarely spend more than $50K/yr.

All my calculations say that I should be able to take my $100K parting gift and run for the hills, but I also know that I'd be leaving a very well paying job at the peak of my earnings and this decision will impact my quality of life for (potentially) the next 40-50 years (both parents lived well into their 90s).

So I'm in a bit of quandary. I've planned to retire early my whole working life and have as good an opportunity as I'm likely to get, but part of my frugal mindset has always been not to leave money sitting on the table. So it's a bit hard to just walk away.

Encouragement and/or cautions welcome.
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Old 09-11-2013, 12:42 PM   #2
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Take the off ramp and become a stepford husband.

Sorry, I couldn't resist.

I was in a similar situation to you in many ways but with lower pension and SAHM spouse. Still the best decision I have ever made. At the end of the day, if I had continued to work instead of retiring and being able to do what I want I would have just been feathering our kids inheritance since I had plenty for us.

Put on that right blinker....
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Old 09-11-2013, 12:49 PM   #3
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Welcome aboard, stepford.

All signs are pointing to the off-ramp.


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Old 09-11-2013, 12:49 PM   #4
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How much more would you make in the next two years over and above the $100K? That's what you'd be really working for. Also, if a layoff is occurring now, there may be more in the future, and the $100K might be $50K. I'd merge to the right and take the exit.
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Old 09-11-2013, 02:03 PM   #5
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Pension covers more than half your expenses and you have 2M besides! I'd take the luscious package and be done. Not even close.
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Old 09-11-2013, 02:13 PM   #6
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Hard to vote yea, which I do, when I was in a similar situation and said No. Here either a voluntary or not so voluntary would have been about a net of 40K. And my DW and I are close, but Dang It, I want to do it on my own terms when I am good and ready. (In real life I don't often say Dang It ) Anyway, I hope that you have bigger whatchamacalits and take the money and run and spend your day doing what you want. Enjoy Life.
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Old 09-11-2013, 02:53 PM   #7
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You didn't say how much your current earnings are, but you did say that DW earns enough for household expenses and health care, so your investment portfolio and severance are icing on the cake. It's not clear how much you would really have to eat into your portfolio until the pension kicks in. An extra two years would give you an incremental financial benefit, other things being equal, but that benefit would be reduced by the amount of your severance. My question is whether you really have a choice? Even if you can find another job at your company, will you be laid off one year out without severance? Or will you be miserable for the next two years?

IMHO it is a wise thing to know when one's portfolio is sufficient, and to know when to go.
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Old 09-11-2013, 03:18 PM   #8
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Will you get any unemployment to offset the salary loss?
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Old 09-11-2013, 03:53 PM   #9
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Will you get any unemployment to offset the salary loss?
Yes, for however long California decides to pay it. That perhaps ~$20K and the $100K severance are the two things I won't get if I work for 2 years and then retire voluntarily. What I would get, however, is about $200K/yr + the 10% increase in pension I mentioned in the previous post (that and 2 more years waking up at 4AM and sitting in traffic for 3 hours a day)...

All in all my net cost (after tax) of leaving early would be right around $200K (the 10% decrease in assets I mentioned in the OP). Right now I do think it's worth the cost, but the cost is significant so I'm still thinking it over.

Thanks everyone for your encouragement.
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Old 09-11-2013, 03:58 PM   #10
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....2 more years waking up at 4AM and sitting in traffic for 3 hours a day)...
Sounds to me like you have all that you need, but I understand how hard it is to pull the plug on a good high paying job.

Who will benefit the most if you work for two more years? Is it worth it to you?
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Old 09-11-2013, 04:05 PM   #11
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Take the package. Living on unemployment and severance will easily get you by two years while your investment grows. 50K expense and 100K severance is no brainer to me! You can also look into possibility of working/consulting for two years for some other firm. All the best!
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Old 09-11-2013, 04:41 PM   #12
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I've been planning to retire at 55 for some time and at 53
.................................................. .................

So I'm in a bit of quandary. I've planned to retire early my whole working life and have as good an opportunity as I'm likely to get, but part of my frugal mindset has always been not to leave money sitting on the table. So it's a bit hard to just walk away.

Encouragement and/or cautions welcome.
You have won the game. It does not matter whether you retire now or two years from now either way you will be leaving some money on the table. I would be out the door now.
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Old 09-11-2013, 04:51 PM   #13
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Take the ramp and don't look back.
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Old 09-11-2013, 06:43 PM   #14
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I'll add to the chorus saying 'take the money and run'. At 56, with your expenses, about the same assets (although a less expensive home), minimal pension and my wife retiring also so paying for health insurance out of pocket - I pulled the plug on a decent paying career. That was nine months ago, and I haven't had a single regret.

And I do understand being frugal and not wanting to leave 100K per year on the table. But the numbers in the financial statement aren't as nice as owning your own time, likely for the first time in your life. And you can end up working a lot more years with the 'just a little more' mindset. Have to say I wouldn't have hesitated if my company had offered a package in the last few years.
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Old 09-11-2013, 06:58 PM   #15
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Not trying to talk you into staying, but just so there's no "I wish I knew" moment that comes up later, know that if you leave your company "during the year when you turn 55" you would have penalty free access to your 401k assets. There is a work-around, though, which is to roll the 401k into a tIRA and invoke the 72t payment schedule. That is not as flexible, but it can work. If you have not run i-orp, you might try that. It sounds like you might be a candidate for increasing your spending (leveling your lifestyle).
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Old 09-11-2013, 08:05 PM   #16
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The advantage to leaving now, when you do have enough assets to cover your expected expenses in retirement, is TWO YEARS. No matter what the package is if you stay at work, not one is going to get you those two years back. How many years are still left on the meter. Unknown! So these two are pretty good ones, and I wouldn't want to give them up.
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Old 09-11-2013, 09:24 PM   #17
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I would take the off ramp, the $100K and the unemployment. If you don't like being retired you could always look for a job again, maybe a new career you would find more personally rewarding.
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Old 09-11-2013, 09:38 PM   #18
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How much more would you make in the next two years over and above the $100K? That's what you'd be really working for. Also, if a layoff is occurring now, there may be more in the future, and the $100K might be $50K. I'd merge to the right and take the exit.
+1

I've seen a lot of layoffs -- it's much better to be in the first round wrt severance.
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Old 09-11-2013, 10:13 PM   #19
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Go. Your spouse makes enough to pay all the bills, you will soon be able to access the nest egg in 2 years, and you'll have severance and unemployment til then. And the ones left behind have to pick up the work of those who leave.
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Old 09-11-2013, 11:02 PM   #20
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What does your wife think about it? What does she suggest you do? Will she have ANY resentment if you "get to" leave the rat race 2 years ahead of plan?

Just some food for thought...

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