Looking for ER advice from the experts...

[Wanderlust]

Hi,

I am hitting the ER date at megacorp this year and they are offering a buyout, no severance money or pension but almost 120K in funds that can only be used for medical premiums. So the question is do I take this, or work longer and hope that in the future another package is offered. It is tough to predict what megacorp might offer next, if anything, because over the last three years, three diff packages have been offered.

Facts:
Will be 55 later this year. Making very good money, but lots of stress and uncertainty. Not really into the pressure cooker anymore, and also concerned that staying longer might end up causing stress related health problems.
Wife is 57 in the medical field making reasonable money.

Finances:
My pre-tax accounts (ira,401k, etc) = 340K
Wife 401k = 150K
My megacorp retirement account = 360K
After tax money = 400K
Medical buyout account = 120K
Inheritance coming in 6 months ~300K (100K cash, 200K land)
2 Homes – 70K eq / 360K value and 230K eg / 500K value. Both should appreciate slightly faster than inflation and provide a nice payout in the future if the economy does not crater again.
SS @ 62 = 22K, DW SS @ 62 = 18K
Neither of us have pensions
No other debt other than the two homes

Plan would be to rent both houses by mid 2014, and to take a few years to wander around the USA and probably Europe; RVing, exploring, visiting relatives, and volunteering, hiking, biking, and other things to get back in shape. Then settle back down in a college town where one of our children live. We would most likely then work part time in an enjoyable job for 3-5 years. Plan to earn 20K+/- each working. If I model all of this in fidelity and FIRE the outcome is that we can do this if we stay around 80K a year total expenses with medical premiums paid for 5+ years. But this is a big cut from what we make now and quite a life style change. Plus it is somewhat hard to model using FIRE or Fidelity, the rental properties, the need to buy a small house in the future, and some of the other complexities we have, such as some (200K) of the inheritance may be farm land that is cash rented.

In summary, the planning tools say we can do this if we are careful and the markets are reasonably friendly. But I don’t want to make a rash decision based on work stress, so any advice and/or word of wisdom are appreciated. What are some fundamental questions we need to ask ourselves?

Thanks

 

[CUinFl]

Welcome aboard.... I am certain many will have great advice for you.

In reading through your post, the first thing which popped into my mind is you should use Quicken's financial planner. It is a great too to consolidate the financial picture and let you run "what if" scenarios. It would also show what are you high spending years (I.e. greater than 80k) and what would be less.


What I would suggest doing, before you retire, is to try to live on $80k, plowing the excess into your account. Then have the discussion with you wife on what trade offs need to be made. That would put you into a good pre retirement mindset.


Another suggestion would to be to figure out those first few years of expense as a few of those activities have significant first time expenses (I.e. RV ing, hiking, etc)


Excited for you two....

 

[pb4uski]

One thing to consider is with Obamacare coming on-line how valuable that medical premiums account is. Is the $120k to pay for health insurance premiums as a retiree on the employer's plan or to help you buy health insurance outside the employer plan?

Assuming outside the employer plan, can the account be applied to the gross premium or only the premium after Obamacare subsidies?

Can you elaborate on how this account works?

+1 on the suggestion to use Quicken Lifetime Planner to plan for your retirement and look at what-ifs. I would supplement that with Firecalc or other stochastic model.

 

[Wanderlust]

Great information.

Quicken Lifetime Planner does not seem to be available anymore. Is this now part of Quicken Premier 2013? Anyone using this SW that is happy with the capabilities? Some amazon reviews panned it.

Trying to live on 80K(or what ever our future budget would be) and saving the rest is an interesting concept. Basically you are saying make all the post retirement adjustments pre-ER. Have other folks tried this? I was thinking more of the big bang approach. Spend like a drunken sailor (but still saving the max pre-tax allowed) until ER Then go on an austerity budget.

As far as the medical premiums account, it can be used to buy insurance outside the employers plan. How this works with Obamacare subsidies is a good question. I need to research this some more.

 

[ERhoosier]

Strongly agree with living on actual anticipated ER budget for a while BEFORE you actually ER. Many have found it is not as easy to do as it sounds. Much better to find that out while still w#rking with decent income stream rather than later after having blown through much of the nest-egg & burned a good paying employment bridge behind you.

And not sure how that medical premium account would be considered under ACA (Obamacare). But with that MPA and anticipated income from your investments & rentals (or capital gains if/when you sell) my guess is you might not qualify for significant (if any) HI premium subsidies.

 

[pb4uski]

Great information.

Quicken Lifetime Planner does not seem to be available anymore. Is this now part of Quicken Premier 2013? Anyone using this SW that is happy with the capabilities? Some amazon reviews panned it.

Trying to live on 80K(or what ever our future budget would be) and saving the rest is an interesting concept. Basically you are saying make all the post retirement adjustments pre-ER. Have other folks tried this? I was thinking more of the big bang approach. Spend like a drunken sailor (but still saving the max pre-tax allowed) until ER Then go on an austerity budget.

As far as the medical premiums account, it can be used to buy insurance outside the employers plan. How this works with Obamacare subsidies is a good question. I need to research this some more.

Sorry, I should have been clearer - QLP is part of Quicken Deluxe or higher versions of Quicken. If you have a recent version of Quicken Deluxe or higher it would be under the Planning menu. While it has it warts like all planners, I like it because it is easy to use and pretty intuitive. The downside is that it is a deterministic planner (you provide the investment return and inflation assumptions and it uses those for every year), which is why I supplementally use other tools like FireCalc.

Our post-retirement budget is not very different from our pre-retirement budget other than medical insurance and lack of earnings.