jollystomper
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Apr 16, 2012
- Messages
- 6,184
Hello,
My company has made me an early retirement offer that I am considering and have to make a decision on in the next couple of weeks. I'm glad I found this site!
Background: My wife and I are both 54 and in good health. We have about $1.3 million stashed away in 401ks ($725K), IRAs ($50K), investments($225K) and cash ($300K). My income is $150K not counting bonuses (which can vary from $10K-$40K), my wife brings in around $15K. About 30-35% of our total income goes to the above savings/investment vehicles.
The major unknown expense (other than health care, of course) is our youngest will be graduating from high school next year and college plans haven't been solidified. We were able to get our other kids through college without any debt for us or for them, and we hope to do the same for our last child. A "known" expense is replacing 2 of our cars that we have had for over 10 years - we bought them 2-3 years old used, so we would do that same thing again. That will impact our insurance rates but not too badly.
Our house is almost paid off, our mortgage is $800/month. The mortgage balance is $90K and it is valued (by realtors if it were on the market for sale) at $400K. While it is tempting to sell it and move to a lower tax area (we are near states with lower state income tax and one that doesn't tax pension income), we still have lots of family/friends ties to our area, so that would be hard unless as a last resort.
We have zero credit card debt, we use 2 cards but pay them off every month.
My "hope" is to retire and not be required to work at all. In all likelihood I would work just because I enjoy being active - I just want it to be a choice and not a requirement to live . Yeah, wishful thinking these days . We have been going to a financial planner and using various financial calculators, and based on our continued savings and market probabilities everything seemed to point to sometime in of 2015 as the likely time I could achieve that.
The offer my company has made is "we will reduce your salary by 30%, and also reduce our matching 401K contributions proportionately. But you will only have to work 3 days a week. We'll guarantee your job (layoff have been occurring) through the end of 2013, but you must retire no later than December 2013."
I will get a retirement pension that will be worth around $62k a year by that time. We have estimated our retirement expenses to start at $95k a year (then increase with a yearly adjustment for inflation). With the "rule of thumb" of drawing no more than 3-4% of your savings, we'd be pulling around $33K (for starters) to meet our expenses, but this is below that range. Even with inflation, it seems doable. However, I really don't get health care - they provide a "fund" that I can use to pay health care premiums, but folks who have retired have told be don't expect it to last more than 2-3 years.
I'm not factoring Social Security into this. My benefits are projected to be around $21k/year at 62 or 28K/year at 66, but who knows how they will be impacted by the current political and economic situation.
The main drawbacks I see with this offer is:
- The salary reduction will cut back on our ability to save. I guess with college on the way, and future health costs rising, my wife and I wanted to sock away as much as possible to address this. We have gotten used to saving a high percentage of our income without it affecting our lifestyle (we're not extravagant folks). When we had multiple kids in college we were also saving practically nothing, but we did see the benefits of having us (and them) without student loan debt, so it was worth it then.
- I really wonder if I could reduce my workload to 2 days a week. I have more of a "creative/troubleshooting" job that I enjoy (other than the commute and travel), and it might find it tough to limit myself if, after working 3 days for the week, I get an idea or a request that interests me - it would be tough to delay my thoughts/actions on it until the next week. But maybe that shows that I am a workaholic and need to break that habit .
So, what do you think? Does it seem to make financial sense to take the offer? Are my concerns too overblown? Any input is appreciated. Thanks!
My company has made me an early retirement offer that I am considering and have to make a decision on in the next couple of weeks. I'm glad I found this site!
Background: My wife and I are both 54 and in good health. We have about $1.3 million stashed away in 401ks ($725K), IRAs ($50K), investments($225K) and cash ($300K). My income is $150K not counting bonuses (which can vary from $10K-$40K), my wife brings in around $15K. About 30-35% of our total income goes to the above savings/investment vehicles.
The major unknown expense (other than health care, of course) is our youngest will be graduating from high school next year and college plans haven't been solidified. We were able to get our other kids through college without any debt for us or for them, and we hope to do the same for our last child. A "known" expense is replacing 2 of our cars that we have had for over 10 years - we bought them 2-3 years old used, so we would do that same thing again. That will impact our insurance rates but not too badly.
Our house is almost paid off, our mortgage is $800/month. The mortgage balance is $90K and it is valued (by realtors if it were on the market for sale) at $400K. While it is tempting to sell it and move to a lower tax area (we are near states with lower state income tax and one that doesn't tax pension income), we still have lots of family/friends ties to our area, so that would be hard unless as a last resort.
We have zero credit card debt, we use 2 cards but pay them off every month.
My "hope" is to retire and not be required to work at all. In all likelihood I would work just because I enjoy being active - I just want it to be a choice and not a requirement to live . Yeah, wishful thinking these days . We have been going to a financial planner and using various financial calculators, and based on our continued savings and market probabilities everything seemed to point to sometime in of 2015 as the likely time I could achieve that.
The offer my company has made is "we will reduce your salary by 30%, and also reduce our matching 401K contributions proportionately. But you will only have to work 3 days a week. We'll guarantee your job (layoff have been occurring) through the end of 2013, but you must retire no later than December 2013."
I will get a retirement pension that will be worth around $62k a year by that time. We have estimated our retirement expenses to start at $95k a year (then increase with a yearly adjustment for inflation). With the "rule of thumb" of drawing no more than 3-4% of your savings, we'd be pulling around $33K (for starters) to meet our expenses, but this is below that range. Even with inflation, it seems doable. However, I really don't get health care - they provide a "fund" that I can use to pay health care premiums, but folks who have retired have told be don't expect it to last more than 2-3 years.
I'm not factoring Social Security into this. My benefits are projected to be around $21k/year at 62 or 28K/year at 66, but who knows how they will be impacted by the current political and economic situation.
The main drawbacks I see with this offer is:
- The salary reduction will cut back on our ability to save. I guess with college on the way, and future health costs rising, my wife and I wanted to sock away as much as possible to address this. We have gotten used to saving a high percentage of our income without it affecting our lifestyle (we're not extravagant folks). When we had multiple kids in college we were also saving practically nothing, but we did see the benefits of having us (and them) without student loan debt, so it was worth it then.
- I really wonder if I could reduce my workload to 2 days a week. I have more of a "creative/troubleshooting" job that I enjoy (other than the commute and travel), and it might find it tough to limit myself if, after working 3 days for the week, I get an idea or a request that interests me - it would be tough to delay my thoughts/actions on it until the next week. But maybe that shows that I am a workaholic and need to break that habit .
So, what do you think? Does it seem to make financial sense to take the offer? Are my concerns too overblown? Any input is appreciated. Thanks!