This is it, 2 weeks notice, July 15, 2013

[51togo]

Posted once couple months ago. Today I summited my severance package at age 56 ( wife 55 ), very nervious sending out the signed package via FedEX but I am very relax now and at peace with myself. My aerospace megacorp package is not great but it is time to start a new chapter. I will get one week pay for every year of service with 27 years giving me half year salary. In additional, one year medical, one year education assistance, and that's it. I am making $120K as Operations Manager in California and my wife $50K in major insurance claim rep, now I have to rely on her for the medical and serveral more years before she retires. No debt, two daughters just got married and we paid off their college loan, so feel free althoght it seems odd with her supporting me for a change but her supports has improves our 32 years marriage. I like to stay for several more years but it will be at the expense of my health. I work hard all my life and feel guilty to be supported by my wife in return. Our calculation are as follows. $1M total 401 K, hope not to touch it until 591/2. I will get a pension of $3K before tax, therefore may be $2K after tax. Her $50K annual salary will be about $2000/month after tax. Our expense are $5K therefore I am short about $1K/month. Our mortage is $40K remaining and I like tp pay it off with my $60K severance. In 5 years, my SS will be $1700 at 62 or $2400 at 65. I will take it at 62. I am afriad that I am not able to slow down from my fast pace job, but I know the next few years will be very tough. I hope to start a second carrer but have no plan. People in our office is very stress because one additional major player is taking the package as well. I love my job but used to be 80/20 and now 60/40. I hope I would be able to adjust quickly and how long would it take and should I start taking the 401K or get a line of credit from my bank? I have LTC at $2500 and wonder I should drop that? My wife did not qualify due to a kidney transplant. I feel better now after sharing my thought with you. Thanks!

 

[48Fire]

Congratulations! I would take the $1K per month using a 72t. That would only be 1.2% withdraw rate, so very safe. And only for 3 years. Enjoy it while you can.

 

[5971]

Congratulations!

(You might want to edit title to 2013 not 2003 )

 

[Fishingmn]

How much is the mortgage and at what interest rate?

Instead of using the severance to pay off the loan you might just keep paying the mortgage and use those additional funds as a means to cover the monthly shortfall. I'd at least look at that as an alternative.

 

[obgyn65]

Congratulations. It seems that you are all set.

 

[clifp]

No need to do a 72(t). You can withdraw money penalty free from a 401K, unless your administrator does not allow it. (rare) It you terminate employment after 55.
You have $12,000/year shortfall and you have $1 Mil in your 401K just take the money out you need and don't worry about it!

 

[pb4uski]

No need to do a 72(t). You can withdraw money penalty free from a 401K, unless your administrator does allow it. (rare) It you terminate employment after 55.

You have $12,000/year shortfall and you have $1 Mil in your 401K just take the money out you need and don't worry about it!

+1 also, I don't think the tax bite on your pension will be anywhere near 1/3. but then again you do live in California. If you do you own taxes you could create a dummy return with your estimated 2013 and 2014 numbers to get an idea.

 

[51togo]

Thank you everyone, I feel better already. I will check with my 401K admin. to see if no penalty since termination after 55. I also like the idea from fishingmn to pay the monthly mortage using severance. We own $40K at 5% or $850/month. My severance will be about $70K before tax, how much do you think after tax? We do have an emergency account of $35K for major car repair, big ticket items like LTC insurance $2500, life insurance etc. to tap into this account. Our 401K is 70% income fund at 3.5% and 30% company stock returning 10% would you feel I should change? It's a big aerospace firm and been stable return. This will be a special 4th of July. Thank you!

 

[MRG]

No need to do a 72(t). You can withdraw money penalty free from a 401K, unless your administrator does not allow it. (rare) It you terminate employment after 55.
You have $12,000/year shortfall and you have $1 Mil in your 401K just take the money out you need and don't worry about it!

You stole my plan! +1.

 

[LitGal]

Congratulations, 51! You will find this site most helpful as you make your way through the maze of decisions and calculations. There are many folks here with seasoned experience in so many ER matters. You'll find it's like walking into coffee klatch at Panera, with old acquaintances and friends welcoming you with good advice and a pat on the back!

Best Wishes!

 

[utrecht]

How does your wife's $50K salary only amount to $2000 per month after taxes?

 

[pb4uski]

....My severance will be about $70K before tax, how much do you think after tax? We do have an emergency account of $35K for major car repair, big ticket items like LTC insurance $2500, life insurance etc. to tap into this account. Our 401K is 70% income fund at 3.5% and 30% company stock returning 10% would you feel I should change? It's a big aerospace firm and been stable return. This will be a special 4th of July. Thank you!

Try TurboTax® TaxCaster - Free Tax Calculator - Free Tax Estimator to get an idea of the tax bite of your severance.

I would not be concentrated in a single company stock. Think of Enron. I think it is better to be diversified. Can you change the company stock to a diversified equity fund after you leave while still being in the 401k? If so, I would.

 

[REWahoo]

I would not be concentrated in a single company stock. Think of Enron. I think it is better to be diversified. Can you change the company stock to a diversified equity fund after you leave while still being in the 401k? If so, I would.

+1!

It's a big aerospace firm and been stable return

Past performance is no guarantee of future returns.

I know two individuals who were way too concentrated in their company stock (two different companies) but wouldn't diversify because they "knew" the company was solid. Both took major hits when their company stock tanked.

 

[Ed_The_Gypsy]

Thank you everyone, I feel better already. I will check with my 401K admin. to see if no penalty since termination after 55. I also like the idea from fishingmn to pay the monthly mortage using severance. We own $40K at 5% or $850/month. My severance will be about $70K before tax, how much do you think after tax? We do have an emergency account of $35K for major car repair, big ticket items like LTC insurance $2500, life insurance etc. to tap into this account. Our 401K is 70% income fund at 3.5% and 30% company stock returning 10% would you feel I should change? It's a big aerospace firm and been stable return. This will be a special 4th of July. Thank you!

Yeeeow! I would reduce company stock to 10%. I have seen too many loyal employees destroyed by company stock. I am happy that it has been good to you. Now, say good bye and think globally. It is your butt, not theirs.

(Let me guess about 'big aerospace firm'--no, check that. )

 

[Ed_The_Gypsy]

No need to do a 72(t). You can withdraw money penalty free from a 401K, unless your administrator does not allow it. (rare) It you terminate employment after 55.
You have $12,000/year shortfall and you have $1 Mil in your 401K just take the money out you need and don't worry about it!

Yeah. This is the reason I kept a 401K until I was 55. Rock on, rocketman.

 

[Katsmeow]

In your first post here you said you had $125k in cash and now you mention $35k. What happened to the other $90k?

If you have $125k in non-tax deferred accounts then it might be OK to use the severance to pay off the mortgage. If you only have $35k in non-tax deferred accounts then I wouldn't do it as I think you need more easily available cash.

You said then that you will get a pension of $3k a month and your wife will get one of $2k a month. How old do you each have to be for those pensions?

It might be better for at least one of you or your wife to not take SS at 62 and to let it grow for awhile. That isn't something you have to decide now, but it might work out better.

I would get out of the company stock entirely if it was me. I wouldn't like the risk concentrated in one stock.

 

[51togo]

wow, many comments on company stock and I got the message. I thought I am already conservative at 30%. At one time, I was at 70%. Utrecht, my wife's $50K annual salary returns little over $2.5k per month after 401k deduction while I have reduced to $2K since I have been and will be using her medical coverage adding about 400/ month since the begining of this year we have double coverage until my medical runs out next July. My pension starts Aug 1, 2013 at $3K monthly. The company severance adds one more year of service or $100/month, however one cannot collect until next year July 2014....what do you think, long run a good deal but need the money now. Another reason not to pay off the mortage? Katsmeow, with a large ( and last )wedding last month and set aside $25K ( annual gift limit )for each daughter for their house downpayment. That's it...althought many think we should save more for ourselves but we feel it will be harder for the next generation and with low interest rate its good time to be homeowners. I think we will hold off paying off the house and see how it plays out. I not sure I need to apply for $100K line of credit just in case. I have been paying for a Genworth LTC insurance of $2500 for three years now. I wonder if most of you ER agree that this is a good investment. I understand it comes down to afordability, is it really necessary and how the Obama care will affect the LTC? Thank you all for your encouragements and support!

 

[Katsmeow]

On your wife's salary I probably wouldn't have her make 401(k) contributions above whatever is necessary to get any match from her employer. That is, if you are withdrawing from your 401(k) or an IRA I can't see any reason to be contributing to her 401(k) unless beyond whatever is necessary to get any employer matching.

If it was me I would probably continue to pay the LTC premiums. Like many you seem to be in that gray area where not enough to self insure but too much to just ignore it.

 

[jclarksnakes]

I think it is a mistake to buy LTC insurance while planning to take SS at 62. Generally you buy LTC insurance because you may not have enough income or assets to cover the cost of long term care and you do not know what inflation will do in the future and how LTC costs will increase due to that inflation. SS is COLA'd (at least for the foreseeable future) and waiting to get full SS at 70 provides inflation protected longevity insurance. With the OP's SS numbers he posted ($1700 at 62 and $2400 at 65) it would be almost $3000 at 70. He also has a million in the 401K and a pension and presumably his DW's SS. If I was in his shoes I would use the file and suspend SS tactic to get the spousal benefit for himself or his DW at age 66 and then get full SS for both of them at age 70. That full SS plus what is left from the 401 (after drawing some down as an income bridge until they are both getting full SS) plus the pension should be enough to safely consider self insuring rather than spending $2400 a year on LTC insurance. Also the LTC insurance will almost certainly be subject to rate increases in the future.

 

[Chuckanut]

Congratulations on your soon to be retirement.

 

[51togo]

Thank you everyone! I am excited and got my farewell e-mail ready to send today. My boss flew in yesterfday on my retirement lunch and my dear wife is taking a day off to come celebrate at the office. Several people in my group had tears when I make the annoucement, it was touching. My boss asked my to extend for another month and I told him No because it is better this way, there will be always some more BS reasons. It feels good and I will update on the 15th and there after. Almost FIRE, I told my daughters I soon be FIREed and they asked what it means. I told them they need to be ready as well and went thru their 401K with them, I want to make sure they will be able to do the same as well at my age or sooner.

 

[KB]

Congratulations.

Enjoy the weekend, tomorrow is the first day of your new life. And Mondays will have a new meaning altogether.

 

[MRG]

Congratulations, KB is 100% spot on. I love Mondays now.

MRG

 

[51togo]

Thank you, most Sunday nights in the past 5 years I have to log on approve time cards, update on events and get ready for Monday. Not this Sunday. BTW just got the pension package from MegaCorp, since I am a bit short on the monthly to cover the expenses until 62, we decided to check the 5 years certain and life annunity box as I have life insurance until 80 years old so my DW is covered. 100% contingent annunity will cost a reduction of $300/month. Does it make sense ?

 

[MDJO]

51, congrats. Welcome to the club.