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Update After 3 Months in ER
Old 11-05-2006, 10:45 AM   #1
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Update After 3 Months in ER

Well it has been three months since I was "forced" into early retirement at age 54 as my boss was planning on increasing my workload 2 fold and on top of that, reducing my salary. Made sense to talk to the owner of the company whereby I negotiated a 19 month severence package, so technically, will not be offically retired, dollar wise, until April 08. Here are the specifics of my plan for comment or feedback:

Will have company paid health insurance until April 08, can go to COBRA from there for 18 months or opt to take a previous employers insurance for retirees. Both expensive, but you got to have it.

I currently have about 1.7MM with $320K in taxable accounts and $1.38MM in IRA/401K.
I plan on saving $5000 per month until 4/08 with thought to pay down mortgage to about $50K on a $400K property by Aug 07. (I have an interest only loan that will go to traditional adjustable that will adjust every 6 months at that time, so want it down as much as possible)

With the savings plan and projected growth of portfolio, looking to have about $1.9MM starting at 4/08 when my severance package is complete. Plan is to have about $1MM in fixed for steady and assured income, and $900K in stocks.

Now for the expense side of the equation:

Starting 11/07 will have a pension of $22,800 that unfortunately has no COL adjust so in time that will essentially not be worth much.

I would like about $65,000 after taxes, another reason why I choose to paydown the mortgage, so have less expenses to deal with. Seems very doable going thru the FIRE calc.

With all that said, after three months, I am not totally bored yet but do have those times of guilt but thanks to all on the forum, realize these are normal, and there is nothing better than not having a schedule and doing what you want, when you want.

I guess the only questions I have are, does this plan seem reasonable to all those that have been in ER for a long time, and am I being too conservative on the fixed side? Also could pay off the mortage obviously but chose to get it low first and depending on how investments go, pay it off perhaps when I can draw from my IRA without penalty

Any other advice always appreciated

Thanks
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Re: Update After 3 Months in ER
Old 11-05-2006, 12:20 PM   #2
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Re: Update After 3 Months in ER

Looks reasonable to me. You might want to pay off the mortgage. It just makes life easier and you are moving out of leverage in your ER life. Also go over the $65k budget because you may be overestimating and you now have your actual run rates to map against it.

I would go with a higher equity content especially at your age. Maybe $200k or $300k more.
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Re: Update After 3 Months in ER
Old 11-05-2006, 12:48 PM   #3
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Re: Update After 3 Months in ER

First congratulations,

Second my comments,

(1) My prejudice is to have more in stocks but that is largely a matter of personal risk tolerance.

(2) Your after tax savings are small relative to your pre-tax savings. Have you looked at the possibility that in a worst case situtation you will exhaust your pre-tax savings before 59 1/2? There are threads on the board discussing methods for withdrawing for IRAs without penalty before that age.

(3) Normally I would say pay off the mortgate but I think that you have to trade that versus putting more in after tax savings.
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Re: Update After 3 Months in ER
Old 11-05-2006, 03:35 PM   #4
 
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Re: Update After 3 Months in ER

Quote:

Starting 11/07 will have a pension of $22,800 that unfortunately has no COL adjust so in time that will essentially not be worth much.
Keep in mind that in time, you won't be worth much either!

- You will have close to $2 Mil when you stop saving. At a 4% withdrawal rate that is $80K alone. Add to that your $23K Pension. - As far as I can see, you never mentioned Social Security, which I'm sure you and your wife are both eligible for. This might be another $40K per year or probably more!

Have you decided who gets to spend your money when you're dead?


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Re: Update After 3 Months in ER
Old 11-05-2006, 06:02 PM   #5
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Re: Update After 3 Months in ER

Quote:
Originally Posted by oliverdickens
Well it has been three months since I was "forced" into early retirement at age 54 as my boss was planning on increasing my workload 2 fold and on top of that, reducing my salary. Made sense to talk to the owner of the company whereby I negotiated a 19 month severence package, so technically, will not be offically retired, dollar wise, until April 08. Here are the specifics of my plan for comment or feedback:

Will have company paid health insurance until April 08, can go to COBRA from there for 18 months or opt to take a previous employers insurance for retirees. Both expensive, but you got to have it.

I currently have about 1.7MM with $320K in taxable accounts and $1.38MM in IRA/401K.
I plan on saving $5000 per month until 4/08 with thought to pay down mortgage to about $50K on a $400K property by Aug 07. (I have an interest only loan that will go to traditional adjustable that will adjust every 6 months at that time, so want it down as much as possible)

With the savings plan and projected growth of portfolio, looking to have about $1.9MM starting at 4/08 when my severance package is complete. Plan is to have about $1MM in fixed for steady and assured income, and $900K in stocks.

Now for the expense side of the equation:

Starting 11/07 will have a pension of $22,800 that unfortunately has no COL adjust so in time that will essentially not be worth much.

I would like about $65,000 after taxes, another reason why I choose to paydown the mortgage, so have less expenses to deal with. Seems very doable going thru the FIRE calc.

With all that said, after three months, I am not totally bored yet but do have those times of guilt but thanks to all on the forum, realize these are normal, and there is nothing better than not having a schedule and doing what you want, when you want.

I guess the only questions I have are, does this plan seem reasonable to all those that have been in ER for a long time, and am I being too conservative on the fixed side? Also could pay off the mortage obviously but chose to get it low first and depending on how investments go, pay it off perhaps when I can draw from my IRA without penalty

Any other advice always appreciated

Thanks
Your plan seems very reasonable. I am just wondering how you've managed to negotiate a 19 month severance package. This seems to be more than most employers are willing to give. Was it length of service with the comapny or an employment contract?
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Re: Update After 3 Months in ER
Old 11-05-2006, 06:08 PM   #6
 
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Re: Update After 3 Months in ER

Quote:
Originally Posted by Corporateburnout
Your plan seems very reasonable. I am just wondering how you've managed to negotiate a 19 month severance package. This seems to be more than most employers are willing to give. Was it length of service with the comapny or an employment contract?
All you have to do is see the owner with a bunch of sheep and have your digital camera ready!
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Re: Update After 3 Months in ER
Old 11-05-2006, 07:30 PM   #7
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Re: Update After 3 Months in ER

Quote:
Originally Posted by oliverdickens
Well it has been three months since I was "forced" into early retirement at age 54 as my boss was planning on increasing my workload 2 fold and on top of that, reducing my salary.
As I see it, this was almost a constructive dismissal and I suspect that together with that evidence and good negotiating skills, a 19 month severance is achievable. I've seen 2 year severance packages in the company I used to work for.
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Re: Update After 3 Months in ER
Old 11-05-2006, 08:53 PM   #8
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Re: Update After 3 Months in ER

For those wondering how I negotiated a 19 month severence, I had a employee contract, no black mail was necessary. I probably could have pushed for 2years given the circumstances but the owner was being influenced by my ex boss to cut me off at the knees, so I thought 19 months with ability to have health insurance for 3 years, including COBRA, was a good deal to get out of the stress and have a life. It also provides a good way to determine if ER is right for me or not.
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Re: Update After 3 Months in ER
Old 11-06-2006, 06:14 AM   #9
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Re: Update After 3 Months in ER

Quote:
Originally Posted by oliverdickens
For those wondering how I negotiated a 19 month severence, I had a employee contract, no black mail was necessary. I probably could have pushed for 2years given the circumstances but the owner was being influenced by my ex boss to cut me off at the knees, so I thought 19 months with ability to have health insurance for 3 years, including COBRA, was a good deal to get out of the stress and have a life. It also provides a good way to determine if ER is right for me or not.
Just an observation. I don't believe I ever had a job in my life where
I wouldn't have left in a New York minute if offered this sort of "deal".

JG
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