72T

[gwix98]

Happy holidays to all!

Looking for advice/opinion on the following scenario:

53 y/o guy with working wife likely to face first layoff
of his life. ER wannabe, but unlikey. May be able to replace current job with another, but difficult to know.
Rather tight market and with major downsizing of company, many former employees with similar skills
likely to be on the same market competing for the few
positions with other firms. Many younger, and not mgmt.
Eligible for unemployment for 7 months or so, and will
have additional funds, so could probably go nearly one year without working, but might have to make major
changes after that point.

Would consider 72t arrangement as nearly last resort.
Funds are in a rollover IRA.
If during the required 6.5 year of drawing from the IRA,
I become employed again whats would be some options
for returning the monies again for the future needs of
retirement? Is using a ROTH the best likely situation?

Whadda think?

gwix

Give me your net worth with a rough breakdown, and I'll give you your answer.

JG

[gwix98]

JG


150k IRA
15K cash and equivalents
200K home equity (150K mortgage)

Home would sell easily for $350K here.
We could replace this with small home or
condo cash to eliminate our one debt.
No other debt...cars in good shape, and
could live on substantially less than our
current income of about $88K.

Incomes are split 50:50.

Opinions?


gwix

[charlie]

Hey gwix,

I am sorry about your situation .... seems like layoffs
always happen during this time of year.

For others who may not know, if you start drawing
on your IRA using 72t, you must continue for 5 years
or age 59.5, whichever is longer.

If you go back to work during that time you can max
out your allowable contributions to your new employers
401k and/or start a ROTH with your excess cash.
I would lean toward stuffing as much as possible in
a ROTH .... it really depends on how generous your
new employer is with 401k matching. If you have
anything left over, put it in low cost, tax efficient
index funds and I-bonds.

Cheers,

Charlie

Whoa...........that's a little skinny, even for me. 53, eh?
Well, if it was me, I would take the 7 months of unemployment (I'm assuming here you want to cut back)
and live on the unemp. comp. plus your wife's income
while you plan your escape.
I assume you can do that without tapping into the IRA.
At your age, if I was motivated and with your spouse's
agreement, I would find something you enjoy even if
part time, and then actively plan for ER. I agree drawing from the IRA at this time should be a last resort.
You can do it though. I semiretired at 49 with a smaller
net worth than you have now. That was 11 years ago and I have not touched the IRA yet. You will need some luck and a
cooperative spouse. I had the luck but had to leave the spouse behind. Assume you would prefer something less drastic. Saving like crazy, then selling the house
and cutting back your lifestyle should get you there
pretty quickly. I could do it starting from where you are
now. The keys are how motivated you are and how your wife feels about it. It's not easy.

JG

[gwix98]

Yup,

Pretty much what I had figured most would say!
My wife had the forsight to pick an employer with a true pension (state) so she will be able to draw a 50%
pension at age 60...7 years or so for now. Wish I had
made that same decision 20 some years ago, but hey thats the way it goes.
Figure we can make it in "retirement"( 7 years from now)
on about 4-5K a month with our living situation paid off.
Look to remain in a part-time situation workwise past
62, as I could both use the income, and the time out of
the house. Guess we will see..never know what curves are gonna come your way!
I'm sure moving to an area where housing is cheaper
might help too, but I like the northwest.

Appreciate all the input.


gwix

[bruce1]

Sorry you are being laid off bit I am missing something here and not spending enough money. I have never spent 4-5 K a month consistently. If I bought a car or some otehr big ticket items yes. Usually spend about 2K after tax (no mortgage and no medical) Not sure of your total situation but I could easily live on your wifes 44K and save. Investigate carefully to see if you can. If your home is appreciating it would be good to keep it until you are ready to retire. Not feeling deprived ...depraved maybe but not deprived
Could spend less.
Am sounding like John Galt.
I guess my main idea is cut back as soon or before you are laid off to see if you can live happily with less.
good Luck
Bruce

[gwix98]

Thanks for your thoughtful insight, Bruce.

The 4-5K figure was really a hopeful figure for income
after retirement based on about 2K SS, 1.8K pension,
and hopefully 1K or so from IRA/401K with a SWR of
around 4% on say a 300K balance. And maybe a little
part time work thrown in too. I also hope to be able
to live under that amount so I can continue to save.
I still hope to do this in 9 years when I will be 62.
Yes, you mentioned no mortgage. I would hope to be in
that situation too, and could be if we sell our current
large home, and buy something much smaller, or a condo (2nd choice) for cash or near cash. That would
likely take $800 or so out of the equation. We do however like the home and location, and the kids like
coming home to the place where they grew up, if
you know what I mean.

I can be added to my wife's medical for a very attractive
$50 a month, so I am extremely thankful for that.

One of my kids is out of the house and the other I am
helping with college expenses which is something that
might be difficult to continue on 1/2 the income. I was
pretty much responsible for all my college expenses,
and I would hate to saddle her with everything.

Overall, I feel extremely fortunate to have made it this far without any bumps in the road. We really have been
fortunate employment wise and healthwise.
I am most thankfull of the decision to marry an employable and supportive spouse!

It certainly would be a good trial to be forced to actually
live on substantially less, kinda a "ER" test, so we shall
see how it all shakes out. I am a fairly senior employee
and the decisions will likely be made by seniority so I
may survive as well, so the next 6 months should
give us some answers.
Its my hope the 72T issue won't need to be looked at
at most it could only be 6-7 hundred a month at the
current balance.
I love this board. While much of it doesn't always apply directly to my situation, there are some pretty savvy folks on here who know how to spend their resources wisely and enjoy their lives to the fullest. Glad I stumbled upon it.

gwix