ER and new career?

B

Bill

Guest
The ER bug is hitting me very hard this week. Partly because the new rates (GATT for Nov.@4.37 vs. Dec.@4.93) for the lump sum came out this past Sunday and December increased, lowering the lump amount by $21K in only one month.

Have a home we just refi'ed @5.25 and a vehicle payment ('03 H2 Hummer, I know, a bit excessive). One vehicle ('99 Lexus) is paid off and in excellent shape. I want to retire early and work in a different field for a couple of years. I would have to start a SEPP right away since the new job would only pay about a third of my current salary.

My issue: I am scared to death to make the leap. I read REHP frequently, lurking in the background. I am only 53 and I know waiting until 55 would provide a larger comfort zone. Several issues concern me. The recent HR 1776 bill which would allow corps. a new rate to minimize their pension obligation eventually would erode the value of the lump sum and may even allow the companies to eliminate the option. I am torn. I want to retire, I want to work elsewhere (believe it or not, drive a truck vs. current tech job), but, I fear the outcome. I guess after thirty years with the same company, it is just a bit un-nerving.

Right now, the current job is secure and normal wisdom tells me to bite the bullet and stay until 55 and take a chance with the lump sum rate and value.

Any suggestions?

Bill
 
Forget the seminar. Questions: Do you have enough emergency savings? Can you pay all your bills with a job that only pays 1/3 of your current salary? Do you have health insurance from elsewhere?
 
Can you live on 3 1/2 % or less of your lump sum, including health care? I mean forever, not just for the first 2 years while driving a truck. If not, you need to make choices about your annual expenditures and income stream. Most early retirees have little, if any debt. They also tend to live frugally, unless they are very rich. Few lump sum payouts will qualify people as very rich. Unless your company offers life time health care, you might be well advised to make sure that you and your spouse qualify for a private health insurance policy before quitting. Do you understand how to properly construct a portfolio? If not, learn before you quit.
 
All valid responses and questions. I know that no one can advise me on this personal decision.

Yes, we can live on 3.5% of my lump when we combine the draw with the wifes 72T. Also have a small trust fund at about $6.5K per year. Do I have enough savings? I can say no. I don't think you can ever have enough savings. The new job would not be needed to pay the bills. I would use the income to build an additional cushion and start paying down the home. We would also need only one vehicle. The Hummer will be sold. Fortunately, I feel we could live the same life style we do now, pay all the bills, and still have about $1.2k left over per month. I know there are several options we can do to reduce our monthly expenses (second telephone line, HBO, etc.)

I am doing a pro/con analysis as we speak and so far, things are tied. I guess my greatest concern is the rates increasing over the next couple of years. I have done several analysis' or 'what if's' on lump sum calculations. A conservative estimate retiring in two years ('05) would put the lump at almost exactly where I am in November ('03). No gain. And that is assuming the rates don't take a huge jump.

Oh, the health care issue. Thanks for bringing that up. The company pays 80% of insurance coverage for employees with over thirty years. The back up plan is the wife retired from the same company three years ago and has the insurance as well. I think we are okay there, although, I know premiums increase. Then the health care benefits with the new job.....think we are okay there.

As most of you can relate, this is a huge decision for us. The uncertainties, the economy (although I do feel now is a good time to get in the market), the job outlook, etc. Leaving my current salary and bonuses is a lot to give up. The other side of the coin is the job burn out, the rat race, corporate greed and the changes going on with their retirement funding issues.

Decisions, decisions. Thank you for the 'food for thought' responses. I have increased the pros and cons table I am building.

Bill
 
Hi Bill! I did it on next to nothing and never looked back. Best decision I ever made, and no amount
of troubles or setbacks will ever change that.
 
Thanks JohnGalt. I feel once I make up my mind, things will be just fine. I guess it is just making that final decision to start all of the paper work. Funny thing, the boss, who I told in confidence, is starting to dangle a couple of carrots. And you know, I don't want those carrots. After thirty years, I am tired, I don't trust the company, am afraid the government is siding with big business, overlooking the small guy out there trying to get by. I am trying to look out after us now, not the career.

Still racking the brain, running figures, drawing up scenarios, looking at the pros and cons, and I am still no closer to making the decision. Hopefully, I will wake up, call HR to get the paper work started and get on with it.

This is probably the hardest decision I have ever made in my life.

Bill
 
Bill on ER,

Bill, I ER this year at age 51, my wife will ER next spring.
If you are prepared an plan things out (there are always unknowns) that is all you can do.

We plan on being debt free once we move next spring. No car payments, no house payments (except taxes, etc) no other credit debt.

Our biggest issue is our daughter (age 10) and her schooling. We have a good portion of the planning done for that, but not complete.

I could have worked another 4-5 years but the work environment was not good and so decided to leave and go on to ER. I would have been better off financially to work another 4 years, but the tradeoff (time away from family, stress, etc) wasn not worth it to me.

Just some thought from a new ER.

If you wait to take a trip until all the traffic lights are green, it ain't gonna happen.

Best wishes for you .

earlyout
 
Excellent point earlyout. My options are to take the low GATT rate in November or wait for another eighteen months. Then there is the possibility of the rates going up, reducing the lump sum.

I always had an ace in the hole by doing some contracting in the telcom field. Unfortunately, all of the opportunities has dried up for now. Rumors have a voluntary package to go early, but, you can't count on rumors. The left over monies now are at $1750 per month as I forgot to include the trust money.

I don't know why I am so hesitant now as I always planned to bail by April '04 or wait until Aug. '05 when I turn 55, so by going in November of this year, I am close to my original plans. I guess reality has hit me and I am getting cold feet. Looks like it will work on paper any way, but, it is still a big decision. I know once I make the decision, I won't look back.

Thanks for the input and best of luck.

Bill
 
After I was retired and before I remarried, I was dating a woman who taught at the local high school. She did not like her job, but had her Master's and a long career.
I asked her once about her retirement plans (she was maybe 52 at the time). She said she planned to work until she was 60. I was shocked by this as for me,
working at something you don't enjoy and hoping you
live to a particular age before you can enjoy yourself
is completely foreign to my way of thinking.

Ask not for whom the bell tolls.
 
Accidental ER. I suspect there are as many ways to ER as there are ER's.
Circa 1982 I graphed my 401k out to 1.2 mil in 2006 age 63 whereafter we would upgrade the camper to a "big" RV and see the USA.
1993 was layed off - couldn't find a job, inherited my widowed mom, 1994 auto wreck she medically retired.
I knew we couldn"t "afford" to live on our savings (roughly 300K total).
Guess what?. We lived the life of Riley on less than $50/day. Uncle Mick's camper in the front yard became a staging base for my niece and nephew's (and buddies) all navy to invade the French Quarter and Super Dome during 90"s. 1995 a tornado effectively tolaled the camp(she got 15 years of remodelling done in one fellswope and decided we are going to live here forever skip the RV.).
I did one year of contract engineering 95-96 which totally convinced me to remain an ER.
I joined this forum for my 60th birthday present to myself.
By all means have a plan, be ready to adjust, and remember - as an ER you have more options than you think.
BTY we haven't touched our 401k/IRA's yet. Who would have believed that in 1993? - not me.
 
 After thirty years, I am tired, I don't trust the company, am afraid the government is siding with big business, overlooking the small guy out there trying to get by.  
Bill
Click to expand...

If you are driving around in a Hummer and a '99 Lexus, about 99.9% of the people in the world would laugh at your notion that you are a "small guy, just trying to get by" while the big bad government exploits you.

If people who have money don't support government expenditures through taxes, who will? The tooth fairy? And where do you think that the U.S. would get the oil to power your SUV (along with tens of millions of similar vehicles) if the government didn't have a policy of maintaining access to world oil markets, at an extremely high cost both in dollars and in lives.

The fact that not everyone can afford to comfortably retire at 50 or 53 or whatever is not a fault of the U.S. government -- it is economic reality. Be thankful for what you have, as an American with an income that is apparently above average -- and quit whining. Government obviously has a lot of room for improvement, but the vast majority of us would be a lot worse off without it.
 
Hmmm....Ted, never expected a response like that. What I drive does not reflect my comfort level for retirement. The funny thing is most people think the Hummer cost 100K. They do not. We have been lucky on several real estate deals and we are not wealthy. The government issue has nothing to do with oil. It is the companies wining and dining the government to lower their retirement funding requirements, thus lowering the rates tied to the lump sum issues.

I am the small guy. Worked thirty years to get where I am. I am below middle management and not one of the big guys. Don't think I was whining, just trying to see where I fit with the others in my situation. I also did not complain about taxes.

Ted, thanks for your response. Sorry you are having a bad day.

Bill
 
Hey unclemick. You have the right idea. Just do it man!
Have a plan but be ready to get a new one. I have not
touched my IRA yet either (retired since 1993 also),
which I would never have guessed could be done back then. And another thing. There are thousands
(dare I say millions?) who would love to ER and could do so with very little trauma. Most won't though and that's a shame.
 
AzH2,

I must admit that when I read your original post as "Bill", the Lexus and H2 Hummer just didn't seem to go with wondering if it was time to retire!

The company I used to work for had a few early out offers in the 90's. Many of the eligible would wring their hands and wail what they should do. "Oh woe is us, we have this opportunity that few others can get, and we just don't know WHAT to doooooooo". This happened a few times, and it was pretty much the same people again and again. I'm NOT saying that you're doing that, AzH2! They would discuss it endlessly, and most would decline it. It just seemed too big of a jump for them. But one stick that seemed to poke them was a decrease in the GATT Rate. One guy saw it as a no brainer to go. If he stayed, the whole next year in effect would be working for "free", as his future lump sum would decline by that years earnings. So he took it. A few years later, the industry tanked big time and the endless rounds of layoffs began, till very few of anybody was left.

I didn't have a choice with mine. The GATT was 5.48 if I am remembering right. So it was backed down into the present by that yearly rate. Yeah, as if I could get that rate now...

I would like to say that if someone early retires, then goes to work at another job, we should pull their ER credentials. Because they ended up just doing a career/job switch, not ER! :D
 
I see a lot resonses that touch on the emotions of taking the 'big leap' into ER. i suspect a lot of people work into their 60's to reach an "acceptable" age to retire. Luckily I was still job hunting when it dawned I didn't need one. In 1993 my view of ER was 55 not 49 as it turned out.
 
Hi unclemick! Again struck by our similar stories.
I semiretired in 1993 at age 49. I had no angst
about an "acceptable" age as I tend to make my own
rules. Anyway, a "Godfather" opportunity came up
right away and so I went back to work for a couple of years. Then, like you, it dawned on me that I could
retire for good. Drew my last paycheck in June, 1998.
I was 53. I think retirement is on the list of stressful
life experiences. I have had my share of stress, but
retirement caused none at all. On the contrary, it removed it.
 
. . . Had a 'nice lady' tell me recently, "I was too young to be retired." . . .
-----------------
I've heard that line several times since I retired at age 49 this past April. My response now is to look very serious and explain, "Well. . . I've actually done some research into both State and Federal laws, and it turns out that there are no legal age limits for retirement." :)
 
Here's one that trumps everybody.

Six years ago, the day after my 40th birthday, this Army recruiter starts chatting me up. I'm thinking he's got business at the the local AF Base here and was going to aks for directions.

No! He starts into his "Army as a great career" "It's a great place for young people to start" "lots of college bennies and travel!" recruiter-type schpiel! He was trying to get me to join the ARMY! And he was not some old grizzled Sgt Bilko type. He was short of 35 I'd say

I hated to tell him I was 40 yrs and one day old and had already done 20 yrs in the Air Force.

Everybody should have one day like this in their lives
 
::)Sigh...I only wish I was mistaken for someone to young to be retired. I'm only 50, but the hair and beard are definitely much older. :mad:

Bill, I'll only echo what others have said here. GET OUT DEBT! It's the best investment you can make with the greatest of returns. That, accompanied by a health plan similar to yours is what placed my wife and I in the position of being able to go out in January 04. You can do it!

Get rid of the excess baggage too. If you have a lot of stuff, then you have to have a larger house to store the stuff and more insurance to protect the stuff and on and on....simplify, simplify. Why work to support crap?

For the last several years, my wife and I have been systematically cleaning house getting rid of stuff we no longer need or thought- we-couldn't -live- without-and-found-that-we-could. It's very liberating. ::)

Good luck to you. I hope you decide you can ER.
 
Thanks for the input Proud_Texan (me too, btw). Only debt is the auto and house. Everything else is paid off. We have planned for this for some time. My only concern is the final jump. I am not any closer to making the decision to go as I was two or three weeks ago. Funny thing is I have made up my mind several times now and then changed them. Even today, I said that is it, I going. And, if things work just right in the next couple of days, I will go.

On paper, everything works. Matter of fact, there is only about $700 difference per month from current salary to combined (wife's 72T/my 72T/trust fund) retirement draw. I know I could do without or work around that $700 right now. It is just that final push to get me out the door.

Bill
 
I don't want to discourage you, but it is a very big
decision and you seem quite ambivalent. I am unsure
about the degree of uncertainty and waffling others
may have endured. In my case it was one of the
easiest decisions I ever made. I had to do it,
even if I had to work out the details on the fly
(which as it turned out I did). Wild horses and the
threat of insolvency could not have stopped me once I
decided to go.
 
I've said this in another of these forums, but it's like standing at the open door of an airplane get ready for your first jump. Even if you've packed your chute correctly and done all the practice jumps on the ground, it's still kind of scary.

I'd say if you're chute's packed correctly, jump. The reason why it's good to get rid of your debt though is because it's liking parachuting while holding an anvil. :eek:

You have to do what's best for you and stay in your comfort zone.
Only you have to live with your decision. You'll make the right choice.
 
Bill:

Like you, I have wrestled with this question quite a lot. It's not that I don't want to ER, it's more like I want to ER AND be reasonably certain that I am doing it at the right time. As with any other business decision, timing is critical. Using my perfect 20-20 hindsight, retiring 3 years ago would have been pretty smart. Unfortunately, my crystal ball was a little cloudy that day and I did not foresee the 2001-2002 recession.

Anyway, the 2 BIG issues that have been discussed here are: 1) health insurance; and 2) debt. Of the two, health insurance may be the bigger issue. Debt reduction is a great thing but the bottom line on debt is its effect upon your cash-flow. If you can comfortably service some debt, it's really not much of a problem. If you can't comfortably service the debt and ER, then that puts the situation in a whole new light. We won't have our home paid off by the time I ER but our retirement income will easily cover the house payment and all of our bills. Heck... my wife ER'd in 2001 at the ripe old age of 51 and her pension check covers all of our monthly bills. Also, we will have 50% of our health insurance paid for by my employer, so that brings that cost down to a reasonable level that fits into our budget.

Another issue of importance here is the effect that your job has upon you. If you are in a high stress job that is affecting you physically or mentally, get out ASAP. It is far better to live on less income than to have a serious health problem. If your job does not have a deleterious effect upon your health, then working until age 55 may be a good idea. That was the conclusion that I came to once the corporate demons were shackled sufficiently that I could tolerate their presence. Eleven months to go... and counting! :D


Ed_B
 
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