Beginning the Glide Path for 2015

[2B]

I've made several comments in other posts about my intention to finally retire in January 2015. I will say that once I had firmly made this decision it's getting harder to get up in the morning and come in. Unfortunately, I feel I have a financial issue that makes it worth waiting. I'll also detail some other issues and plans for people to comment on or ridicule me whichever the case may be.

1. I foolishly enrolled in a SERP plan where I had before tax dollars put into an IRA like plan but it must pay off soon after leaving the company. The payouts can be spread over 1 to 5 years which is determined by the election made at sign up. I "heard" that I could change this later but I didn't hear that it delayed the payout by 5 years. I don't want to go there so I have to deal with a big lump sum about a month after leaving the company. This would trigger income taxes about 5 times my normal amount (well into the 33% level) if I left now and it gets worse with every paycheck. If I leave in January, my income tax "only" doubles where I spread most of it out into lower tax brackets. This explains my planned delay to January 2015.
2. I'm trying to burn as much vacation time as I can before the end of the year but I also don't want to make it obvious I'm a short timer. I expect to have a lump sum of about $25,000 coming when I cash out the remaining vacation time in January. I'm thinking of increasing my 401k deduction up to the annual maximum in an attempt to capture as much of this and two January pay periods as possible. I don't know if cashed out vacation time can go into my 401k. I certainly don't want to ask HR. Does anyone know if this is a practical way to reduce my taxable income?
3. My FireCalc 99% run gives me a little over twice my "normal" living expenses (including taxes and post employment medical) so I get the only benefit of being a chronic OMY-er. This "normal" expense amount doesn't include serious vacations or significant help with grandkids' college expenses. I'm a believer in Bernicke plus I can also live with a variable withdrawl rate expecially when older. It just so happens that my and DW's SS and pensions are just slightly above this "normal" expense amount. I'm thinking of creating a sinking fund with CDs to pay these amounts until we are old enough to collect SS and medicare. The remaining portfolio balance would then be more aggressively tapped at a 5% rate (similar to what Merriman talks about). This would have my "normal" expenses covered but extra money would float with overall market performance. I still expect to have happy heirs when the casket lid is closed. Comments?
4. I am a professional engineer. Do any of the engineers in the forum think it's worth keeping this up-to-date "just in case?"
5. Are there any other things I should be looking at doing?

[Options]

Congrats 2B on your decision. My date is 2/3/15 because 2/1 and 2/2 are a weekend and leaving 2/3 will extend my company-paid medical til the end of February instead of end of January. This results in one less COBRA payment (in my case, COBRA is less than ACA), saving $500. I'm only going in on 2/3 to pick up my check and leave. If your company continues your medical until the end of the month you terminate, regardless of the date (and most companies operate like this), you might think about doing the same.

Once I firmly decided on the date, I too began to find it harder and harder to go in. Imagine your disappointment in reneging on the deal you've made with yourself by doing the OMY syndrome (I know I can't do it).

I'm handling vacation by taking every Monday off until ER date. This extra time off has made a tremendous difference in my attitude. It also helps me to keep coming in to w*rk while simultaneously reducing the taxable income in my final check. My intention is to have no vacation left by the time of my ER date. BTW, vacation time will always be paid out, and not be put into your 401k or anywhere else.

About that SERP plan, with over twice your normal living expenses accounted for, is it really worth spending another year of your life in a place you'd rather not be just to save a few bucks on taxes?

I'm not an engineer, but I keep everything up-to-date monthly. As time goes on, I expect to be a little less obsessed.

[2B]

Quote:

Originally Posted by Options About that SERP plan, with over twice your normal living expenses accounted for, is it really worth spending another year of your life in a place you'd rather not be just to save a few bucks on taxes?

It's 5 months more at this point and the dollar amount is close to six figures. If it was "a few bucks" I'd be gone but I'd choke writing the IRS that kind of check.

It's also not bad coming in. There's no stress or hassle other than the drive to and from. If we hadn't moved 30 miles further away, I might actually be considering another OMY.

Thanks for the comments.

[walkinwood]

Congratulations!

It is good to have the flexibility to go back to work - even part time - in case of a '08/'09 repeat. We did. However, I have no idea what it takes to maintain your PE designation.

Having read your posts here, I'd be surprised if you find anything major that you've forgotten to plan for.

[38Chevy454]

Quote:

Originally Posted by walkinwood However, I have no idea what it takes to maintain your PE designation.

I am a PE also, all it takes is keep paying the yearly/bi-yearly fees to keep your PE license current.


Back to OP, congratulations on making the decision and being on the downhill slide into retirement. I think your logic to minimize the lump sum payout is sound, assuming you can survive working another 6 months! You have the financial aspects covered, so keep burning vacation and work on a graceful exit.

Also concur the unused vacation is paid out as a check, can't go into 401k. You might be able to max out your 401k contribution for 2015 so you contribute like 100% after the std deductions for health care, medicare and SS. At least you would pay no (or nearly none) stare or fed income tax on the first month of 2015 paycheck(s).

[marinauser]

On keeping your PE, it depends on whether the state(s) you are licensed in require continuing education and, if so, what it will cost you to keep up with the classes. For me, I would keep it for at least two years and perhaps tie continuing education in with some vacation time.

[robnplunder]

Quote:

Originally Posted by 2B I am a professional engineer. Do any of the engineers in the forum think it's worth keeping this up-to-date "just in case?

Nope, unless you really like to keep up with the latest.

[38Chevy454]

Thought of something, you may be able to suspend your PE license, such that it is not expired, but just in a hold or inactive status. Check your states rules, it could save the hassles of reinstatement and also save paying the fees until you decide you want to bring it back up.

[MBAustin]

I also had a deferred compensation plan but Megacorp's rule was that you had to stay until 62 in order to spread out the payments, so lump sum was my only option also.

I did consider staying until January to reduce the tax bite, but my BS bucket was completely overflowing and I was able to save a colleague's job by leaving when I did (there was a workforce reduction underway and I "counted" as a reduction for my group).

I'm just glad that I looked at the details of this plan several years before and stopped putting my bonuses into it before the balance got too big, as I always planned to ER before age 60.