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Checklist for getting ready to ER
Old 10-06-2007, 10:28 AM   #1
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Checklist for getting ready to ER

ER is less than a year away from me. I'm a planner and a list maker and I'm not sure I've got everything covered. I'd like to put together a list of things I have to do, and when I need to get cracking on them. Here's a start, with some questions and some assumptions that may be incorrect. In my case, I'm single, 45, no pension from this job (but I do have a small one from a previous job), stock options, ESPP and a 401K. Assume the obvious that I've run the numbers and am confident I can retire. This is about the mechanics of what I need to do. If there has already been a thread for this, please let me know, I wasn't sure what to search for.

0) Pick a retirement date. Along with personal factors, it doesn't make sense to leave the week before bonuses come out, for example. Other things to consider is to finish an ESPP period, stock option vesting dates, etc. Unfortunately this can lead to "one more year" or "one more month" but it does make sense to consider events like this within or a month or so of a planned date. Use accrued vacation to bridge to such a date rather than just cashing out vacation.

1) Health insurance. This is the biggie. When do I need to apply? Should I make it effective on my retirement date, or bleed out my COBRA insurance? Should I get a final checkup before I leave my current plan, or should I hold off and get one as soon as I get my new policy to make sure I don't find something that would disqualify me? I've seen some recent and past threads about where to look for insurance, but I'm still nervous about this. I see people talking about $1000/month policies (for couples), but then I go to ehealthinsurance and see BCBS policies in the $100-$250 range for me. Maybe that's due to age differences. I guess figuring out which policy to get is a separate topic and I'm sure there's already a lot of good info out there, so for this thread let's leave it with when I need to be applying and putting it in effect.

2) Decide what to do about my 401K, either leave it where it is or move it to my IRA account. Plan in advance, but it cannot be executed until I leave.

3) Untie myself from my work computer. Move any personal information, bookmarks, etc, off my laptop, and change any accounts that use my work email address, make sure all of my contacts have my alternate email address, and make a copy of all of my personal contacts. I should've been more careful about this in the past but I didn't even have my own computer for awhile, and some things can't be avoided. So I'm doing as much as I can now and I'll need to make a final sweep before I leave.

4) Exercise stock options. In my case, which is probably pretty standard, I get 3 months after I leave to exercise any remaining vested options. I'm also liquidating much of it now to guard against a drop I won't have time to recover from, but mine vests monthly after the first year so there should still be some when I leave.

5) ESPP. To get favorable tax treatment (qualifying disposition), I need to hold the stock a day and 2 years from the offering date (for some plans you made need to use a day and a year from the purchase date if that is longer), so I assume I'll still need to hold onto those newer shares even after I stop working. Or does that rule change after you leave? In any case, I don't see that there's anything special to do here, except that I might as well stop my ESPP contribution if I'm not going to finish as ESPP period, because they will just refund what I've contributed in that period.

6) Max out benefits especially if leaving mid year. My current 401K deduction is planned to try to max out my 401K deduction in late December. Next year I may take out more early to max it out by my planned end date, and certainly to try to max out the employer match. Take advantage any dental, vision, FSA, (what others?) benefits while I have them. Need to plan this by Jan 1 of the year of retirement.

7) Set up an income stream or bucket to replace salary. I'm starting to do this now, by stopping my dividend and cap gains reinvestment and putting that in a money market to build up a reserve and flow.

8 ) Stop automatic investments. There's no sense in withdrawing money from one savings source to put it in another. Might want to do this a bit early and put that money in cash reserve instead, depending on how I've done in step 7.

9) Taxes. I usually withhold extra from each check to cover my investment income. I either need to increase this withholding next year since I won't have as many pay checks, or plan to start filing quarterly estimated payments. I found the EFTPS site thanks to a recent post. Is the best way to start doing quarterly payments after I leave, or from the start of the year even while I'm working, or what? This is another area I don't have a good handle on.


What am I missing or could be doing better?
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Old 10-06-2007, 10:34 AM   #2
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There is a great thread in the best of the boards you might want to check out
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Old 10-06-2007, 10:47 AM   #3
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Originally Posted by RunningBum View Post

1) Health insurance. This is the biggie...... so for this thread let's leave it with when I need to be applying and putting it in effect.
First, Nords has compiled a comprehensive pre-retirement checklist previously...do a search for that.

Secondly, I recommend that you secure private health insurance BEFORE you resign, even if you wind up paying for an overlapping policy for some period of time. Assuming that you'll be able to obtain private insurance at some rate x months down the road is gambling.

That's a mistake I made, assuming I'd ride on my still-working wife's employer plan until she packs it in shortly after i did, then buying an HSA plan at e.healthinsurance.com-like rates. Shortly after retiring my wife developed lower back problems and has been getting MRI's, working through therapuetic options, etc, then I re-injured my knee and had a pretty signifacant surgical repair done, and I think it's a safe bet that any private HI outfit will want to exclude my wife's lower back and my knee. Now she'll likely continue to work until a package is offered by her employer or our portfolio grows an extra $100K or so (only a few weeks if this October market run-up continues )

At any rate, if you think about the likelihood of a >40 year old (or a pair of them!) being diagnosed with a heart issue, diabetes, a cancer, or an orthopedic issue, etc, is too great to ignore.

Cb
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Old 10-06-2007, 10:52 AM   #4
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I think you have given thorough consideration to your plans. Items on the list are going to vary a lot from person to person.

Personally, I have already brought home all but a handful of personal items from work, and bring personal files home on my thumbdrive regularly.

I will need to settle on a post-ER asset allocation plan.

I plan to give at least three months' notice once I have decided on a date.

At work, I am already writing up step-by-step notes on how to do certain parts of my job in case there are questions. Also I am trying to make my notes of results in recent projects, clear enough for my successor to easily find and understand. I am trying to clean out my huge Outlook "Inbox" and "Sent", to get rid of emails that are no longer necessary to keep (which will make the necessary ones easier to manage).

I need to put the addresses, emails, URL's, and/or phone numbers for TSP, pension, Vanguard, and social security in a notebook at my fingertips. That should be easy to do.

I need to get my house ready to sell, which means finishing my wallpaper scraping and painting, cleaning, having the carpets replaced, doing some major landscaping work, and completing numerous repairs of minor Katrina damage that I had been putting off. I need to sell all of my furniture since it is not worth moving, and buy a blow-up bed and pump for temporary use. I need to go through my things and dispose of EVERYTHING that is not worth moving to Missouri (my planned ER location). I am already working on that and have been for a couple of years.

I plan to buy my next car once I am retired so I need to figure out the logistics of the move. Maybe I could sell the old one here, drive the rental truck up there, and buy a new one in Missouri, thus not having to make the drive twice? not sure how I plan to do that, yet.
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Old 10-06-2007, 12:33 PM   #5
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Quote:
Originally Posted by RunningBum View Post
0) Pick a retirement date.

GOOD IDEA, including bridging with vacation.

1) Health insurance. This is the biggie.

What does your employer offer? At your age, will they provide it? If not, as others have suggested, ehealthinsurance.com is a prime site to determine the best choices for you.

2) Decide what to do about my 401K, either leave it where it is or move it to my IRA account. Plan in advance, but it cannot be executed until I leave.

That's correct. Will they let you keep it there? Some employers won't. What investment choices do you have in the 401K? Are they sufficient for your asset allocation plans? Can you get more options with your IRA? Does it make sense to convert to a Roth?

3) Untie myself from my work computer.

4) Exercise stock options. In my case, which is probably pretty standard, I get 3 months after I leave to exercise any remaining vested options.

5) ESPP. To get favorable tax treatment (qualifying disposition), I need to hold the stock a day and 2 years from the offering date (for some plans you made need to use a day and a year from the purchase date if that is longer), so I assume I'll still need to hold onto those newer shares even after I stop working. Or does that rule change after you leave?

Your benefits department should be able to tell you this.

6) Max out benefits especially if leaving mid year. My current 401K deduction is planned to try to max out my 401K deduction in late December. Next year I may take out more early to max it out by my planned end date, and certainly to try to max out the employer match. Take advantage any dental, vision, FSA, (what others?) benefits while I have them. Need to plan this by Jan 1 of the year of retirement.

Does your employer offer an HSA with the health plan? If so, consider joining during open enrollment -- you can shelter more income and even after you've left, you can open an HSA with your new health plan.


7) Set up an income stream or bucket to replace salary. I'm starting to do this now, by stopping my dividend and cap gains reinvestment and putting that in a money market to build up a reserve and flow.

Excellant. Have you determined the asset allocation you'll need to generate income and preserve it? You'll likely need to reposition investments once you determine that. That should be one of your TO DO's now, rather than after you've left.


8 ) Stop automatic investments.

How do these fit in with your asset allocation plan?

9) Taxes. I usually withhold extra from each check to cover my investment income. I either need to increase this withholding next year since I won't have as many pay checks, or plan to start filing quarterly estimated payments. I found the EFTPS site thanks to a recent post. Is the best way to start doing quarterly payments after I leave, or from the start of the year even while I'm working, or what?

Why? With only working half a year and then retiring will your total income be as great? Modelling using a tool such as Turbo Tax will provide you an answer about your tax liability.

10) TRANSITION PLAN: when will you notify your boss? What do you need to do with the Benefits department? What can you suggest to your boss about how to transition your assignments/workload? You never know -- they might occasionally want your help as a consultant. Show them you're concerned, but its time for you to move on.

What am I missing or could be doing better?
-- Rita Not retired yet, planning for mid-2008
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Old 10-06-2007, 01:18 PM   #6
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Old 10-06-2007, 02:45 PM   #7
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Thanks for the tips and the pointer to the other very useful thread. Keep 'em coming!

I'm going to be on my own for health insurance, so I have bookmarked and investigated ehealthinsurance.com and a couple other sites that I heard of either here or elsewhere.

I'll pretty likely roll my Fidelity 401K into a Vanguard IRA to have more choices. I haven't gone the Roth route yet because my income is too high to qualify, and I don't want to pay the higher tax rate either. Maybe next year will be different but I doubt it.

The tax issue is that I do extra deductions to cover investment income, and that won't reduce just because I don't have a job, except that it will keep me from going as deep into the higher brackets. Also, for some reason a couple years ago the company limited how much we could take out for taxes when exercising stock options, and this can create a hugh tax liability.

I've also got a move coming, collapsing two homes into one. I'm going to move what I can put in my Pilot, and sell/donate/junk the rest. I've actually been planning this one ever since I moved to Texas so I haven't accumulated too much, and most of what I did buy was pretty cheap stuff. I figure that's a different topic since I telecommute and the two events don't have to coincide. I'm just waiting on my daughter to finish HS this spring to sell this house. I did pay attention to the garage sale vs. donate thread.

I've had a great relationship with both my previous and new boss. I've told them roughly what to expect since what I do is pretty specialized. I don't want to get into the whole thing, and I know it wouldn't work for everyone, but it seems to have been the right decision for me to give them early warning. I'm doing the kind of work I enjoy without the pressure of some of the new work my group has picked up. I even got more stock options this last pass. Fewer than past years, but still it would've been easy for my boss to skip me since I may not even be around when they start to vest after a year, and certainly won't vest all of them. They may have trouble with headcount games to fill my spot, but there is another guy in the group who could pick up my work.
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