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Game Plan for Dealing with a Difficult Work Environment and close to FIRE?
Old 10-06-2013, 06:30 AM   #1
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Game Plan for Dealing with a Difficult Work Environment and close to FIRE?

Assuming I had my mortgage paid off, I would have enough in my investment portfolio to cover my basic annual expenses, using 4 percent as a safe withdrawal rate.

I could possibly FIRE sometime within 2 to 4 years. The pressure and conditions of my job continue to deteriorate. I have been employed there for about six and one-half years. There is a good likelihood that my position will be relocated to another part of the country. If this happens, I would have to re-apply for my job, and if offered employment, I would be taking a 10-15 percent salary reduction. I am not interested in pursuing this path if the position is relocated.

If I am laid off I would be eligible for severance and unemployment compensation. Although I have looked, comparable jobs in this region are available, potential employers are not knocking down my door.

My thought was that, in order to make the next 12-24 months tolerable, I would lock into any gains from my investment portfolio on a month to month basis and place the gain into an account earmarked for the early payment of my mortgage. So for example, if my investment portfolio value was 200,000 in September and rose to 205,000 in October, I would lock the 5,000 gain and add it to my mortgage prepayment account. If my investment portfolio went below 200,000 I would wait until it went above 200,000 in a month to lock in the gain again.

I have an emergency fund and I obtained a home equity line of credit.

I have a low interest rate on my mortgage, like 3.4% I believe. And I do not think there is a prepayment penalty on this mortgage.

I think this might psychologically make a difficult work situation slightly more tolerable. It would help me to see in a timely way how I am progressing toward achieving a goal. The only drawback I can see is that if I waited to lock into the investment portfolio gains until after the job ended, I might pay less capital gains tax on the investment portfolio gains because my annual income would be less.

What do you think about this plan? Does it sound like a good idea?
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Old 10-06-2013, 08:48 AM   #2
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Depending on your age and AA, a 4% WR may be borderline.

I think my portfolio will earn more than my 3.375% mortgage rate in the long term so I have kept my mortgage, even in retirement. For the 20 months or so I have been retired, my return has been much more than my mortgage rate. I take solace that on any given day I can pay off my mortgage if I want/need to.

Given you have severance, an emergency fund and a HELOC, I'm not sure why you need a bigger emergency fund, which is effectively what you are proposing. Also, what are the federal and state tax implications of your plan compared to staying the course?
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Old 10-06-2013, 10:17 AM   #3
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In your shoes, I would not focus on paying off the mortgage but on finding a job with better or at least equal pay with an employer that is in better shape and treats employees with more respect. Being consistently employed that close to FI is far more important than setting aside funds to pay off all or part of the mortgage. Keeping up your savings rate is critical to your success. I would beef up the emergency fund and polish the resume.
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Old 10-06-2013, 11:11 AM   #4
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I'm not sure exactly what the federal and state tax implications would be. But I know that if I paid off the mortgage, I would lose the mortgage interest deduction. And I would have to pay a capital gains tax and the transactions that occur where I lock in the gain.

I just thought that this was a good way to deal psychologically with a difficult work situation, until Obamacare becomes effective and until I am eligible for any severance pay. If I leave before I am told I have to go, I lose the eligibility for a severance.

Can you think of other ways that I could set short terms goals to better deal with this situation? Thanks.
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Old 10-06-2013, 11:26 AM   #5
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Quote:
Originally Posted by nico08 View Post
I'm not sure exactly what the federal and state tax implications would be. But I know that if I paid off the mortgage, I would lose the mortgage interest deduction. And I would have to pay a capital gains tax and the transactions that occur where I lock in the gain.
Keep in mind that losing the mortgage interest deduction may not necessarly be the financial loser you perceive. When I was looking at paying off my mortgage in 1998, the tipping was actually my realization that I would hit the "floor" known as the Standard Deduction, thereby capping the loss of deductible interest. This was only for my state income taxes, not my federal income taxes, but that small difference was enough to tell me that I should pay off the mortgage.

Make sure you check this out in case your itemized deduction(s) would drop below the standard deduction (federal and/or state) should you pay off the mortgage and not have to pay any more interest.
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Old 10-06-2013, 11:38 AM   #6
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I would look at the long term here. A better job with a better employer solves all your stated concerns.

What you propose lowers your long term returns because you are taking money off the table. That's great in Vegas, but not so good for your retirement.

The handwriting is on the wall. Your job is moving and the rate of pay will be lower. You will have to reapply and compete for it. If you get it, you will have to move. Focusing on the mortgage is not what I would do in your shoes.
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Old 10-06-2013, 04:54 PM   #7
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If you are looking at getting 4% inflation adjusted from your portfolio, and the mortgage is ~ 3.4% fixed, then I fail to see how paying off the mortgage is important.

That's not a comment on whether you should or shouldn't pay it off, just that I don't think it should be a focal point of your plan. And remember, if you put $5,000 into it, that $5,000 is pretty much 'dead money' until you pay the whole thing off and free yourself of the monthly payment.

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Old 10-06-2013, 05:21 PM   #8
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Thank you for the advice. What you are saying makes sense. I guess I was just thinking that it might be a way to accept a difficult situation for the short-term.

The first job I had after graduate school I kept for about 11 years. This current job I have been in for about 6.5 years. I guess we will see how long I will be in my next (and hopefully last) job for. It's unfortunate though, because this large company was not always a publicly traded company and employees would have 30 and 40 years with the company. The stability is partly what I attracted me to the company. Those days are over.
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Old 10-06-2013, 05:35 PM   #9
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Only you can decide how much you can put up with, but I agree that you should focus on finding another job. Sometimes you just need to leave for your own sanity. And you want to make a decent salary so you don't have to touch your savings.

I had to make this difficult decision this year, when I only had ~ one year to go. I took a pay cut, but my mental and physical health were worth it. I am so much happier in the new job, and my new team really is appreciative of what I am bringing to the table. I am enjoying it so much I may stay a little longer than originally planned. Who knows, time will tell.
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Old 10-06-2013, 05:44 PM   #10
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How deep into the mortgage are you?
What might give you a boost is to print out the amortization schedule, and pay ahead an extra month or two in principal. You will shorten the loan duration, and not lose any deductible interest at this time.
This worked out well for us, and we paid off the 30 year note in 10 years or so.
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Old 10-06-2013, 06:31 PM   #11
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Hi- I am not long into the mortgage at all- less than a year. I think the interest amount in the first couple of years is about $5,000 each year.
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