Have You Lived Extra Frugally a Couple Years Post Retirement to Increase Portfolio?

[nico08]

Hi. I was working for a large corporation for over seven years. The company was relocating and my position was in jeopardy, but no specific date had been given as to when the unit would be shut down.

Based on FIRECalc, I was about 90 percent of where I needed to be in order to be FIRE. My estimate was that I would need to keep working for about 16 more months to be ready to resign and enter the next phase (early retirement) of my life. I am 44.

I was terminated on 7/31/14. I believe that the termination was pretextual and simply a way for the company to get rid of me without paying severance that, based on its own rules, I would have been eligible for, based on company rules. If my job was relocated or eliminated, I would have been eligible for severance. The state that I live and work in has a law against discrimination, and I am a member of three protected classes. The employer committed multiple torts in what led up to the termination, and this may be addressed in a civil action.

My question though, is whether anyone has retired sooner than you had intended due to a lay off or some other life circumstance? And then lived extra frugally for the next couple of years in order to give your investment portfolio the time to grow where it needed to be in order to retire early for the long term based on your originally planned retirement budget?

If you have followed this path, I would like to know your experience with it. And if you have any other advice in a circumstance like this. I should be eligible for unemployment compensation (I never made a claim before) and I have about 6 weeks of paid time off that I should be entitled to receive and should get me closer to the net worth I need for long term retirement.

Thank you for your advice!

 

[gauss]

I had a somewhat similar situation. They did not push me out of the door, but rather wanted to push me out of my current workgroup. The timing was bad for me in that I had committed to my DM that I would care for her during her major spinal surgery that was scheduled in a few weeks. I went on a leave of absence and then ended up resigning outright.

What made the difference to me was that like you, I was about 90% funded via FIREcalc however this was without accounting for my accrued Social Security benefits. When I went through the process of figuring out what I was scheduled to receive from Social Security, if I never worked another day in my life, then FIRECalc had me way over the top. The trick to get the number is to enter '0' for last years earnings in the benefit estimator at Retirement Estimator . If you don't enter '0' for last years earnings, then the estimator assumes that you will keep earning until the age of sixty something which was not the info that I needed. Social Security is really great for ERs in that you accrue the majority of the benefits early in your career. For our case, the value was the better part of 1M but that assumed delaying the draw until age 70 and then living to 100.

-gauss

 

[nico08]

I had a somewhat similar situation. They did not push me out of the door, but rather wanted to push me out of my current workgroup. The timing was bad for me in that I had committed to my DM that I would care for her during her major spinal surgery that was scheduled in a few weeks. I went on a leave of absence and then ended up resigning outright.

What made the difference to me was that like you, I was about 90% funded via FIREcalc however this was without accounting for my accrued Social Security benefits. When I went through the process of figuring out what I was scheduled to receive from Social Security, if I never worked another day in my life, then FIRECalc had me way over the top. The trick to get the number is to enter '0' for last years earnings in the benefit estimator at Retirement Estimator . If you don't enter '0' for last years earnings, then the estimator assumes that you will keep earning until the age of sixty something which was not the info that I needed. Social Security is really great for ERs in that you accrue the majority of the benefits early in your career. For our case, the value was the better part of 1M but that assumed delaying the draw until age 70 and then living to 100.

-gauss

Hi Gauss. Thank you for sharing your experience. Unfortunately for me, the 90 percent completion of my early retirement goal already factored in my social security benefit and a small deferred defined benefit pension that I will start receiving at 60.

 

[Donzo]

when I retired I was VERY frugal for the first year or 2. I had enough, 100% in FC but was not used/comfortable with spending after so many years of saving. i retired 8 years ago and have 40% more $ now than when I retired . I have loosened the spending habits.... a lot. I remember one of the forums well liked and prolific posters here say that when you get to 90% or better on FC you are "just polishing cannon balls" with more saving. I would give ER a try and watch the portfolio - you could always go back to work if necessary. But you may also (and prob) be free!

 

[nico08]

when I retired I was VERY frugal for the first year or 2. I had enough, 100% in FC but was not used/comfortable with spending after so many years of saving. i retired 8 years ago and have 40% more $ now than when I retired . I have loosened the spending habits.... a lot. I remember one of the forums well liked and prolific posters here say that when you get to 90% or better on FC you are "just polishing cannon balls" with more saving. I would give ER a try and watch the portfolio - you could always go back to work if necessary. But you may also (and prob) be free!

Thank you Donzo. Your words are encouraging. I think part of the issue for me, is that I like to be in control, and in this employment situation, the employer decided when to end the work relationship as opposed to me making that decision.

 

[Donzo]

I'm sure it is an uneasy feeling to not be holding the reins at this point. But, fortunately you have been saving and preparing - at 44 to be at 90% is admirable! Don't worry to much, enjoy your freedom!

 

[Ready]

Nico08,

I'm sorry to hear about your employment situation. I can imagine how stressful something like this is to go through. I wish you the best with whatever you decide to do.

Regarding your question about living extra frugally for a couple of years while building your portfolio, I think this is not a good idea. It would be great if the stock market simply returned nice steady profits each year, but the reality is that we have no idea what the next few years may hold. The market could keep going up, but it could also experience a major correction, like 30%. If it did, then how would you feel about not having steady income coming in?

In running your numbers through Firecalc, you are theoretically looking at the worst case scenarios in history, assuming you are using the explore tab to find out what income is sustainable through 100% of the historical cycles. If this number says you are only at 90%, I would not personally feel comfortable ending my income stream completely.

That being said, if you are 90% there, my recommendation would be to take some time off, relax, and give some thought to what you would like to do next. You certainly are not in a position where you have to immediately jump to another job just to pay your bills, so use this to your advantage to figure out what would be really enjoyable for you as you enter the next chapter of your life.
You may find that your next opportunity is far more satisfying than the one you left.

 

[TimSF]

That being said, if you are 90% there, my recommendation would be to take some time off, relax, and give some thought to what you would like to do next. You certainly are not in a position where you have to immediately jump to another job just to pay your bills, so use this to your advantage to figure out what would be really enjoyable for you as you enter the next chapter of your life.
You may find that your next opportunity is far more satisfying than the one you left.

+1. To be 44 and at 90% FC-proof, you are definitely in the drivers-seat. As your post affirms, you have multiple options to close the gap: you can tighten the belt on expenses for a while, decide to pick up some part-time w**k that you enjoy, or simply proceed as you are for awhile and reevaluate later. For now, I would take some time, enjoy, and reflect on your situation before making decisions. Because of the manner of your termination, you even will receive unemployment! You might even hit the jackpot with your civil suit against the employer. In all likelihood your (former) employer will probably want to work out a settlement with you. Have you hired a lawyer yet? That may be the most important decision you make initially.
Congratulations on having done so well to this point.

 

[daylatedollarshort]

A few years back my husband was just really demotivated and stressed from long hours at a megacorp job. Instead of saving more we just decided to live on what we had, plus any part-time work.

I just read a lot of forums and books on how to live well for less, simple living and sustainable living. We have actually been able to improve our lifestyle, increase our net worth and spend much less. Work took up a lot of time we now have to spend on comparison shopping, tax planning, financial aid planning for college, doing more of our own chores and repairs, making use of the library and public park activities, lowering our energy costs, etc.

If we had known years ago what we know now, we could have FIREd much sooner in life.

I had a friend in the same situation as you are in now, terminated to avoid the promised severance package, and the company settled out of court. I'd suggest not signing any termination papers going forward until you talk to an employment attorney.

 

[Lsbcal]

Hi. I was working for a large corporation for over seven years. The company was relocating and my position was in jeopardy, but no specific date had been given as to when the unit would be shut down.

Based on FIRECalc, I was about 90 percent of where I needed to be in order to be FIRE. My estimate was that I would need to keep working for about 16 more months to be ready to resign and enter the next phase (early retirement) of my life. I am 44.
...

I was 55 when the mass layoffs came in 2003. I did do some "consulting" work for a year or so with my old company after a hiatus. The layoffs came right before a new bull market so that helped. We were frugal at first and also in 2009 after the stock market decline.

I would not presume to give you advice on your specific situation. People mean different things by living frugally. One person might define frugal as living on $80k/yr and another might really be talking about $40k/yr.

I would say that you should look at some details of the FIRECalc runs. In particular we are definitely not at the start of a bull market. That started in 2009 and who knows how the future will go. I would look at how you would have held up in markets that were well into recovery from a recessionary period. Some of the detailed FIRECalc spreadsheet output might help or maybe you could just build your own model using SP500 and Treasury bond data. That is what I would do.

Also take a hard look at how much equity you would be confident in holding. I'm not sure a heavy FI component would be good for a person at 44 and retired. It is hard to look at historical bond data right now with the low rates we have today. What you have going for you is that even if it takes 10 years to get to historical rate norms you will still have many years after that.

I know how you might be feeling right now and am hopeful you find a good path forward. Good luck!

 

[tfudtuckerpucker]

I had a friend in the same situation as you are in now, terminated to avoid the promised severance package, and the company settled out of court. I'd suggest not signing any termination papers going forward until you talk to an employment attorney.

If you talk with an attorney, be sure you choose one who is experienced in employment litigation in the county where you were employed. Even better, choose one who has experience dealing with your company in similar issues. There's a good chance you are not the first employee to take civil action against them. Indeed, my understanding is megacorps routinely flaunt EEOC laws, and allocate a pile of cash for the subset who take civil action, and settle out of court. Even though there are laws that regulate age discrimination, the feds are innocuous/impotent with poor funding, and you are on your own to take civil recourse.

 

[gardenfun]

Hi Nico,
I, too, lost my job unexpectedly 4 years ago at age 56. Unlike most of the folks on the forum, I hadn't run any retirement calculators previously or made any other plans for retirement. I had, however, contributed to IRAs/401K's all my working life.

The first thought through my mind when I lost my job was "I really don't want to work for a corporation again". I did interview for several jobs, but it was in the heart of the recession, and frankly I believe most places did not want to hire a 56 year old. My field is marketing research. I know a lot of folks say "worst case scenario I'll go back to w*rk". I don't think that would have been possible for me at this stage.

I agree it's hard to not have control over when you retire. I hadn't given any thought previously to when I wanted to retire--I guess I just assumed at 65. But to have that decision taken away from me was a bit hard to recover from.

I did educate myself quickly about the financial side of things, thanks to books like Work Less Live More by Bob Clyatt. I had always heard that "rule" about needing 80% of your pre-retirement income. I was glad to find out that my feeling that post-retirement needs are more related to expenses was correct.

But the silver lining in all this is that it forced me to take a look at my life and figure out what choices I had in how I wanted to live it. Some of the previous posters have given you excellent advice about sitting back at this point and taking stock.

I did indeed become very frugal after losing my job! I sold my home and am renting now and couldn't be happier. I have had a couple of parttime jobs, contributing between $10 and $15K to my expenses, along with a small pension. I am so glad not to have to work at MegaCorp again!

Good luck to you.

 

[MRG]

Sorry for your problem, perhaps there's a blessing in it. I'm new, retired 4/30/13, yes I felt extra cautious. Over the next year it's getting better. The market has been kind, that will change sometime.

There's a thread on the site called:23 years of frugal living. It was an inspiration to me. I'd attach the link except my phone is winning the fight. Best wishes.

Sent from my SAMSUNG-SGH-I337 using Early Retirement Forum mobile app

 

[nico08]

I want to thank everyone for their thoughtful replies. You have given me some good advice. And thank you for sharing your personal stories with me, because it helps me to realize that I am not alone.

I will say that I am somewhat conflicted. It felt awesome last night, Sunday, to know that I did not have to deal with a horrible Monday at work. But this morning, as I puttered around, I thought to myself, well I can't do this (nothing) for the rest of my life!

Oh, and yes, I have a lawyer involved, and we are hoping to negotiate some type of reasonable settlement.

 

[ShadowBloom]

I'm in a similar situation, having been laid off a short while ago and Firecalc saying almost there but not quite... I am still figuring out exactly what I want/need to do, and living more frugally to avoid getting another job is definitely one option I'm exploring. I've been pleased to find that my expenses are lower than I anticipated. My transportation expenses are down; my lunch expenses are down. (I find figuring out lunch challenging, though, as I'm used to eating at the company cafeteria every day). A lot of clothes shopping I used to do turns out to have been an attempt to compensate for unhappiness at work. I'm buying less without even really trying.

 

[nico08]

It's funny you should say that about shopping. I went to Harbor Freight today, and bought some rechargeable batteries, and new blades for the jig saw and reciprocating saw. Now I used a 20 percent off coupon, and I got a free set of screw drivers with another coupon, but I asked myself whether I would now fill my free time with shopping. And that would not be good, so I want to try and find some free or low cost activities to keep me occupied.

 

[Lsbcal]

...
I will say that I am somewhat conflicted. It felt awesome last night, Sunday, to know that I did not have to deal with a horrible Monday at work. But this morning, as I puttered around, I thought to myself, well I can't do this (nothing) for the rest of my life!
...

Most of us here either had a plan or developed one in ER to fill up our days. I'm sure you've read some of that here. In my opinion it is a full time job to find and do what is fulfilling in ER. Some lucky people have known all along what their passion is when they don't have to earn a paycheck. For others, it is back to the R&D lab to discover what excites them. Some never can quite get the 9 to 5 routine out of their blood.

For me I just basically dug deeper into my previous interests like: gardening, running, investing, art, and reading fiction/non-fiction. I did take a few courses at the JC in language (French) and also art.

 

[ShadowBloom]

"But this morning, as I puttered around, I thought to myself, well I can't do this (nothing) for the rest of my life!" (Sorry, don't know how to quote properly yet)

That's the other thing I'm finding. I don't miss working, and there are lots of things I want to do instead of it, but I miss the structure work gave my days. Having a job automatically means a large part of the week is planned. Without that, I felt a little lost at times. I'm trying to plan out my week in advance now, with one or two priority tasks committed for each day (and a "task" can be taking a walk and sitting in the park). I hope eventually it comes more naturally.

 

[ggbutcher]

I'm not retired yet, I have a plan, but you never know who/what might come to stand in the way of it. My philosophy about that is as follows: We have identified certain expenses that we consider 'mandatory', that is, things we need to pay in order to be able to wake up in a comfortable setting, eat three meals a day, and maintain our health. These expenses form the foundation of considering what income we need to be FI. EVERYTHING ELSE is discretionary, or, things we can give up and not compromise our basic ability to survive comfortably. With a mandatory/discretionary mindset, you can focus on the true effect of unplanned events.

We basically achieved FI in those terms when I retired from the military, which to this day has about a $700/month margin over that mandatory number. Indeed, I exercised that concept during a 6 month period of unemployment, and we were comfortable during that time. We had kids at home at that time, so working at that small margin for longer than necessary wasn't a good idea from a risk perspective.

Now, staring at each other across the kitchen table day after day would introduce it's own stresses, so just making 'mandatory' your retirement goal is probably not sufficient in and of itself. But I feel it's worth understanding that fundamental difference in your expenses, so you can make reasonable, triaged decisions when faced with unplanned events such as terminations/layoffs.

 

[Lsbcal]

Ggbutcher, I think you hit the nail on the head. Only recently have I come to the necessities versus discretionary categorization.

It has helped a lot that with Medicare and SS and DS out of college, the necessities are more easily covered from the portfolio.

 

[ggbutcher]

To expound further, it seems to me that the two biggest and possibly problematic mandatories are health care and housing. Consider that un-subsidized health care can cost upward of $2000/mo, and mortgages are typically in the $1500-$2000 range. Having either of these would definitely upset my FI apple cart.

I'm a little dated on health care, not sure what ACA has done for/to us. I have Tricare, which is both a great deal, and "you get what you pay for", so I can't fully appreciate having to get health care off the market. I do know that friends having to rely on the 'great deal' that was COBRA were strapped by it.

I do think that paying off ownership of at least one residence (most preferrably, the one you live in) is imperative to getting control of expenses, and that is something we might have a bit more control over. We underbought as young parents, paid it off, and are still living very comfortably and happily in it. I joke that the next house we buy will be the one-story job with wide doorways for the wheelchairs...

With those two mandatory expenses under control, our FI picture is very different than it would be otherwise.

 

[kramer]

You have a 90% on Fire Calc and you are including Social Security and a deferred pension already to get to that number.

Everyone is at a different place on the risk-reward curve. But I would say, NO, you are definitely not in a position to retire. By almost any measure, expected future returns are less today than over the history that FireCalc covers. It's not like you have to work much more to greatly increase your future financial security. My guess is your likelihood of failure is more like 33% (with today's low expected returns for both bonds and stocks) if you spent a fixed percentage forever like Firecalc assumes.

I retired very early (age 41) with the determination to live frugally if I really had to. I was so burned out on my job and career. But I would simply not take the risk you are contemplating when you don't have to and the alternative is not very difficult.

I would suggest reading Bill Bernstein's latest book, it will scare you straight.

 

[athena53]

Everyone is at a different place on the risk-reward curve. But I would say, NO, you are definitely not in a position to retire. By almost any measure, expected future returns are less today than over the history that FireCalc covers. It's not like you have to work much more to greatly increase your future financial security.

I agree. I also left earlier than expected due to ugly politics, but I was 61 (had planned to work till 65) and had been above FIRE level for quite awhile. You can resolve to throttle back on impulse spending, use grocery coupons, cut down on restaurant meals, etc. but Stuff Happens, especially in old age. Transmissions die, you need hearing aids (not covered by Medicare and the good ones can cost thousands of $$), etc. I just had 2 dental implants completed. They were $5,000 each. They were started when I was still working and the insurance coverage maxed out at $1,500. Surely they're not a "need", but they really enhance the quality of life. DH and I love to travel but he just turned 76 and he's over 6 feet tall with a creaky back and some health issues and long-hauls in Coach are out of the question. It just takes too long for him to recover. I work hard to use airline miles and credit card rewards plus a small pile of cash to get us to Europe in Business Class every once in awhile. Last month we shamelessly squandered $100 for 2 airline club passes during long layovers in both directions when we went to Alaska. I'd hate to have had such a tight travel budget that we couldn't make that choice. You're making a decision now that has implications 40 or 50 years out, and if you realize at age 70 that there's a risk of outliving your savings, it may be hard to go back to work.

Take some time to get over the emotional baggage of not leaving on your own terms (and good luck with the lawsuit), but consider picking up another job.

 

[nico08]

Hi ShadowBloom. How long has it been since you were laid off? And how long do you think you will take before you make a decision about whether you want to return to the work force?

And like you, after the shock of the termination wears off, I think I will need to create some type of structure in my life.

Is your profile set up for private messages?

 

[Andre1969]

"That's the other thing I'm finding. I don't miss working, and there are lots of things I want to do instead of it, but I miss the structure work gave my days. Having a job automatically means a large part of the week is planned. Without that, I felt a little lost at times. I'm trying to plan out my week in advance now, with one or two priority tasks committed for each day (and a "task" can be taking a walk and sitting in the park). I hope eventually it comes more naturally.

One thing I worry about, with having too much free time, is that I might feel the temptation to start expanding tasks to where they fill up more time. For instance, I've noticed that since my uncle retired, when he cuts the grass over at Grandmom's house, he'll do about half of it one day, and the other half another day. It takes about an hour and a half, riding around on the tractor, to do it all at once. Two hours, max, if you let the grass get too tall, and have to cut it more slowly, or the tractor starts throwing the mower belt, getting clogged, etc. I've cut it in as little as an hour, if it's been a dry spell and the grass hasn't grown too much.

Well, yesterday, I cut my grass. My yard can easily be split up into three parts: the part around the house, which wraps around behind the garage, the part on the other side of the driveway, which is in front of, and on the far side of the driveway, and the "back field", which is about 1/2 acre of grass out in back, on the other side of the creek, surrounded by woods on three sides, and the neighbor's yard on the fourth. Gotta admit, that as soon as I was done cutting the first part, by the house, I was tempted to call it a day, put the tractor up, and leave the rest til later. But, I decided to push on through, and had the whole thing cut in about 90 minutes.

I hope that, as I get older, my uncle doesn't become a bad influence on me!