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Old 01-07-2012, 04:21 PM   #21
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I have a lot of anxiety about losing my job ...

...not being able to meet my minimum expenses...

...I have a fairly modest single residence home that is mortgage free. Using a safe withdrawal rate of 4% for my current retirement savings, I would have about a $16,000 withdrawal rate annually. My property tax, property insurance, utilities (electric, gas for heating, cable, internet, landline, water, sewer, garbage pickup, cell phone) will end up costing about $13,000...

...I know that the $13,000 annual expense does not account for food, car insurance and maintenance, car gas, entertainment, clothes, home repairs, health insurance, vacation or hobby expenses...
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...In your case, I would consider your retirement "stash" to be your emergency back-up. IOW you already have an emergency fund, but, if you happen to be unemployed for a lengthy period, you DO have you retirement stash to fall back on. Not a pleasant thought to delay retirement even further, but much better than the guy who only has an emergency fund and no back up to that...
Let's say somehow you cannot find a job in your current field. So, with a house paid for and low debt, to fill the time you can take a low-paying job, even a part-time one, to avoid tapping your retirement fund to allow it to grow. The plus side of some of these jobs is that they appear to be low-stress. For example, whenever I go to Trader Joes, I find the workers there to be helpful and in good spirit. Didn't ask, but I would suspect many were part-timers.

The worst case is you have to do ESR like that for a long period. So, if the job is low-stress, it may even be better for your health.

When my wife first quit her job, and had not figured out what she would do, she was interested in a part-time job at the local public library. Turned out that we did not need the money, and she has been happy being a house wife (she cooks good and healthy meals for me), so did not take that job, but it was a potential opportunity.

I think if one plays out the worst case scenario in his head (OK, just reasonable ones, and not calamitous, because no one can plan for that), and thinks of some potential solutions, it helps a lot.
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Old 01-07-2012, 05:12 PM   #22
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Great idea. I really need to do this while rates are low. Is there any effect on one's credit rating from having an untapped, active HELOC?

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A:

- Go set up a HELOC. Most banks will do this for free and you can set it up and never draw a penny from it if you do not wish to. .
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Old 01-07-2012, 05:27 PM   #23
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Midnighter,

I was very close to where you are a few years ago. A planner by nature, I developed seven or 8 scenarios - bare bones to living large. I color coded expenses (in order of importance) so in each scenario, I could see at a glance how much was covered. So, for example, my bare bones budget might have all expenses covered, while the scenario representing my current expenses might have mandatory expenses in green but everything discretionary still waiting to be funded. Over time, watching more and more expenses go green both helped me feel less anxious and kept me motivated. Knowing at a glance that if I lost my job tomorrow, most of my mandatory expenses would be covered helped me to stay (relatively) calm through all of the job and market turmoil in 2008 and 2009. And knowing just how much more I would need (from a part time job or additional savings) to attain the lifestyles in each scenario helped me make the decision to move to another location to reduce my expenses.
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Old 01-07-2012, 05:36 PM   #24
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I planned everything for our retirement and researched it to the tenth degree but I was blindsided by a few awful things that occurred that cut my net worth by a lot and stomped my plans .So in my mind the clue to less anxiety is to know that you have the resilience to handle whatever is thrown your way .It might not be the retirement you had planned for but it will still be a retirement .
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Old 01-07-2012, 09:58 PM   #25
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Midnighter,

I was very close to where you are a few years ago. A planner by nature, I developed seven or 8 scenarios - bare bones to living large. I color coded expenses (in order of importance) so in each scenario, I could see at a glance how much was covered. So, for example, my bare bones budget might have all expenses covered, while the scenario representing my current expenses might have mandatory expenses in green but everything discretionary still waiting to be funded. Over time, watching more and more expenses go green both helped me feel less anxious and kept me motivated. Knowing at a glance that if I lost my job tomorrow, most of my mandatory expenses would be covered helped me to stay (relatively) calm through all of the job and market turmoil in 2008 and 2009. And knowing just how much more I would need (from a part time job or additional savings) to attain the lifestyles in each scenario helped me make the decision to move to another location to reduce my expenses.
Hi Lagniappe:

This is a good plan of action. I can try and create different spending scenarios as well as defining expenses as discretionary or mandatory. Then, as net worth increases, I can see the progress I am making toward covering discretionary expenses. This should create some sense of psychological security. Thanks.
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Old 01-09-2012, 12:04 AM   #26
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Those who are not worriers by nature just don't get it.
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Yes, I am a worrier by nature. Sometimes it is an asset and sometimes it is a liability.
I worry about them too...
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Old 01-09-2012, 04:55 AM   #27
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One thing that may help is to consider the pareto principle, or the good old 80/20 rule. Plan for the things that are reasonably likely.

A few examples:

1. I have been unemployed for three four-month periods in my life. I therefore saved for a six month emergency fund. True, I could be unemployed for five years, but I don't spend a lot of time worrying about that.

2. I have three children. I researched the most likely causes of death, and discovered that the most common are drowning and car accidents. I therefore have taught my children to swim, make sure they wear their seatbelts, and similar activities. True, my children could die from a lightning-strike or a plane crash, but I don't worry about that too much.

3. I'd like to retire early. I researched the 4% rule and read up on the assumptions it makes. So I plan to call myself FI when I get to a 4% withdrawal rate. Yes, the stock market may slump, inflation may run rampant, and I may live 50 years in retirement. But it's not likely, so I don't worry about it too much.

I think in the end you have to balance the worry so it is healthy. Too little and you become reckless, but too much and you waste the life and time you do have. If I worried too much about long periods of unemployment, I would not be able to enjoy my evenings and weekends as much. If I worried about asteroids killing my children, I would not enjoy walks outside as much. If I worried about running out of money in retirement, I would not enjoy the retirement I will actually have.

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Old 01-09-2012, 07:34 AM   #28
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Those who are not worriers by nature just don't get it.
Ain't that the truth! ...
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Old 01-09-2012, 10:14 AM   #29
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This is a great topic. About 6 years before DH could get out of his company with pension and medical benefits he fell on the ice and hurt his back badly. Two surgeries and almost a year later he was able to return to work and retired on time. The anxiety that this caused us was awful. But in retrospect there were a lot of things that people told us that were helpful.
One was to be very mindful of spending. We got into the habit of tracking all of our spending. It really helps to know how much you need. Also, we learned a lot of skills that would be very helpful if things get bad. Vegetable gardening, car repair, learning to cook from scratch, developing a network of friends and skills that you can fall back on. I like the suggestion that if the worst case scenario happened you could always just work part time somewhere to make enough to exist on. We had a Heloc in place that we did not have to touch, and I was also working but we would have had a totally different retirement scenario had he not gone back to work with the pension and medical carrot.
Things like unemployment benefits, social security disability, long term disability policies, food stamps and medicaid have saved a lot of people from falling into homelessness and destitution.
All you can do is prepare the best you can, and work on developing networks and skills.
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Old 01-09-2012, 02:00 PM   #30
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I ultimately want to retire early. I am 41 years old. I probably need to work another 7 to 13 years.

I have a lot of anxiety about losing my job (and not being able to find another one), becoming disabled or having some other financial setback and not being able to meet my minimum expenses. I am single, so I do not have anyone else to rely on if I have an employment loss or other setback. I do have an emergency fund and I have some form of group-based long term disability insurance.

I have a fairly modest single residence home that is mortgage free. Using a safe withdrawal rate of 4% for my current retirement savings, I would have about a $16,000 withdrawal rate annually. My property tax, property insurance, utilities (electric, gas for heating, cable, internet, landline, water, sewer, garbage pickup, cell phone) will end up costing about $13,000. I will have a small defined pension benefit of about $12,000 (which was COLAed, but the state removed the COLA, and that is currrently the subject of a class action legal appeal) that will start 20 years from now and I will will be eligible for social security (if it still exists) in a reduced amount in about 20 years.

I know that the $13,000 annual expense does not account for food, car insurance and maintenance, car gas, entertainment, clothes, home repairs, health insurance, vacation or hobby expenses.

I am just trying to figure out how I can get some sense of security from knowing that at least my most basic needs will be covered if I loss my job (and am not able to find another one), become disabled or have some other financial setback and not being able to meet my minimum expenses. If I had a real sense that, even if everything went bad with work, the economy, my investment rate of return, etc., I could still have most basic needs covered, then I think some of this anxiety would go away and I would then be more productive, effective and optimistic.

How have others gained a sense of security from knowing that their savings/investments toward early retirement, while not complete, still have created a psychological advantage for them?

Thank you for your advice.

When I was your age I worried too. I think you should plan to be able to retire by 58 and/or semi retire at 55. Most disabled I see the old age disabilities are after 55 or so and so are the age related unemployment problem.

Keep living below your means and perhaps look to increase current income.

Have a worse case plan. I for example have a roommate that pays me 170 a week and mows the lawn and does other chores.

I am 63 with 530K saved up so my worse case losing my job is living on roommate income and SS and drawing out 2-3% from investments.

When I was in my 50s I had very long stretches of unemployment and was able to live on unemployment, temp work and roommate income.

You aren't in miserable shape so you might be able to live on your income with a roommate or part time job and if not disabled can get unemployment and or a part time job until you land a new job.

Find another source of income like self employment or a roommate and line up all your ideas so if you did find yourself in a tight spot you could jump into action.
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Old 01-09-2012, 03:06 PM   #31
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Great idea. I really need to do this while rates are low. Is there any effect on one's credit rating from having an untapped, active HELOC?

Amethyst
When you first take the line out there is a modest short term hit (20 points?) due to a hard inquiry and establishment of new credit. After that goes away, it actually improves your credit rating because you have a large, untapped line (which the algorithm and most underwriters like to see). If you already had strong scores (750+), the overall effect is negligible to modest.
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