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Old 06-15-2016, 03:51 PM   #1
Confused about dryer sheets
 
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Old ER Forum Poster - Need Help

[Mod Edit]
I'm now 54, and was recently laid off from my mid-level tech management Silicon Valley job. My earnings topped out last year at 240k/yr. My SO (56) is semi-retired and earns about 15k/yr.

We have a modest portfolio due to a late start (mid-40's) with our investments. We have about 750K in taxable and non-taxable accounts. We do not own real estate. The plan was to get to at least 1mil in 2-3 years. Obviously, our plan has been thwarted.

My core question here is, can I use a 3% withdrawal rate (drawing down against my cash reserves earning between 1-2%) to supplement my UI until I find another job? My concern is preserving what we have so that we're not jeopardizing our capital (sorry, if I'm getting the terminology wrong).

Here's our monthly expenses, UI and using the 3% withdrawal rate:

Expenses: $4800
UI: $1800
3% W/D: $1875
SO's Inc: $1100

The numbers above doesn't tax taxes into consideration as UI in California is taxable.

Any thoughts or feedback is greatly appreciated. Let me know if you need additional information.

I forgot to add that I do get a severance - this will go into the short term cash reserves earning 1% at Goldman Sachs online account. I have plenty in our checking account to last for a few months without dipping into the other cash buckets.
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Old 06-15-2016, 04:47 PM   #2
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You want to avoid drawing from tax sheltered money ( 401K, IRA, ROTH) as much as possible, because it will have penalities on top of the tax payable.

You should honestly only take out what you need, rather than a flat x%, that flat x% suggests you are not examining your real needs.

You should of course cut expenses since it could be a long time until you get another job. At age 54 in IT, it is possible nobody will hire you.

Hopefully if you read this forum previously, you already have your credit cards at zero balance (paid off in full each month).
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Old 06-15-2016, 05:06 PM   #3
Confused about dryer sheets
 
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Quote:
Originally Posted by Sunset View Post
You want to avoid drawing from tax sheltered money ( 401K, IRA, ROTH) as much as possible, because it will have penalities on top of the tax payable.

You should honestly only take out what you need, rather than a flat x%, that flat x% suggests you are not examining your real needs.

You should of course cut expenses since it could be a long time until you get another job. At age 54 in IT, it is possible nobody will hire you.

Hopefully if you read this forum previously, you already have your credit cards at zero balance (paid off in full each month).
Thank you

Age discrimination is rampant in the Silicon Valley, so I'm prepared for an uphill climb with finding another job of similar pay/position.

We have zero debt. We haven't carried credit card balances, car loans etc for several years.
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Old 06-16-2016, 04:05 AM   #4
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Quote:
Originally Posted by shavedape View Post
[Mod Edit]....
My core question here is, can I use a 3% withdrawal rate (drawing down against my cash reserves earning between 1-2%) to supplement my UI until I find another job? My concern is preserving what we have so that we're not jeopardizing our capital (sorry, if I'm getting the terminology wrong).
...
Sorry to hear about the job loss.

Trim as much of your expenses as possible and only spend what you have to from taxed accounts.

If you feel getting another job quickly is difficult, consider signing up for contract work/assignments, if there is a need in your tech field. Good luck.
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Old 06-16-2016, 10:11 AM   #5
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Do your expenses include health insurance? If you have to buy insurance on an ACA exchange, it'll probably come to 500-1000/month for premiums (unsubsidized) for a couple.

You can check on CoveredCA and get exact figures using their calculator. Also keep in mind deductibles and max OOP (~$12k for family) may be very different from your employer healthcare. I'd guess that ACA premiums will be cheaper than Cobra but max OOP will be worse.
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Old 06-16-2016, 10:36 AM   #6
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The short answer is to me to focus on expense side as sharply, but realistically, as you can in the short run and not worry about withdrawal rates. If you find you cannot replace your earnings in a reasonable period of time, then use a reasonable long term withdrawal rate to back into what expense level you can afford and make further expense adjustments as warranted.


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Old 06-16-2016, 11:23 AM   #7
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IMHO, in any reasonable portfolio you could withdraw 3% indefinitely and not eat into principal.
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Old 06-16-2016, 12:27 PM   #8
Confused about dryer sheets
 
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Our Cobra cost (1286/mo - inc dental & vision) is included in the monthly expense total. I did some shopping around on the exchange and there's not much of difference with the monthly amount when I do a comparison.

Quite frankly, the monthly medical premium cost is the thing keeping me up at night. I have our other controllable expenses on a very tight leash. Also, my husband has severe COPD (we're looking into SSDI), which has taken it's toll the last two years. So, our medical costs are bound to escalate in the upcoming years. I'm in very good health, but you never know....
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Old 06-16-2016, 12:53 PM   #9
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While you are over the threshold this year for any healthcare subsidies, this is something within your control for 2017. Controlling your taxable income in 2017 to be over the medicaid limit but stay under 150% by only using savings or other non-taxable money will substantially reduce your HC costs. Potentially you can have a maximum OOP including premiums around $2000 for next year. That can dramatically reduce your expense level.
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