New job opportunity

[DAYDREAMER]

Currently working as an engineer at giant company that will be freezing my pension in 2016, but job security is high. I am 48, and was planning on retiring at age 55 and taking advantage of the early retire option, and go out and work with a millionair friend of mine building homes till I decide not to work anymore. The probability of success doing this is actaully quite high, because he and I are pretty skilled with our hands and have a strong will to succeed. He also has 30 million in cash to help any problem that could come up.

Since my pension is being frozen in 2016, I have no reason to stick around past that date.

Current financial status:

1 paid off home worth 400k (keeping because I need the garage)
1 home owe 55k--worth 700k (current residence)
630k in 401k (combined)
wife has 25 years vested in pension
I have 14 years vested

Current salary is 120k and wifes salary is 95k, but only need 48k to live and pay bills. Wife will stay working at her job until she reaches 55, currently 50, and supply us health care till age 65 (retirement perk).

Current engineering job is alright, but the engineering field does not give me the hands on experience I was hoping for when picking a career in college.

I'm thinking about bailing the 9-5 job in 2016 when pension gets frozen, and going into a whole new direction.

Any thoughts?

 

[pb4uski]

Is the increase in your pension between bailing in 2016 vs bailing now sufficient to wait another 2 years to chase your dream?

Is it possible to go part-time with Megacorp and use the time freed up to chase the real estate opportunity as a way to transition from where you are to where you want to be?

 

[DAYDREAMER]

Part time transition at megacorp is not an option.

The biggest thing I lose by bailing from megacorp in 2016 is that ability to start witdrawing a pension at age 55. Its actually ending up that the pension freeze is making my age 55 ER go from 2200/month to 660/month. Since the 660/month is what it will be, I really dont care to much about the pension option anymore.

Oh, and I wont bail now, because for personal security reasons, I want my house to be fully paid off. My personal quirk. I hate debt.

 

[pb4uski]

Part time transition at megacorp is not an option.

The biggest thing I lose by bailing from megacorp in 2016 is that ability to start witdrawing a pension at age 55. Its actually ending up that the pension freeze is making my age 55 ER go from 2200/month to 660/month. Since the 660/month is what it will be, I really dont care to much about the pension option anymore.

I'm confused. If you stay you can get $660/month starting at age 55. If you leave now you get what?

 

[stepford]

If the OP's Megacorp that will freeze his pension in 2016 is Boeing he should know a handy little secret: Pension service calculation depends only on base salary and years worked. In other words, there's no impact on your pension if you work part time. This may be an opportunity for him to transition to this new job sooner without impacting his pension.

PS. From what I can tell a LOT of Boeing employees feel the same way as the OP, i.e. no point in staying past 2016. I know Boeing is doing what they have to do to control costs, but I suspect they'll find a pretty huge exodus in the early months of 2016.... yielding a younger, cheaper more easily brainwa... ummm... TRAINED workforce. Probably just what they want.

EDIT: Whoops. Seeing the OP's later comment it sounds like his Megacorp is not Boeing and my comments aren't particularly relevant. Sorry about that.

 

[pb4uski]

FWIW, according to immediateannuities.com the payout rate on an immediate annuity for a 55 yo male would be 5.74% so that would make your pension worth about $138k if you were 55 now. Discounting for 7 years at 2.5% drops the value to $116k today.

Of course, it is the difference between that $116k and the value if you were to leave that is the effective pension compensation for staying until 2016.

 

[DAYDREAMER]

If the OP's Megacorp that will freeze his pension in 2016 is Boeing he should know a handy little secret: Pension service calculation depends only on base salary and years worked. In other words, there's no impact on your pension if you work part time. This may be an opportunity for him to transition to this new job sooner without impacting his pension.

PS. From what I can tell a LOT of Boeing employees feel the same way as the OP, i.e. no point in staying past 2016. I know Boeing is doing what they have to do to control costs, but I suspect they'll find a pretty huge exodus in the early months of 2016.... yielding a younger, cheaper more easily brainwa... ummm... TRAINED workforce. Probably just what they want.

EDIT: Whoops. Seeing the OP's later comment it sounds like his Megacorp is not Boeing and my comments aren't particularly relevant. Sorry about that.

Lol, yes the mega corp is Boeing, and yes there will be a MASS exidus come 2016. I'm not sure what made you change your mind that I didnt work for Boeing. My job would not allow working part time at Boeing. The handy secret I use is the Boeing pension calculator to figure my numbers, and its amazing how much less for my situation.

To answer pb4uski question, if you stay to age 55, you qualify to be able be able draw on your pension at a 2%penalty for each year before age 60. If you quit before age 55, you get a 6% penalty for each year you draw before age 65.

 

[DJRR]

Lol, yes the mega corp is Boeing, and yes there will be a MASS exidus come 2016. I'm not sure what made you change your mind that I didnt work for Boeing. My job would not allow working part time at Boeing. The handy secret I use is the Boeing pension calculator to figure my numbers, and its amazing how much less for my situation.

To answer pb4uski question, if you stay to age 55, you qualify to be able be able draw on your pension at a 2%penalty for each year before age 60. If you quit before age 55, you get a 6% penalty for each year you draw before age 65.

Still confused. You say your age 55 payout would drop from $2,200 to $660 per month which is a 70% reduction, not 60% (10 * 6%)

So if your pension is frozen in 2016 you will be fifty. The options look like:

1. You stay 5 more years until 55 and can take your pension with a 10% reduction at 55 or let it accumulate until you need to take it. Seems a slam dunk to take it at 55.

2. You quit and can take your pension at 55 with a 60% or 70% reduction, or you let it accumulate until you need to take it. Probably better to accumulate than take the hit, at least while your wife is working and covering all your living expenses.

3. You quit now, lose 2 years of vesting, and go on with your life. How does this impact #2?

Is there some one time option when the pension is frozen to take the money? Also are the only dates available 55 or 65 or can you elect to take it any time after 55?

I know rules vary greatly by plan, but there are a lot of variables to consider.

 

[DAYDREAMER]

LOL, I read my original post about Job security being "high". Well, that may be a tad optimistic. Mega Corp is moving engineering jobs to cheaper areas and making people relocate and reapply for the new jobs. If this happens to me, it helps make the decision to just move on to my next opportunity. In a way, I'm kind of excited about all the reorgs, because a push out the door makes it easier.

My fear of self terminating is that I will be 90 y/o thinking back why I left my well paying job as I open a can of cat food for dinner. A layoff eliminates self blame. Our org has not been tagged for layoff, but, every org I sit next too are getting nailed. It just a matter of time.

 

[heeyy_joe]

Well, according to commercials they are making some real good improvements to cat food.

 

[Milton]

Since my pension is being frozen in 2016, I have no reason to stick around past that date.

Not sure that is quite correct. Your current salary of $120,000 provides a pretty significant financial incentive to stick around, unless (i) you are FI and so no longer need the income, or (ii) you can easily earn more money working elsewhere.

(i) doesn't seem to be accurate. (ii) may be applicable, I'm not sure; but by age 50 you may well face difficulties finding alternative employment.

Partnering with your wealthy friend could be a great opportunity; but if he is supplying up to $30 million capital, and your contribution is limited to being 'handy', I suspect that you will be working "for" him rather than "with". Better nail down the details before leaving Boeing.

A layoff eleminates self blame.

Ha! So true. How typical of human nature …

P.S. I can tell you are a genuine engineer by your terrible spelling!

 

[DAYDREAMER]

Not sure that is quite correct. Your current salary of $120,000 provides a pretty significant financial incentive to stick around, unless (i) you are FI and so no longer need the income, or (ii) you can easily earn more money working elsewhere.

(i) doesn't seem to be accurate. (ii) may be applicable, I'm not sure; but by age 50 you may well face difficulties finding alternative employment.

Partnering with your wealthy friend could be a great opportunity; but if he is supplying up to $30 million capital, and your contribution is limited to being 'handy', I suspect that you will be working "for" him rather than "with". Better nail down the details before leaving Boeing.


Ha! So true. How typical of human nature …

P.S. I can tell you are a genuine engineer by your terrible spelling!

The 120k salary and pension accrual is the only reason I'm still in the 9 to 5.
(i) you are correct, DW and I are not FI at this time.
(ii) I cannot earn more money in a 9 to 5 job

Because DW makes good money and she likes her job, with expenses of 48k/yr, I do not need to make 120k.
.
My buddy would not be putting up 30 mil as capital into a business, we would partner one house at a time, 1/2 each and grow from there. I mention the 30 mil to be a back drop safety net should something unforeseen happen. He dabbles in real estate because it interests him, not because he needs more money.

My goal is to find something that is hands on, I enjoy doing, makes a little money, and could do for the rest of my life.

My goal is not to retire, but to be excited to get out of bed to go do something I'm passionate about.

You are right about my spelling! Had to spell check twice before getting this reply spelled correctly

 

[LongPrime]

How close in is the 400k house to dt seattle??

 

[DAYDREAMER]

How close in is the 400k house to dt seattle??

The home is a brutal 60 miles north of DT Seattle. Worst traffic around! My nephiew is living there right now and commuting to DT Seattle. His rent is to keep the lawn mowed. No small job. 3 acres of grass and park like landscape. I love that place. Lived there 18 years, with a lot of TLC to make it heavn.

 

[daylatedollarshort]

You are right about my spelling! Had to spell check twice before getting this reply spelled correctly

I used to look for misspellings on programmer resumes when I did IT recruiting, while other managers would weed those resumes out. They didn't get it that we weren't hiring people in order to win spelling bees, we wanted people with top notch, laser focused programing skills, which is often a zero sum game with writing and other more liberal arts type talents.

Good luck on your career decision. Maybe the construction work is something you could try out on the weekends to see if it is really for you? We had a friend do something similar mid life and ended up back in an engineering type job after a year or two.

 

[2B]

You are right about my spelling! Had to spell check twice before getting this reply spelled correctly

I had a hard time getting my high school counselor to sign off on my application to the UW College of Engineering. She said my English scores were too high. ?? She thought I should go into teaching of all things. Of course, on chat boards everybody types quickly and typos and misspellings happen.

I have been a OMY-er for several years. I've been FI since 2006. I make my high salary and have to do very little for it. I get to play with computer games (simulation software) and color with red, green and blue pencils (and sometimes yellow!). It's interesting enough that I overall enjoy doing it. I can't get DW to travel as much as the vacation time I get now. The only negative is my commute (about an hour each way) which is getting old. We used to live close to the office but DW wanted to live nearer to one of our children.

I would be reluctant to retire without being FI despite the pension screw job. You probably won't see as many people leaving as you think because they still need alternatives if they aren't FI. Building houses may also not be as lucrative as you think unless you are very experienced and have built several before now. The industry is also very cyclical. If you want to test it out, you might want to take your vacation time to do one with weekends and after work time thrown in. Your $30MM friend may like having a hobby job but that's not the thing to have if you aren't FI.

Also, partnerships are always dangerous. There needs to be clear delineations of responsibilities and a dissolution path in the event of a problem. Personally, I'd build houses on my own. If you want to be with your buddy, I suggest you buy lots next to each other and trade labor to build two at once. Just my opinion but I've seen problems with partnerships before.

 

[Golden sunsets]

Daydreamer; if your ultimate goal is to be FI as soon as possible, how about selling the 400,000 home and investing the proceeds, together with an aggressive savings plan with the unspent salary(must be in excess of 140k/yr.) if you did this until you are 55 you would be FI and you would have the higher pension.

 

[DAYDREAMER]

Here's my plan after calmly thinking this through. A lot of good advice from all. Thank you.
I will continue working till 55 at the lazy B.
DW and I will max out 401k and company will match giving 6% of salary till 2020.
2016 Boeing will add 9% of salary into 401k
2017 Boeing will add 8% of salary into 401k
2018 Boeing will add 7% of salary into 401k
2019 and on Boeing will add 5% of salary into 401k.
Fully fund Roth for DW and I each year (as long as our income qualifies)
Pay off mortgage by December 2014 (I like the no debt philosophy)
Starting 2015, invest $50k/yr in after tax index funds (in Vanguard) till 2020.

Reason for this conclusion------- I need to make every effort to ensure FI. My original post was instigated by a bad day. I've refocused my energy, put my head down, and will keep moving forward. It's only 6 more years

 

[Golden sunsets]

Sounds like a solid plan. It looks like Boeing is matching 6 percent plus adding specific amounts? Presumably the extra $$$ is to offset the truncated pension-so not too too bad. As you get closer to 55 it will get easier too.

 

[DJRR]

It's only 6 more years

I would prefer to think about it as having a rock solid retirement 10 years earlier than the typical persons social security only retirement

Think you have a great plan and while not retiring as early as some it will be a great accomplishment with substantial security. Now make sure you stay healthy