Layoff at 59 - time to retire?

[NancyH]

Hi from West Georgia,

We relocated to West GA 5 years ago due to my job. In April of this year, I was laid off by my employer. My salary was $95K per year before the layoff. I received 2 months severance, and they paid my first month on COBRA.

I have been actively looking for a new job, but am finding that opportunities for an experienced professional in our immediate area are very limited (I am not interested in commuting to city of Atlanta which is 1 -1.5 hrs each way).
Our plan had been to work 4-5 more years with the goal of by paying off our mortgage before we retired. We owe $116K on a home we purchased in 2011 and the current market value is $210K.

My husband and I are both 59. He is self-employed (S-Corp sole proprietor) and pulls a salary of $60K per year from the business; excess income is left in the business account which is currently at $130K. We have 2 adult children, who live in the northeast and are financially self supporting.

Combined, we have $450K in IRAs, $237K in Annuities, $85K in personal savings.

Another concern for us is cost of health insurance once my COBRA benefit is exhausted. Right now I am weighing whether I should look at making a career change and explore lower paying jobs to get health insurance coverage until we are eligible for Medicare.

I found this group while searching for information on determining if we are financially ready to live on one income. I look forward to obtaining advice and hearing about the experiences of others who have been in a similar situation.

 

[CaliKid]

I don't have any answers but sorry to hear of the layoff and difficulty finding employment.

Can you work in your husband's business to increase the income it produces?

 

[Big_Hitter]

Another concern for us is cost of health insurance once my COBRA benefit is exhausted. Right now I am weighing whether I should look at making a career change and explore lower paying jobs to get health insurance coverage until we are eligible for Medicare.

an ACA metal plan has to be much cheaper than COBRA

 

[Ian S]

Sorry to learn of the layoff. The first thing you'll have to do is a detailed budget based on past spending but also anticipated future spending especially health insurance and medical costs. Being down to one income, you may qualify for premium assistance via the ACA exchange. You might also benefit from running Firecalc and i-orp programs to assess your situation. Your husband might want to take a larger salary as, IIRC, the total S-Corp "profit" is taxed on your individual tax return whether or not you actually take it out of the company.

 

[Ian S]

an ACA metal plan has to be much cheaper than COBRA

I would think so too. They might even qualify for premium assistance especially if they run the insurance through the husband; then the premiums may be deducted above the (M)AGI line.

 

[Katiek]

Hi, sorry to hear about the layoff but welcome to the site. If you haven't already seen them, this link has some important items to consider when determining if you are ready to FIRE:

http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html

 

[NancyH]

Thanks for helpful advice

Thanks to all who responded with tips and advice!

@Big_Hitter
I did check ACA rates before signing up for COBRA, and will check again in November prior to Open Enrollment to see if we can reduce costs by switching.
COBRA was $980 vs. ACA comparable plan for $1200. It may be with 2017 projected income that the ACA costs will go down, but not holding my breath.

@Ian S
I will check with our tax account about the paying the health insurance from the business to reduce AGI. I will check out the FireCalc tool and look at possibly increasing husband's salary. Thanks for the tips!

@KatieK
Thanks for the link you shared.

We met with our financial planner today, and I'm feeling better knowing I have some tools here that will help us make the right decisions.

Nancy H

 

[Bflotomny]

Nancy H
Welcome to the group. Sorry to hear of your layoff.

Something to work on besides getting employment; health coverage may be offered by several alternative sources:

Your husband is self employed. If he is a manufacturer rep. The rep's may have an organization that offers coverage to members.

Another source is the local Chamber of Commerce. Membership is usually required but sometimes health coverage is offered. Your husband's business would qualify. If not in your town check surrounding towns Chambers if they offer coverage to members.

The last source could be your alma mater I recently received an offer from my college. It was costly but "any port in a storm"

Good Luck

 

[Sunset]

You will have a big adjustment in lifestyle if you don't get another job, as you were the large breadwinner.

I'm not sure your mortgage is doing you any good as a Federal tax deduction because it is fairly low, so whatever interest rate it is at, is pretty much not effectively reduced by using it as a deduction, possibly you just take the standard deduction right now ?

There must be a lot of fat in your budget to cut out (cable, phone packages, restaurants, etc..). Its important to list all your expenses so you know for sure how much you spend.

 

[EastWest Gal]

Health insurance premium is a line item deduction for self-employed.

Also, some business groups and trade associations have group health insurance possibilities. You may want to check with your local chamber of commerce, for example.


Sent from my iPhone using Early Retirement Forum

 

[big-papa]

I went through this a couple of years ago. Cobra was significantly more expensive than an ACA plan. I stayed on Cobra till the end of the year I was layed off then switched to an ACA plan. Of course it was cheaper primarily because of the subsidy. At the time, we were living off of our taxable accounts which didn't generate a lot of income/capital gains, so getting to the subsidy was pretty easy. Different story if we had dipped into rollover IRA's/401Ks. If you don't go back to work, then some tax planning might be in order.

 

[pb4uski]

For the first year after I retired I was able to buy a small group plan through our Chamber of Commerce... I had to join the Chamber an that cost about $100/year but the savings in health insurance were well worth it.

Another angle to explore if you and your DH are relatively healthy is whether catastrophic health coverage in your state offers savings over say, a bronze plan... if it does you would likely qualify since the cost of health insurance exceeds 8% of your income.

 

[Katiek]

Glad things are looking better with a little time, Nancy. I obviously don't know what your financial planner recommended, but if it involves any big changes in your investments, you may want to post some of the recommendations here and get a second opinion. I'm always careful about investment decisions during emotionally difficult times.

 

[Big_Hitter]

COBRA was $980 vs. ACA comparable plan for $1200. It may be with 2017 projected income that the ACA costs will go down, but not holding my breath.

that's a really low cobra premium

 

[cooch96]

Is 1hr each direction really too far? I'm kinda excited when my commute is that short.

 

[Markola]

Can you share your new plan? A lot of people wonder how they'd cope.

Seems to me you have a half million in assets to invest and draw from sustainably at 4% + your annuities payout + your husband's income.

On the expense side, simple budget cuts you could make + ending often surprisingly high costs-to-work + refinance your small mortgage + lower income taxes + no paycheck withholdings taken for 401k or insurances or parking.

Then, you ought to have a fairly manageable gap to fill with your work only until SS starts, or maybe even a happy surprise.

 

[NancyH]

Layoff at 59 - practicing retirement

I certainly appreciate all the recommendations and suggestions from the group and thought I would post an update.

After meeting with our Financial Planner, the good news is that I underestimated our retirement savings. Our total savings in more in the $720K range when I add in my 401K rollover from previous employer.

For the remainder of 2016, we are going to try to live on DH's salary and work on figuring out a realistic budget that we can live on. Our big expenses are mortgage $1300/month and health insurance $980/month. Prior to my layoff we had already paid off both cars, and had taken measures to reduce our cell phone bills by switching to prepaid plans and cut back on our cable service and internet. I've started a spreadsheet to track our utilities, insurance, food, gas, entertainment and miscellaneous expenses.

I am still actively seeking work within a 30 minute commute of where we live (a rural area of west Georgia), so my options in the immediate area are limited. I am also considering the possibility of a career change to a lower paying full-time position that has medical benefits (and less stress and responsibilities).

If I don't return to work, we have a conventional savings account that we could draw from ($60K over 2-3 years) and still leave an emergency fund of $15K in tact.

So our plan is still a work in progress, and I am not sure if the goal of paying off our mortgage before retirement will happen or not. But I think we will be OK either way.

Practicing retirement and enjoying the break,

Nancy H.

 

[wmc1000]

Nancy, paying off your mortgage may not be the most important decision at this point. Getting from today until you decide to draw SS, by stretching your money is priority one. Does your $1300 mortgage pmt include extra premium payment or do you have a 15yr. mortgage? And getting an insurance plan paid through your husbands co. will also yield a tax break if an ACA plan won't generate significant subsidy amounts.

 

[NancyH]

Yes, this is a 15 yr mortgage and we have been paying on it for a little over 2 years. We stopped making extra principal payments when I was laid off, but hope to start them again. I'm talking to our accountant about the best way to get my husband's business to cover the cost of health insurance. That will really help with our monthly expenses.

Thanks,
NancyH