Considering retiring on October 31

[allenciox]

Is your severance lump sum or serial? With my MC, since it was serial, I was able to stay on regular health insurance just like an active employee for the duration, as far as the IRS and anyone else was concerned I was still a W-2 receiver.

Then I went cobra once severance ended, and did that for almost 18 months before going on ACA. Either way with only 2 years to cover, you can't go wrong as long as you have coverage somewhere, even if you end up paying full freight.

My severance is lump sum --- I wish it could be otherwise but the FAQ the company provided is very specific about that. It will include one year of pay plus prorated bonus plus 40 days (8 weeks) of vacation I have saved up paid out, all in a lump sum. The total will be well more than $200k in additional pay.

My plan at this point is to open a donor advised fund to fund charitable contributions for years into the future (maybe $150k) plus maxxing out contributions to 529 plan for my two grandchildren (another $30k). That should shelter a significant amount of that additional income from taxes.

I currently have about $1.7 million in retirement accounts ($450k of which is Roth, the rest is tax-deferred), plus $1.3 million in non-retirement cash and securities, and another $500k in assets (most of which is my house which is paid off). The HRA that I will get is another $18k, but I don't have to pay taxes on that.

My idea would be to do Cobra for the final two months of the year (about $930 a month for medical and dental) funded from the HRA and then do ACA next year when my salary will be $0 and I should get most of it back as credits. I probably would not take Social Security until 70 (the social security web site indicates that I would receive $4069/month in 2020 dollars by waiting until then). I should be able to live off of non-retirement accounts until then. This should maximize the probability that I won't run out of money before I die, particularly since I generally live pretty frugally.

I am also considering doing a partial Roth conversion of $20k to $30k of my tax-deferred funds each year before I turn 70 to reduce RMDs at age 70 and to pay tax on the money while I would just be in 12% tax bracket.

 

[EastWest Gal]

Also during 2022 you should be sure your cash holdings will take you through to Medicare age when the ACA cliff returns in 2023. You’ll start Medicare 9 months into 2023, I believe. If you need to sell anything from taxable, do it when your income is lower in 2022.

 

[HawkeyeNFO]

So you get money to not go to work. Then if you want, you could still get another job.
Or not, but either way you get money to not go to your current job anymore.

 

[RunningBum]

My plan at this point is to open a donor advised fund to fund charitable contributions for years into the future (maybe $150k) plus maxxing out contributions to 529 plan for my two grandchildren (another $30k). That should shelter a significant amount of that additional income from taxes.

Great idea, and you can get even more out of it by transferred stocks/funds with unrealized capital gains rather than cash. This lets you gift the same amount while also removing some unrealized cap gains.

My idea would be to do Cobra for the final two months of the year (about $930 a month for medical and dental) funded from the HRA and then do ACA next year when my salary will be $0 and I should get most of it back as credits.

Yes, you should be able to get an ACA subsidy. When I retired I found COBRA premiums too expensive, though the deductibles were lower. If you tend to have a lot of medical expenses you should look at more than the premiums. Sounds like ACA is the way to go for you though.

I probably would not take Social Security until 70 (the social security web site indicates that I would receive $4069/month in 2020 dollars by waiting until then). I should be able to live off of non-retirement accounts until then. This should maximize the probability that I won't run out of money before I die, particularly since I generally live pretty frugally.

I am also considering doing a partial Roth conversion of $20k to $30k of my tax-deferred funds each year before I turn 70 to reduce RMDs at age 70 and to pay tax on the money while I would just be in 12% tax bracket.

This is a major point of debate here because there really isn't a clear best strategy. However, I look at this as you are: longevity insurance, and more room to do Roth conversions. The only reason I'd start earlier is if the stock market really tanked and I didn't want to be selling investments at a low. I have a lot of cash and bond fund holdings to tap first so it'd have to be really bad to start SS earlier than 70.

I would also consider converting more before starting SS since you have over a million$ in tax deferred. Estimate what your taxes at 72 will be with conversions to 12%, 22%, and 24% between now and age 70.

 

[pb4uski]

Actually, my thought is to do COBRA only through the end of the year (two months). Starting next year, I will have no salary so I should be able to do ACA with subsidized premiums (or am I missing something?)

No, unless your COBRA is affordable (and more are not) then that is a good plan.

 

[DayVee B]

My only concern is what I will do with my time after I retire. Also, since the majority of my social life revolves around my work, I will have to figure out what to do there, too. Financially, I am not worried at all.

If others with whom you work and socialize take the offer as well, you can all just get together and enjoy those same relationships doing whatever you want rather than in the work environment. Get together for breakfast weekly, have a poker night, take fishing trips together, join a bowling league, volunteer or some community service,... There is an endless list of places where and ways you can continue to socialize with former work friends. And there's nothing to say you can't step outside your comfort zone and make some new friends to socialize with.

The financial aspect is a no-brainer, take it!

 

[allenciox]

Interesting, I found this site: https://i-orp.com which I really like for retirement planning. It suggests that, in my situation, until I reach medicare age, converting pre-tax to Roth at the rate of $20k per year is optimal (based on qualifying for ObamaCare) it then recommends converting close to $100k per year for each of the next several years which would significantly reduce the RMDs I would need to take turning age 70.

 

[dunkelblau]

My only concern is what I will do with my time after I retire. Also, since the majority of my social life revolves around my work, I will have to figure out what to do there, too. Financially, I am not worried at all.

I got a very similar buyout opportunity a decade go, only ours was based on length of service not age. Similar situation financially so I took the offer. Or so I thought; a few weeks later management denied my application. Since the buyout wouldn't significantly affect my bottom line, I handed in my resignation and entered the free world for the first time since college.

But then what you describe as your only concern hit me hard over just a few weeks. I ran out of ideas for how to spend the hours to get through the day. Fortunately (I guess?) management called me in to discuss revised terms for work conditions, they wanted my wish list. I requested control over location, schedule, and work content, and they quickly agreed. I would also receive the buyout premium as a one-year retention bonus with no further obligation from either side. I figured a year should be enough time to get a clue about how to handle life as retiree.

I moved to my retirement location and persuaded management to get me a desk at a local satellite office. That year went well for me, management was happy with my results, and since I still hadn't found anything better to do with my time, I decided to OMY. Still there after almost a decade.

A couple of guys whose buyout applications were accepted came back after their required six months separation elapsed. One of them explained it wasn't his intention to boomerang, he planned to travel the world with his wife and expected that would keep them occupied for years. But long-term life away from home turned out not to be their liking, so it became a generously paid sabbatical.

 

[Romer]

My only concern is what I will do with my time after I retire. Also, since the majority of my social life revolves around my work, I will have to figure out what to do there, too. Financially, I am not worried at all.

If this is your only concern, things won't change now vs a few more years. Get into some hobbies now while you are young enough to enjoy them. Don't know anything about cars, learn to restore one. Want to explore the off road country, join a club and build up a truck. Interest in wood working, but no skills, now is the time to learn. Go volunteer somewhere. Be an usher at a baseball game

I worked with someone who retired who came back because she was bored and had nothing to do. No hobbies, no interests. I asked her what she was doing so she wouldn't have that problem next time and she looked at my with deer in the headlights look as she hadn't thought about that

If you have more than enough money to retire with no concerns, then no retiring now would just delay this and the start of the new life doing whatever you want to do.

I enjoy my job, but am retiring in 5 months so I can start this new phase while I am young enough and healthy enough to fully enjoy it.

Just a few from someone who just made the decision to pull the trigger

 

[levindb]

I do not know if you have any flexibility, but taking your vacation days (rather than lump sum) could bring you close to the end of the year. Will the company be willing to pay your severance in January vs. October? By pushing your income to 2022, it could help you with taxes rather the other options you had mentioned.

 

[Figaro]

absolutely nothing to think about - enjoy the slow ride and turn in that slip right now. Its great to not have to think about working and enjoying the slow moments of life.

 

[RetiredHappy]

Note that your $1.3M taxable investments should be throwing out dividends and capital gains. Those all count towards income when calculating subsidy qualification for ACA.

 

[Jim59]

A few extra points. 99.9% of people close to retirement, and maybe younger, can only dream of the opportunity being presented to you.

You can be sure that others in your MC will not be turning this opportunity down due to liking working with allenciox. Get out there and seek your purpose!

 

[street]

It sounds like you have a great plan and have prepared well for this day. If it were me I would take the package and never look back.

Retirement isn't the end but the start to a new world and adventure. That is what I have witnessed and learned.

 

[Luvtoride]

Wow, I'm turning 64 in 2 months. I would jump at an offer like that from the company I've worked for 31 years for!
Having worked remotely for the past 18 months and facing the prospect of MAYBE soon having to go back to commuting to NYC from NJ everyday, I'm trying to figure out with my financial advisor if I could retire early.

 

[Dtail]

Wow, I'm turning 64 in 2 months. I would jump at an offer like that from the company I've worked for 31 years for!
Having worked remotely for the past 18 months and facing the prospect of MAYBE soon having to go back to commuting to NYC from NJ everyday, I'm trying to figure out with my financial advisor if I could retire early.

Well if you are comfortable in providing financial info here, you can receive many informed responses in conjunction with your FA advice.

 

[Luvtoride]

Dtail, Thanks, I am brand new here and just filled out my profile and will post a Hi, I am... very soon. I've been reading a few of the threads, stickies and some of the topics here and I have no doubt I will get alot of great advice in regards to when I COULD retire. I will definitely post soon and provide financial details when I do. Thanks, Brian

 

[imnontrad]

Look at the "three bucket" approach for retirement funds.
One great thing about retiring at age 60 is that you have 3 years to convert pre-tax retirement funds to Roth before it could possibly impact Medicare premiums (IRMAA).
Plus, if you choose to work at it, I think you will find that your health improves due to less stress, more sleep, and more time to exercise.

 

[papaof2]

Figure out how you will occupy that 50-60 hours a week that work + commute has taken up.

My company made a similar offer - a year's salary added to the retirement package. I took the money and ran because I didn't think they'd ever make a better offer - and they haven't.

For me, staying busy was easy - I wanted to complete the degree I never had time for so I went back to college full time at 55 1/2 - not the only gray-haired student there but I did get the question from a much younger class member: "You don't need a degree. Why are you working so hard on the classes?" My answer: "I'm paying for this so I intend to get my money's worth." and I did - graduating with honors. I've retired another 3 (maybe 4?) times and, since I turned 70, I've become an author with currently 8 ebooks on Amazon - not getting rich at that (3800 books sold in 5 years) but I'd be writing the fiction whenever the characters in my head start having interesting conversations so I might as well share it ;-)

Good luck!

 

[maestro]

Say adios, and go buy the boat. Enjoy your retirement.

 

[anothercog]

Congrats! I hope to get an offer like that some day.

However, before you accept consider negotiating for more. If you have any restricted stock ask that it vest immediately. Also, since you have been there fir 35 years, as for 2 weeks severance for every year of service. You may not get it but have nothing to lose by asking.

 

[a60dan]

Check out the book How to Retire Wild, Happy & Free.

I found it a good read about the non-financial considerations.

I’ve got a “plan” for that too, and a “retirement mentor “ friend.

 

[Luvtoride]

Check out the book How to Retire Wild, Happy & Free.

I found it a good read about the non-financial considerations.

I’ve got a “plan” for that too, and a “retirement mentor “ friend.

A60Dan, I read that book and thought it gave a good perspective about retirement from a non-financial perspective. I'm always looking for other books to read on the subject.

 

[deserat]

......
This is a major point of debate here because there really isn't a clear best strategy. However, I look at this as you are: longevity insurance, and more room to do Roth conversions. The only reason I'd start earlier is if the stock market really tanked and I didn't want to be selling investments at a low. I have a lot of cash and bond fund holdings to tap first so it'd have to be really bad to start SS earlier than 70.

I would also consider converting more before starting SS since you have over a million$ in tax deferred. Estimate what your taxes at 72 will be with conversions to 12%, 22%, and 24% between now and age 70.

^^^^^ this - you are single and have quite a large percentage of your net worth in tax deferred space. Your SS will take up close to $50K of your single filing in pension income - RMDs will be due when you are 72. By spreading out the Roth conversions over a longer timeframe, you are able to convert them at a lower tax rate as well as possibly meet the ACA limits. You could do a quick spreadsheet analysis on where that point would be on ACA with/without Roth Conversion and COBRA with/without Roth conversions at the different tax brackets.

Single people have much lower tax bracket thresholds, so the thinking with regard to 'up to what bracket to convert' is a different story than MFJ.

You said you don't have much to do if you retire - the excursion above should keep you busy for a little bit

 

[target2019]

My only concern is what I will do with my time after I retire. Also, since the majority of my social life revolves around my work, I will have to figure out what to do there, too. Financially, I am not worried at all.

Look around next time at work and imagine what it will be like when everyone over 60 leaves. And the offer is sweet. Time to go and find new experiences.