Crossroads at 47

[jrh13]

Hello everyone and thank you for reading my post. I've lurked here for awhile (my goal has always been to retire somewhere between 55 and 60) to get some good insights on how to get to my goal, but recent events may alter things a bit.

Here's some info about myself. I'm married to a wonderful wife and have a great 12 year-old daughter. I've just been let go from my 200k (plus bonus) per year job in financial services due to the credit market meltdown. Severance is being negotiated but we're probably looking at 6-8 months of base. The rest of our financial situation is as follows:

Taxable Brokerage A/C - 1.5 million (60% cash, 40% equity / equity funds).
401k / IRA's - 700k (80% equity / equity funds, 20% bond funds).
Emergency Fund - 190k all cash and short-term CD's (represents two years living expenses at 8k per month).
House is worth 500k - 525k with a 140k mortgage. Mortgage, taxes, and insurance come to $2,350 per month.
529 plan has about 40k in it.

It feels strange not working after doing so for 25 years, but I'm thinking this might be an opportunity to make some changes. I don't like the commute associated with working in NYC ( 2 1/2 to 3 hours a day), and I'm not crazy about the stress associated with working in financial services. However, I'm not sure I'm financially ready to walk away, and I'm not sure what other type of employment I could obtain.

One thought is to look around for a year and if nothing reasonable surfaces sell the house and use the equity to buy a house in a locale with a lower cost of living (currently live in NJ). This would cut expenses considerably. Another part is saying just get out now, but our daughter is very happy here, I'm not sure I'm ready to retire, and being in the NYC area gives me by far the best chance of re-obtaining a well-paying job.

Thanks again for your time and any thoughts are greatly appreciated.

[Lotus]

Hello, jrh13, and welcome to the forum. Your post caught my attention as I am also 47 and work in financial services.
You look to be in very good financial shape; at any rate, with plenty saved to take some time off and review where you want to go. It seems sensible to stay in the NYC area for now (not immediately move just to save money) as your family seems happy and you will keep job options open.
I'm sure it is a difficult time, but you have a solid footing for financial independence. For reference, I'm single, have smaller investments than you, and am between 0.5-2.5 years away from early retirement.
Best wishes!

[hova22]

I hear you on the commute in to nyc. Ever thought of trying to obtain employment in NJ somewhere? Newark, Jersey City has financials. Pharma is everywhere, but a bit more spread out. Not sure what type of position you were in before, but taking a pay cut and working closer to home would allow you more time with the wife and daughter. Imagine if that 3 hours was cut down to 1 hour round trip.

You could take some of the cash and pay off the rest of your mortgage to lower the monthly expenses. Personally, I wouldn't want to sell in today's market. If you really had to, you could always rent in the same town until DD goes to college.

Things happend for a reason and I believe this is your opportunity to create a better lifestyle for yourself. You certainly already have the money. If you can get by on the salary of a new lower paying job the money already saved can grow for the next 8-13 years...

[brewer12345]

Quote:

Originally Posted by hova22 I hear you on the commute in to nyc. Ever thought of trying to obtain employment in NJ somewhere? Newark, Jersey City has financials. Pharma is everywhere, but a bit more spread out. Not sure what type of position you were in before, but taking a pay cut and working closer to home would allow you more time with the wife and daughter. Imagine if that 3 hours was cut down to 1 hour round trip.

This is exactly what I am contemplating.

As for OP, I think you are in pretty good shape financially. Best way to acid test it is to run your numbers through firecalc. But I suspect you have plenty of room to take your time about deciding what to do next.

[hova22]

Brewer, I am in the same boat as well. Had an interview yesterday actually.

Sorry, don't mean to hijack, just wanted to reply to Brewer. jrh13, as mentioned, you have a lot of options going forward.

[Rich_by_the_Bay]

Quote:

Originally Posted by jrh13 One thought is to look around for a year and if nothing reasonable surfaces sell the house and use the equity to buy a house in a locale with a lower cost of living (currently live in NJ). This would cut expenses considerably. Another part is saying just get out now, but our daughter is very happy here, I'm not sure I'm ready to retire, and being in the NYC area gives me by far the best chance of re-obtaining a well-paying job. Thanks again for your time and any thoughts are greatly appreciated.

Welcome to the board.

You have done a great job saving, though the cost of living near you is high.

Only caveat is to make sure you have access to good health insurance during your transition. Don't assume you can just go out and buy it affordably as an individual. If you can, great, but be sure before you leap.

Sounds like one of those career setbacks that may turn out to be the best thing that ever happened to you.

[brewer12345]

Quote:

Originally Posted by hova22 Brewer, I am in the same boat as well. Had an interview yesterday actually.

Great. I am just getting started in my search and hoping it does not get expanded to longer commute stuff by virtue of unemployment.

[jrh13]

Thank you all for the feedback. To respond to specific posts:

Hova - I'd love to get a shorter commute and am willing to sacrifice something on the compensation front. My bet in this market though, is that good jobs are going to be hard to come by over the near to medium-term, and if we're going to remain in the area, I may have to take what's available rather than what I prefer.

Lotus - Congratulations and I hope you get to your destination without any hiccups along the way.

Brewer - Thank you for the suggestion, I will do.

Rich - Thank you for the welcome, it's nice to officially get "on board". I do have access to health insurance through COBRA for the next 18 months (though at $1,300 per month it isn't cheap).

[ipatent]

jrh-

I am 47 with one child as well. You have done a good job saving, which gives you the luxury of seeing what is out there in terms of other employment and taking your time.

New Jersey is expensive, but it has its benefits. Depending on exactly where you are in NJ, if you had to you could commute to NYC, Philadelphia, the Lehigh Valley, or within NJ itself. Living where you are gives you a lot of options in that respect. Also, the economic situation in the Northeast (aside from Wall Street itself) is much better than it is in places like California or Florida. A lot of the Midwest (think Detroit) has been hit hard economically as well.

A lot depends on whether you would prefer to slip into quasi-retirement living somewhere less expensive or stay in the rat race.

[jrh13]

Thank you ipat. I think your last sentence sums things up quite well. If this were 5 or so years from now, there is little doubt we'd exit the rat race and go into semi (or maybe full) retirement in a cheaper locale.

If we were to exit the rat race now, there are some options. We're originally from western Pa, eastern Ohio, and still have a lot of family back in the area, so moving back there is a possibility. Advantages are family, a low cost of living, and access to good schools. Disadvantages are the economic situation and weather (gray is the word that comes to mind from November through April).

The Carolinas could also be a possibility given the lower cost of living there and good (relatively speaking) economy. We would have to do further research into the schools though.

I'm also intrigued by Texas given the low cost of real estate and strong local economy there. Just don't know if the wife wants to deal with the summer heat there (though I'm sure we'd all appreciate the milder winters).

Any other thoughts on places with a low cost of living, access to good schools, and a climate no colder than say Pittsburgh (I don't think I could deal with a Minnesota winter).

[brewer12345]

I'd suggest Colorado, but I bet you'd find the winters too cold.

Curious, where in OH are you from? Mom's family ranges from Cleveland down to Canton and then to the WV border.

And now I am in the same boat, since I found out this morning that I no longer have a job. Unfortunately I am 12 years younger and not nearly as well off, so offtothe job hunt I go.

[Milton]

Whether you have sufficient financial assets to retire depends on whether you relocate. I don't believe you have enough to support your current lifestyle, especially with so much in cash and presumably yielding a low return. But if you move to a cheaper location, your cost of living could substantially decrease and you would probably be "financially ready to walk away".

Since you are anticipating a severance payment that will carry you for the next six-odd months, and apparently have no burning desire to move back to the Rust Belt or wherever, I'd say you might as well stay put for the time being. Put some résumés out there, work the telephones, and hope for the best. Possible outcomes:

(1) after the six months is up, you are unable to secure a replacement job of your liking; so you take a couple of months to sell your house and relocate (while living off your emergency savings). At least you know that you tried to make the best of things: you didn't simply give up and run away with your tail between your legs.

(2) you secure a replacement job (in NYC or perhaps somewhere closer to your house: all that commuting is crazy, IMHO!). You take the job and see how it goes, while continuing to pay down your mortgage and otherwise build your nest egg. When at some later time you decide to pack it in, it will be your choice. Note that this decision need not be deferred for a decade, it's entirely up to you ... accepting a new job is not a 'life sentence'.

All of this is probably obvious to you. So no brilliant insights, just some ratification of your own thoughts.

Take heart, and remember that you are not alone: many others have travelled the same path and survived. You might like to read G.J. Meyers, Executive Blues: Down and Out in Corporate America (1995).

[Khan]

Quote:

Originally Posted by brewer12345 I'd suggest Colorado, but I bet you'd find the winters too cold. Curious, where in OH are you from? Mom's family ranges from Cleveland down to Canton and then to the WV border. And now I am in the same boat, since I found out this morning that I no longer have a job. Unfortunately I am 12 years younger and not nearly as well off, so offtothe job hunt I go.

With no notice?

Good luck.

[brewer12345]

Quote:

Originally Posted by Khan With no notice? Good luck.

Well, business ain't been good for a while, so its not exactly a surprise, but this was D-day. All the details are still being worked out, but I will likely get a paycheck for a couple more months. Resume time...

[REWahoo]

Quote:

Originally Posted by brewer12345 And now I am in the same boat, since I found out this morning that I no longer have a job. Unfortunately I am 12 years younger and not nearly as well off, so offtothe job hunt I go.

Uh oh. Is now the time to make a career change and head out to Colorado? Rumor has it there really is life west of the Mississippi, and a good one at that...

[jrh13]

Brewer, I'm sorry to hear about your job. Best of luck in obtaining new employment. I was born in Youngstown, and we moved to the Pittsburgh area when I was almost 9. Still have family / relatives in both places.

Milton, thank you for your input. I agree that our asset allocation in non-retirement funds is too conservative, but until fairly recently my feeling was that financial assets were not a very good value. My view has changed somewhat and the plan is to get more of our cash into either equity funds or something more balanced such as Vanguard Wellington. We'll do this over a period of time. On the employment front, our strategy will probably be something similar to what you suggest (give it a good effort here for about a year, and then seriously consider all options). I also agree that at my age we don't have enough to retire and live the way we currently do. If I were to retire, we would need to reduce expenses. The most logical place to start would be to move to a place with lower housing prices and property taxes.

[firewhen]

In rough numbers, you have $2.5M even without home equity. You have about a million in nonretirement cash. Your taxable income will be minimal. You can live off your cash for years. What is your spending rate? Did you ever go through your old bills/checkbook to figure it out? If you can get by on $75k per year, that is about a dozen years off the cash not even counting whatever interest you make.

Take your time. Use this as an opportunity. Evaluate your portfolio. What do you want to do with the rest of your life? Your daughter will be out of the house in 6 years? How long will you live? How long will you be healthy? We are in NJ. Other than property taxes, it is not that expensive. A car costs here same as anywhere else. Take your time and evaluate your options.

[hankster]

Quote:

Originally Posted by brewer12345 Well, business ain't been good for a while, so its not exactly a surprise, but this was D-day. All the details are still being worked out, but I will likely get a paycheck for a couple more months. Resume time...

Best wishes on the job search Brewer.

[brewer12345]

Quote:

Originally Posted by REWahoo Uh oh. Is now the time to make a career change and head out to Colorado? Rumor has it there really is life west of the Mississippi, and a good one at that...

DW and I have discussed it, but the cold, hard fact is that there are a hundred times more jobs for what I do in the NYC area than in all of CO. The only other place on the planet that has a similar job market is maybe London. Don't want to pick up stakes and move 2000 miles only to find that I have a choice of 3 employers, none of whom might be hiring at any given time.

Maybe in another 5 years.

[Rich_by_the_Bay]

Bummer, Brewer. Sorry about the job loss.

It must really bring into focus the harsh realities of some of the discussion on this board. IIRC you had mentioned something waay back about starting some type of advising practice (was it investment, financial planning, can't recall).

Is that still an option?