Escape Plan

[INTJ10]

Hi, long time lurker here. I appreciate the information and advice on the forum. I thought I would introduce myself and ask a couple of questions.

I am 53. I was laid off from megacorp about 4 years ago. Fortunately, I was able to reinvent myself into a consultant and pretty much matched my previous income. The problem is that I just don't like it anymore. It isn't bad work, but I have been doing the same sort of thing for over 30 years and enough is enough. So I am trying to figure out an escape plan.

Wife and I have enough money put away to get the kids through college. We figure we need ~$45k per year to cover the essentials and $120K per year to match our current lifestyle. I included $12k/yr for health insurance. We have a couple of million stashed in 401k/IRA's. Wife works, makes plenty and likes the work. Unfortunately, the company is not stable enough to count on and the local job market is very tight so that adds uncertainty to our plans.

According to Firecalc, if we could both hang on for 4 more years we are all set. So that is option 1. Firecalc also says we could with draw out $60k per year until SS kicks in and draw out enough from then on to reach the $120K per year goal. I call this option 2. Option 2 means that one or both of us could get by with a much lower paying job. That leads me to my question.

I have an MBA, engineering degree, have taught college courses and I am fairly handy in manual skills so I am pretty open to a variety of jobs. Ideally, I would like something part time or with a lot flexibility of hours. I haven't figured out exactly what job I want but I have some ideas.

Have others found that the ability to work for a lower salary ($30K/year) has enabled them to find a vocation that is somewhat fun? Has anyone else successfully implemented this "escape plan"? Are there other escape plans you can suggest?

Thanks in advance.

 

[Midpack]

This site might be helpful Civic Ventures :: Home.

Or here's a 28 page summary http://www.encore.org/files/PDFs/guide/encore_guide.pdf

I thought the book Encore (same people) was a good read...

 

[OrcasIslandBound]

Congrats INTJ10 on being so far ahead of the game! You're significantly ahead of me, but we hope to retire on a lot less per year (~50 - 60K). If I read correctly, your goal is $165K per year.

I too would like to dabble after "FIRE" (in about 3 years). However, I don't have any interest in doing a $30K/year part time job for yet another megacorp, and I'm a little surprised that you would like this. I suspect, being the go getter that you are, you wouldn't stay with some sort of part time position for junior megacorp for more than a year before you got bored with it. Unless, by some miracle, it was a tiny nitch part time job in a start up that you are suddenly in love with. Of course, while being totally fun, this would quickly develop into a 60 - 80 hour "part time" job.

I suspect that you would have a lot of fun being a bit of an inventor out of your garage, or some other kind of entrepreneur besides consulting. And, I also suspect, there are lots of ex-engineers-MBAs out there who are similar. Does this sound even remotely interesting to you? It certainly is to me, but with an expectation of zero income forever. I'd love to be pleasantly surprised though.

 

[dex]

So I am trying to figure out an escape plan.

Wife and I have enough money put away to get the kids through college. We figure we need ~$45k per year to cover the essentials and $120K per year to match our current lifestyle. I included $12k/yr for health insurance. We have a couple of million stashed in 401k/IRA's. Wife works, makes plenty and likes the work. Unfortunately, the company is not stable enough to count on and the local job market is very tight so that adds uncertainty to our plans.

The numbers appear to say you are there.
Can you post your detailed budget for the 120K/yr in expenses and more details for your financial situation - home value, mortgage remaining, net worth.

 

[FreeAtLast]

Hi,

Welcome to the forum. I work P/T at a lower paid job that I once had at a rate of 35k per year working 4 morning a week. I started doing this about 5 years ago when I was 53.

It has worked out well for me as I still get FT benefits including health insurance. I am starting to think more seriously about pulling the plug altogether, however, the computer software development work that I do is fairly easy yet challenging at the same time.

 

[urn2bfree]

As I read your post I had to double check and make sure I had not written it...Well not exactly...I am in another profession and a little younger but the other details are pretty close as is the desire to get out but maybe not completely....I was contemplating learning to be a travel agent....Anyone know how that has worked out for people? Chances to travel at a discount? Part time options? I do a lot of travel planning for our family and advise others. I read about travel and am a good student. I think I could pick up the license fairly easily. I would be taking a huge pay cut--like 90%--Is this crazy?

 

[obgyn65]

Hello INTJ10 - I am pretty much in the same situation. Bored with my job, and planning to retire next year (age 47), do a lot more volunteering and maybe find a part time teaching position for 20-30k / year. It is very difficult to make the mental jump though.

 

[chinaco]

...
Wife and I have enough money put away to get the kids through college. We figure we need ~$45k per year to cover the essentials and $120K per year to match our current lifestyle. I included $12k/yr for health insurance. We have a couple of million stashed in 401k/IRA's. Wife works, makes plenty and likes the work. Unfortunately, the company is not stable enough to count on and the local job market is very tight so that adds uncertainty to our plans.

...

Are you sure you need $120k/year for your lifestyle? Did you do a thorough job of analyzing your current expenses? There is a cost to working, you stop paying FICA, etc.

Plus, you should do a thorough analysis of each of your current expenses to make sure you are not over paying for certain expense today (e.g., lower cost substitutes).

If you have really tackled the expense side and it take $120k/year... the next step is to determine if there is any part of you current lifestyle that really do not make a big difference to your happiness (i.e., continuing to buy stuff that is not really needed or perhaps even wanted). Next, are there any services that you pay for around the house that you would not mind doing in retirement. For example, if you have a yard service.... can you do it yourself (since you have the time) and save a few shekels?

You will need to "balance the books" somehow... there are only a few ways to do it (that do not depend on luck).... reduce spending, increase you resources, or a combination of the two. I would not recommend relying on luck!


The decision is different for everyone. I am conservative... I would rather work 1 more year to make sure I am really done with w*rk rather than stop w*rking now and assume some risk that I might need to go back to w*rk later.

 

[LOL!]

The discrepancy between essential $45K and actual lifestyle $120K is extremely large IMHO. As others have written, you have to get a handle on that. If $50K of lifestyle is to pay a year of private college or is donated to charity that's one thing, but if you are leasing BMW X5s or Porsche Cayennes for you and every family member and playing golf 3 times a week, then that's another matter.

In our case the essentials would cover housing, utilities, autos, all insurance, food, clothes without having to move to a lower cost of living area. Discretionary would be eating out, pets, most travel, most entertainment, charity, hobbies, most gifts. Maybe we need a poll to see the ratio of essential to discretionary that folks typically have?

As for working for a lower salary: I semi-retired when I was age 50. I worked at the same pay rate, but cut my hours in half for the same company. It made my job much more fun as I dumped some buckets. So perhaps you don't need a part-time job in a completely different vocation?

 

[jayc]

I also entertained the idea of doing something else after 30 years in the same profession. However, most jobs that you have little experience in start out at entry level salary, so you still need to work 40/week to show up with anything meaningful in your take home pay.

You are on the right track with consulting in your chosen field. You/I still want to get the highest hourly wage any time you/I leave the homestead.
For me this is accomplished via working in the profession I have the most knowledge and experience in. Pick and choose the jobs and time frame you want. There are a lot of companies that could use your experience and productivity for 3-4 months then would be just as happy if you go away for 3-4 months until they need you again. Drop down to 3-4 days per week. Present it as a cost savings for the company.

My escape plan was figure out the least number of months a year you need to work (3 for me) based on your wife working, your expenses, and fixed income from my stash. I also do this assuming $8-10/hour for my 'dream job' so I can compare the opportunity cost in lost free time.

So far, in my case, the highest hourly rate with the least time working
trumps my dream job.

 

[INTJ10]

Wow, thanks for the responses. The different perspectives are very helpful. The encore career website has some good information.

A couple of people asked for more details about the budget. We looked at our fixed monthly bills including taxes, insurance (home, auto, life, health), food, clothing, utilities (gas, electricity, cable, telephone, cell phone, internet), car gas that comes to about $48k/yr. The difference between $120K goal and the $48K is discretionary/variable stuff like income taxes, car maintenance/replacement, eating out, vacations, gifts, health club, home improvement and charities. We make about $200K now and save about $65K so I guess we live on about $135k now. We don't have any debt. We do spend a fair amount on the kids (private colleges).


There are a lot of moving parts in a retirement plan so we decided to settle on $120K/yr as the income target and build our plans around that. We could get by with less but in my mind there are some pretty big uncertainties in health care costs and social security so I will sleep better with a bit of a cushion. We are counting on about $20k/yr apiece for social security when we hit 62 in 2020. Given $40K from SS we need about $80k/year from assets.

We live on a farm in a renovated farmhouse which is paid for. I am not really sure what it is worth (maybe $300K). We don't want to move and the taxes are reasonable. I would love to figure out a way to make some money "off the land", that is one of my retirement projects.

Like I said, according to firecalc, I can draw out some money until I hit 62 and still make my plan work but I can't quite call it quits yet. So I am wondering if a career transition/downsizing would make my last few years more fun. The advice so far seems to be leaning towards just reducing the hours in my current field rather than a transition. That makes a lot of sense. I had the notion that a fairly dramatic career change would energize me but it doesn't seem that anybody has had the experience.

Again, greatly appreciate the opportunity to kick around my thoughts on this with others.

 

[walkinwood]

Buy a copy of turbo tax and see what your taxes will be if you stop working. They may drop substantially. Good spot to be in. All the best.

 

[LOL!]

With your portfolio, you should probably spend it down and not start SS until age 70, or at least at FRA and not at ages 62. It may also be possible for you to convert 401(k)/IRA funds to Roth IRAs at a low tax rate between early retirement and age 70 when you start SS.

You should really figure out your tax situation at various ages. You should be surprised to find that your taxes might drop to under $5K most years in retirement. I'd guess today that you pay under $20K a year in taxes.

 

[dex]

I think you need to work on a detailed budget.

Track you actual spending then adjust up and down for post retirement lifestyle.

A couple of people asked for more details about the budget. We looked at our fixed monthly bills including taxes,

insurance (home, auto, life, health),

Check on the need for life ins. Most of the time life ins is needed to replace the income of the person who died. If one of you die you have enough assets for the remaining person.

Life ins 5K??

120K to 115K

food, clothing, utilities (gas, electricity, cable, telephone, cell phone, internet), car gas that comes to about $48k/yr.

The difference between $120K goal and the $48K is discretionary/variable stuff like income taxes,

Taxes on your earned income should be eliminated. If you are earning 200K apx 40 - 50K (?) can be eliminated. 115K now 75K?

car maintenance/replacement, eating out, vacations, gifts, health club,home improvement and charities.

How about taking care of charities in your will? 5K?
75K to 70K

We make about $200K now and save about $65K so I guess we live on about $135k now. We don't have any debt. We do spend a fair amount on the kids (private colleges).

Are you double counting the kids' college costs?

From your first post:

Wife and I have enough money put away to get the kids through college.

10K for the kids ? 70K to 60K?
Add money back for retirement activities?


What do you think?

 

[INTJ10]

Dex and all, good thoughts. I really haven't done any tax forecasting. I do use TurboTax and we are paying about $38K between State and Federal taxes so that could make a difference. Last year I put about 1/2 of my 401K contributions as Roth 401K so I am paying the price now in terms of taxes. I thought it would be a good idea to have some tax exempt money in the portfolio but I am questioning that decision now. Maybe LOL!'s approach is a better way to do that.

My life insurance premium is $32/mth so that won't make much difference. Your right though it is not really needed.

That is an interesting approach to charities, hadn't thought of that.

Somehow we spend a lot on the kids even beyond the college. It would be a good idea to plan it better.

 

[LOL!]

I've been working with TurboTax today. Our gross income is above $200K this year, but our Federal income tax will be under $20K. I thought you wrote that you are self-employed, so you should be able to have a nice self-employed tax-deferred retirement plan going ($49K) and your wife should be able to put $22K away tax-deferred. Besides state income taxes, I guess you are including FICA/medicare taxes in your $38K?

By deferring so much and other tricks, you should be eligible for Roth IRA contributions as well.

 

[pb4uski]

As others have posted your taxes will likely be much lower. If you use TurboTax of similar software, do a "what-if" of your taxes taking out your consulting income and your wife's earnings but leaving in dividends, interest, etc and adding any IRA or 401k withdrawals (where applicable). I suspect thay you will see your taxes decline dramatically since much of your "income" in retirement will be principal withdrawals. I know my taxes will be a small fraction of what they are now when I retire.

Have you considered dialing down your consulting to 50% time? I currently work 50% time and the flexibility makes a huge difference. Might be worth a try for a while. But it is still work.

Like others, I agree that the non-discretionary spending/discretionary spending seems a bit out-of-whack compared to what I would have expected so you may want to scrutinize the budget.

You mention that you have a small farm. We have friends who have a large garden that provides much of their food during the spring/summer/fall. If you enjoy gardening that might be a possibility. BIL has a small farm with chickens and some beef cattle as a hobby that provides much of what they eat - they also sell hay and deduct the costs of fuel, equipment, repairs for taxes. Or you might consider boarding horses.

 

[jIMOh]

For a second career, consider teaching. Shorter work weeks, 2-3 months off in summer, paid health care, and possible a pension added to income depending on how long you stick with it.

For the expenses, I would get detailed (as others have mentioned). I would also boost taxable savings over next 3-4 years. This will lower taxes in retirement any year the taxable accounts are used for income.

I would also learn more about Roth conversions as a way to "save" on taxes over next 40 years.

I would also look into ideas to tap land for income- could be running a business or similar. I have a friend with 25 acres and he liked some of my ideas, but he did not have the time to pursue them. It depends on what part of country you are in and how the land is set up as to what makes sense.

 

[LOL!]

As others have posted your taxes will likely be much lower. If you use TurboTax of similar software, do a "what-if" of your taxes taking out your consulting income and your wife's earnings but leaving in dividends, interest, etc and adding any IRA or 401k withdrawals (where applicable). I suspect thay you will see your taxes decline dramatically since much of your "income" in retirement will be principal withdrawals. I know my taxes will be a small fraction of what they are now when I retire.

This is very true. This is also why a Roth 401(k) probably does not make sense. You are paying at a high marginal income tax rate on those contributions now. However, if you did not use the Roth 401(k), you would contribute pre-tax (i.e. 0% tax) and then in retirement withdraw at an average rate of say 10% or less. So if you are in the 25% marginal income tax bracket now, that's a savings of more than 15%. You need to run the numbers.

See also: The Case Against Roth 401(k) - The Finance Buff

 

[youbet]

For a second career, consider teaching. Shorter work weeks, 2-3 months off in summer, paid health care, and possible a pension added to income depending on how long you stick with it.

Unless you're talking about teaching at the post secondary level, there are a lot of barriers to entering the teaching profession. The main one, of course, is getting a teaching certificate which requires taking several courses and doing student teaching. Rumors of school districts snapping up anyone with a 4 year degree and sponsoring them for a provisional certificate are greatly exaggerated. More likely, you'd be hired as a minimum wage laborer to help move around the mountains of resumes they have from highly qualified certified teachers looking for the same job you are! The competition is fierce.

Perhaps you have the necessary credentials in place and connections to get yourself hired. But generally, for the average citizen, teaching K - 12 is hard to get started in and rarely happens for older job seekers.

OP mentioned past experience teaching college courses already on his resume, That's a more likely possibility. Here in the Chicago area, pay levels for adjunct faculty aren't impressive and the work frequently involves teaching evenings or weekends, but it would have to be better than flipping burgers or other menial work.

 

[INTJ10]

I started out on my own with 1099 income but now I am on salary with a small consulting company. There are pros and cons to both ways. Tax wise, 1099 was a lot better. As LOL! said, I was able to put away more in my solo 401k than I am now which is max $22k 401k through the company.

I taught as an adjunct college professor. It is almost ridiculous how little you make for the time invested. Preparing lectures and grading papers takes a lot of time. In this area (North East), some people do it because adjuncts can qualify for health care benefits if they teach enough classes. As youbet said teaching high school is very different. You need a teaching certificate and jobs are now hard to come by. I was told it is easier to get a job in the "rougher" high schools but you will have to call 911 a couple of times per day (no exaggeration!).

 

[INTJ10]

JiMOh, you mentioned you have ideas for farm income. I have about 40 acres total and about 25 that is "prime farmland" whatever that means. I rent out the 25 acres to a farmer for row crops. He has put in corn, oats, beans and winter wheat. The other 15 acres are woods, meadows and my yard. In this area, there are a lot of apple farms. I have a lot of wild concord grape vines but no "wine grapes". However, there is a winery not too far from here.

I don't know what I don't know about farming. Is there a way to start some of your plans without a big investment or do you have to commit in a big way? I looked into a berry farm (raspberries, strawberries) and woody ornamental plants. I was trying to find some farm businesses where scale doesn't matter so much (like row crops).

 

[jIMOh]

JiMOh, you mentioned you have ideas for farm income. I have about 40 acres total and about 25 that is "prime farmland" whatever that means. I rent out the 25 acres to a farmer for row crops. He has put in corn, oats, beans and winter wheat. The other 15 acres are woods, meadows and my yard. In this area, there are a lot of apple farms. I have a lot of wild concord grape vines but no "wine grapes". However, there is a winery not too far from here.

I don't know what I don't know about farming. Is there a way to start some of your plans without a big investment or do you have to commit in a big way? I looked into a berry farm (raspberries, strawberries) and woody ornamental plants. I was trying to find some farm businesses where scale doesn't matter so much (like row crops).

The ideas my friend and I discussed.

He was thinking of rehabbing the old farm house on his land and renting it out for corporate retreats. I did not think the demand or markup was there to make money.

We discussed doing haunted hay rides (he has trails which go in and out of woods). Low overhead, seasonal work.

We discussed having paintball tournaments on the land (his son does this at other places and pays to do it).

I have experience as a soccer coach and told him renting the land to soccer clubs would very (VERY!) profitable. Only investment needed was to grade the 10-20 acres to be flat (it is flat, just not flat enough). It was not clear to me from looking how many fields would fit in the two clearings he showed me. One of the clearings was shared with his brother, so sharing that money would be sticky as well.

I would suggest to you to look into something like the soccer fields- if a farmer is already using the land, it must be "flat" to some extent. For ONE weekend tournment, the clubs here pay upwards of 20k for soccer fields (30 fields total for 2 days, each field is about 1/2 acre to 1 1/2 acres depending on age of kids using field).

If club A uses field weekend 1
then club B uses field weekend 2
then Lacrosse uses field weekend 3

I could come up with a business model where fields are used 6 times per year and generate between 10-60k annually. That is just on land usage. Some places charge for parking, so that could be additional revenue too. Plus concessions during sport event- more revenue.

Most soccer clubs are required to carry insurance, and there is a liability issue, so look into that.

 

[jIMOh]

Unless you're talking about teaching at the post secondary level, there are a lot of barriers to entering the teaching profession. The main one, of course, is getting a teaching certificate which requires taking several courses and doing student teaching. Rumors of school districts snapping up anyone with a 4 year degree and sponsoring them for a provisional certificate are greatly exaggerated. More likely, you'd be hired as a minimum wage laborer to help move around the mountains of resumes they have from highly qualified certified teachers looking for the same job you are! The competition is fierce.

Perhaps you have the necessary credentials in place and connections to get yourself hired. But generally, for the average citizen, teaching K - 12 is hard to get started in and rarely happens for older job seekers.

OP mentioned past experience teaching college courses already on his resume, That's a more likely possibility. Here in the Chicago area, pay levels for adjunct faculty aren't impressive and the work frequently involves teaching evenings or weekends, but it would have to be better than flipping burgers or other menial work.

I have taught at corporate level for 7 years, and now write training material while awaiting a career change (have a few more tests to pass).

I looked into teaching HS math. I have an engineering degree and this is what I was told by Xavier University... My teaching experience exempts me from any student teaching requirement... my engineering degree has had me take more calculus and statistics than any HS math teacher would ever dream to take. All I needed for my masters was to take the curriculum design classes (which I do for a living now, but have no formal training in).

That is Plan B if my career change does not pan out.

Two teachers have told me to get hired, no masters degree is needed, I just need to commit to getting masters degree in X years or start degree within Y years (one teacher started her masters 10 years ago and has not followed through on it, but she teaches HS in a really small district out in middle of no where).

 

[Walt34]

OP mentioned past experience teaching college courses already on his resume, That's a more likely possibility. Here in the Chicago area, pay levels for adjunct faculty aren't impressive and the work frequently involves teaching evenings or weekends, but it would have to be better than flipping burgers or other menial work.

That's the case around here too. I looked into teaching criminal justice/computer forensics at a two-year school near here but the pay scale was barely better than burger flipping.