RIF to FI? to FIRE?

[FI50]

I got my RIF package last week. The package will cover me for 9 months. On Friday, one on my previous mangers offered me a similar position with the same pay etc...

My FIRE plan would have been in 2021, if everything goes well. I really wanted to shore up the kids education funding, update the house, and buy a new vehicle before calling it done. With DW is still planning to work for a few more years and her income would cover the expenses.

With that in mind, I thought this would be an easy decision. But now I'm not so sure. I'm debating whether to take the package or go back for another 3 years. Any insights would be appreciated.

 

[braumeister]

Not nearly enough information to answer.

What does FIRECalc tell you?

 

[gwraigty]

Is the RIF package that will cover you for 9 months more lucrative than accepting the similar position for now and seeing how you feel about that in 9 months?

 

[cooch96]

Are those your only two options? Is part time work attractive or available?

 

[Aerides]

If you wanted/needed to work to, say, June 2021 to meet your goals to FIRE comfortably, then 9 months severance doesn't get you there. You take the new job. We're assuming it's with the same company, hence the either/or. Who knows, maybe another RIF happens next year and you win it then, but for now it sounds like it's a tad bit too soon.

Or you take the package, and look for a job elsewhere, but that's a gamble, factors including your skills, age, location, etc. Bird in the hand, etc.

Is the package considered serial severance where you are on the company HI for the duration of the 9 months or is it just salary and you are on your own/cobra right away? If it's the latter, then the package isn't as good as it looks to begin with.

 

[FI50]

Not nearly enough information to answer.

What does FIRECalc tell you?

FIRECalc tells me that DW and I can be done in 3 years @100%. I will need to run the the numbers again to see how much longer DW need to work if I'm done. Thanks!

 

[FI50]

Is the RIF package that will cover you for 9 months more lucrative than accepting the similar position for now and seeing how you feel about that in 9 months?

That is a tough one. I feel it would be harder to get a similar position and pay in 9 months. However, getting some time off is very enticing.

 

[FI50]

Are those your only two options? Is part time work attractive or available?

Thus far, those my only 2 options. Part time work would have to come after 9 months.

 

[Carpediem]

FIRECalc tells me that DW and I can be done in 3 years @100%. I will need to run the the numbers again to see how much longer DW need to work if I'm done. Thanks!

Does that mean you don't really have an option to retire - that you either need to take the other job or find another one to cover you for the next 3 years?

 

[gwraigty]

That is a tough one. I feel it would be harder to get a similar position and pay in 9 months. However, getting some time off is very enticing.

What I meant was that you could take the new position instead of the RIF package. Then after working the new position for about 9 months - at which point you'd be even financially had you taken the RIF package - you could decide if you want to stick to your original FIRE plan. If not, then you could leave of your own choosing.

 

[Sunset]

FIRECalc tells me that DW and I can be done in 3 years @100%. I will need to run the the numbers again to see how much longer DW need to work if I'm done. Thanks!

How long if you don't buy a new truck ?

Have you been tracking your spending for a couple of years so you know exactly how much you spent, or are you just ball parking the number ?
It makes a big difference in terms of accuracy, and knowing which expenses are removed and what will need to be added.

 

[FI50]

If you wanted/needed to work to, say, June 2021 to meet your goals to FIRE comfortably, then 9 months severance doesn't get you there. You take the new job. We're assuming it's with the same company, hence the either/or. Who knows, maybe another RIF happens next year and you win it then, but for now it sounds like it's a tad bit too soon.

Or you take the package, and look for a job elsewhere, but that's a gamble, factors including your skills, age, location, etc. Bird in the hand, etc.

Is the package considered serial severance where you are on the company HI for the duration of the 9 months or is it just salary and you are on your own/cobra right away? If it's the latter, then the package isn't as good as it looks to begin with.

Bird in hand is what I'm struggling with. OTOH, getting some time off to recharge is enticing. I would be on the company HI and some other benefits.

 

[Aerides]

Bird in hand is what I'm struggling with. OTOH, getting some time off to recharge is enticing. I would be on the company HI and some other benefits.

Nope don't look at this as an opportunity for time off unless you mean retiring now. I'm assuming you're over 40? You won't want a gap on your resume if you're going to go out into the job market. The only way around that is if your official last day with your company is the end of your severance. Mine was, but I was packaged-out right when I was ready to give notice anyway.

If you're going to take the package, and still work, you should focus on the job search right away. Taking a real break of more than a couple weeks will just be like an advance on your retirement, and not make the next 18 months any easier.

 

[Mdlerth]

For best results, use The Force and search your feelings...

I think your question is whether to take the RIF package and call it done a year-and-a-half earlier than planned. Presumably your plan would have converged assets/income streams/ages/expenses to a satisfactory success rate in 2021, but if you go early you'll have to modify the convergence to some lower combination of assets/income/expenses, etc. Is that accurate?

Of course, only clairvoyance can give you the exact answer, but perhaps a glimpse of my own plans might steer you in the direction of that answer.

My own Megacorp is writhing about in an extended divestiture, with the strong possibility of substantial redundancies sometime in the coming year. I am fully retirement eligible, with a modest legacy pension which I expect to be a significant piece of my retirement funding. If I were to score a RIF package, I would be able to initiate the pension immediately, as well as collect a year's severance pay.

Severance is subject to deductions for FICA/FICM, but not eligible for 401k contributions. Pensions are not subject to any of those subtractions. Since DW will still be w*rking for another year, our tax bracket won't change much, so I neglect tax considerations.

I calculate that if I bank the pension plus the forgone 401k deductions during the RIF year, and in the second year begin to draw down that bank, my actual cash flow will duplicate my regular paycheck for a surprisingly long time. It's not just a year, it will be more than three years!

I won't be making any more 401k contributions, of course, but my contributions and MC's match influence the balance a lot less than what the market does. As far as the money coursing through my checking account, it will be as if I were still on full pay for over three years, and without ever having to go to the sweatshop. I don't spend it all now anyway, so I can continue my existing standard of living for even longer, and the 401k can compound for an extra three years and more without me even having to think about tapping it.

In summary, if your situation is anything like mine, that RIF could actually be worth far more than its 9 months face value. I suggest you do a deep dive into how it will affect your cash flow before making a decision. Good luck!

 

[cathy63]

How secure is your DW's job? You say she's planning to work for a few more years and that would cover expenses, but what if she gets caught in a RIF next year?

I agree that you don't sound like you're in a place in your career where you can take an extended break and then go back to work later, no matter how enticing the time off sounds. If you're feeling burned out on the current role, maybe taking the new job with your old manager would be enough of a change to give you a bit of a lift. If it's the company that's worn you down, then you can take the new job and still start a job search. It's usually easier to find a job when you already have one.

Also, if you go for the retirement option, don't overlook the emotional and relationship costs of one partner retiring earlier than planned. You two need to have an honest discussion about expectations for how this new status will work.

 

[stepford]

The key questions I would ask are:

If you don't take the RIF, are you likely to be able to keep the job until your 2021 target date?

If your job is insecure would you be likely to be offered the same package if you were RIF'd again a year or two from now?

If you don't hate your job and the answer to either of these two questions is yes then I'd suggest keeping the job.


I was in a similar situation, turned down RIF packages 5 and 2 years ahead of my target date and was fortunate enough to be offered the same package when I finally retired at 55, but YMMV. I'd take the financially cautious approach when my family's financial well being is concerned.

 

[FI50]

Does that mean you don't really have an option to retire - that you either need to take the other job or find another one to cover you for the next 3 years?

My DW and I were both planning to work for the next 3 years and then we could both be FIRE if we so choose. If I do decide to take the RIF package it would mean that DW would have to work an additional year. That would be 4 more years of work for DW, according to Firecalc.

 

[FI50]

What I meant was that you could take the new position instead of the RIF package. Then after working the new position for about 9 months - at which point you'd be even financially had you taken the RIF package - you could decide if you want to stick to your original FIRE plan. If not, then you could leave of your own choosing.

Gotcha! Essentially, that is the question. After reviewing my numbers again. Firecalc and whatnot, DW would have to work an extra year and I can be fully retired! This does make a lot of sense, at this point and assuming a yearly 8% return, our portfolio is returning more than what we both make. And, we are only spending about 40% of what we gross.

 

[FI50]

How long if you don't buy a new truck ?

Have you been tracking your spending for a couple of years so you know exactly how much you spent, or are you just ball parking the number ?
It makes a big difference in terms of accuracy, and knowing which expenses are removed and what will need to be added.

If we did not need to buy a new vehicle, education funding, and updating our home, we should be able to retire right now.

The one thing that is making me nervous is that we have only been tracking our expenses for 4 months. With many of the unknowns, we build in a 20% buffer for things we do not feel comfortable, such as healthcare.

 

[FI50]

Nope don't look at this as an opportunity for time off unless you mean retiring now. I'm assuming you're over 40? You won't want a gap on your resume if you're going to go out into the job market. The only way around that is if your official last day with your company is the end of your severance. Mine was, but I was packaged-out right when I was ready to give notice anyway.

If you're going to take the package, and still work, you should focus on the job search right away. Taking a real break of more than a couple weeks will just be like an advance on your retirement, and not make the next 18 months any easier.

I'm looking at this as retiring right now.

 

[FI50]

I think your question is whether to take the RIF package and call it done a year-and-a-half earlier than planned. Presumably your plan would have converged assets/income streams/ages/expenses to a satisfactory success rate in 2021, but if you go early you'll have to modify the convergence to some lower combination of assets/income/expenses, etc. Is that accurate?

Of course, only clairvoyance can give you the exact answer, but perhaps a glimpse of my own plans might steer you in the direction of that answer.

My own Megacorp is writhing about in an extended divestiture, with the strong possibility of substantial redundancies sometime in the coming year. I am fully retirement eligible, with a modest legacy pension which I expect to be a significant piece of my retirement funding. If I were to score a RIF package, I would be able to initiate the pension immediately, as well as collect a year's severance pay.

Severance is subject to deductions for FICA/FICM, but not eligible for 401k contributions. Pensions are not subject to any of those subtractions. Since DW will still be w*rking for another year, our tax bracket won't change much, so I neglect tax considerations.

I calculate that if I bank the pension plus the forgone 401k deductions during the RIF year, and in the second year begin to draw down that bank, my actual cash flow will duplicate my regular paycheck for a surprisingly long time. It's not just a year, it will be more than three years!

I won't be making any more 401k contributions, of course, but my contributions and MC's match influence the balance a lot less than what the market does. As far as the money coursing through my checking account, it will be as if I were still on full pay for over three years, and without ever having to go to the sweatshop. I don't spend it all now anyway, so I can continue my existing standard of living for even longer, and the 401k can compound for an extra three years and more without me even having to think about tapping it.

In summary, if your situation is anything like mine, that RIF could actually be worth far more than its 9 months face value. I suggest you do a deep dive into how it will affect your cash flow before making a decision. Good luck!

Thank you! You have pretty much hit on everything I was thinking. If I take the package and DW works a year longer we would have very similar to the number projected for 2021. That being said, DW enjoys her work and I would be surprise if she would stop working in the near future. 2021 is really the year we both stop working if we chose.

 

[FI50]

How secure is your DW's job? You say she's planning to work for a few more years and that would cover expenses, but what if she gets caught in a RIF next year?

I agree that you don't sound like you're in a place in your career where you can take an extended break and then go back to work later, no matter how enticing the time off sounds. If you're feeling burned out on the current role, maybe taking the new job with your old manager would be enough of a change to give you a bit of a lift. If it's the company that's worn you down, then you can take the new job and still start a job search. It's usually easier to find a job when you already have one.

Also, if you go for the retirement option, don't overlook the emotional and relationship costs of one partner retiring earlier than planned. You two need to have an honest discussion about expectations for how this new status will work.

DW's job is pretty secure. Not quite as secured as a tenured professor, but maybe one step down. We have quite a bit of buffer for things like healthcare, vacation, etc....We could maintain our current lifestyle at 3.25% WR right now if we both stop working.

My job is a specialized niche, so it would be hard to look elsewhere without networking with former colleagues. So either keep going or take the package and retired.

The emotional aspect scares me. We have and continuing the discussion. At the same time, I don't believe neither one of us fully understands the impact.

 

[FI50]

The key questions I would ask are:

If you don't take the RIF, are you likely to be able to keep the job until your 2021 target date?

If your job is insecure would you be likely to be offered the same package if you were RIF'd again a year or two from now?

If you don't hate your job and the answer to either of these two questions is yes then I'd suggest keeping the job.


I was in a similar situation, turned down RIF packages 5 and 2 years ahead of my target date and was fortunate enough to be offered the same package when I finally retired at 55, but YMMV. I'd take the financially cautious approach when my family's financial well being is concerned.

One of the things I have been doing lately is pushing back on projects I'm not interested it and I'm pretty sure management is seeing that. So unless I accept every assignments coming my direction I can't say my job is safe. I'm pretty burned out and I don't think going to the new team will help....

 

[thumbs]

Would you have room to cut expenses if needed? I am learning towards taking the RIF package.

 

[FI50]

Would you have room to cut expenses if needed? I am learning towards taking the RIF package.

I do believe we have room to cut some expenses. On top of that, we built in a 20% buffer since we have only track expenses for 4 months.