Take Severance ? Need a Final Push!

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refi

Recycles dryer sheets
Joined
Jul 26, 2017
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I have an opportunity to take a severance and transition to FI and am trying to think it through. Even though the math says I should stay, everything else tells me I should call it a day. Any feedback would be helpful.

My stats right now are about (see breakdown from a few months back for more granular details):

Net Worth - 6.1m
VHCOL Area
Cash - 600k
Equities - 2.5m
Real Estate - 3m
Real Estate Rental Net Cash Flow - $14k-$15k/mo

Currently Monthly Spend - ~$5k/mo, maybe $6k/mo.

Overall, my numbers feel solid and I've been hating work since forever.

My options would be:

#1 - Take Severance starting in Sept.
- 3 months of pay
- COBRA
- pro-rated bonus for 2023
- relaxation/ no more stress

#2 - Stay on through bonus Period next March
- 6 months of pay
- Health insurance
- Full bonus (i'm assuming it will be paid)
- RSU vest ($60k)
- Less of a tax hit, pay spread over time
- Easier ability to get loans for investment deals.

Current total compensation is around $600k/yr.

Anyway, I feel I'm asking for confirmation bias to make sure. Any thoughts either way would be appreciated. Trying to get rid of these golden handcuffs.
 
It looks like you have more than enough.
Jump in, the Retirement water is fine.
It doesn't look like you need more money. Your time is limited, how do you want to spend it?
 
latexman said:
What's your estimated retirement burn rate?
Click to expand...

Burn rate would be about the same. $5-$6k/mo. Maybe it would spike up to $7-8k/mo w/ insurance and more travel, but overall I'm pretty frugal.
 
Take the money. You can spend your time working, or take the money and make it work for you as you spend your time not working and pursuing other interests.
 
It's up to you.

Per your post, your cash flow exceeds your monthly expenses.
 
There will always be another carrot. That's why RSUs and the like were invented. If you wait till March you could look forward another 6 months and see something else you'd have to leave on the table, and so it goes.
 
Same boat. One more year syndrome for the past 4-5 years. It's really hard to walk away from a good salary, benefits, and perhaps a sense of purpose. You easily have the money and then some, will more be better if your decision is based on the math?
 
I have a saying - "Always take the first package".

If companies are no longer growing rapidly, they have to start cutting. Stress, workload, pay, systems and procedures, it all gets worse.

The second and subsequent packages are worse as by then the company has figured out that the high growth days that allowed them to pay $600K aren't coming back.
 
Comparable situation here. VHCOL region, high exposure to r.e., very high income, but offset by much higher burn rate.

I'm over my OMY syndrome, but I'm taking the equivalent of your option #2 so would be hypocritical for me to advise you otherwise. Do I have enough already - yes absolutely. But can't bring myself to just walk away and leave what I feel I have earned on the table. It's just not in my DNA - would feel like a loss.

Gotta say though, it's really hard to suck it up and do what you gotta do when you know the exit door is right there.

You don't say your age, which could be a key factor. All in all, I think if I were you, given your positive cash flow, I'd be more much more inclined to hit option #1.
 
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LateToFIRE said:
Comparable situation here. VHCOL region, high exposure to r.e., very high income, but offset by much higher burn rate.

I'm over my OMY syndrome, but I'm taking the equivalent of your option #2 so would be hypocritical for me to advise you otherwise. Do I have enough already - yes absolutely. But can't bring myself to just walk away and leave what I feel I have earned on the table. It's just not in my DNA - would feel like a loss.

Gotta say though, it's really hard to suck it up and do what you gotta do when you know the exit door is right there.

You don't say your age, which could be a key factor. All in all, I think if I were you, given your positive cash flow, I'd be more much more inclined to hit option #1.
Click to expand...

I'm 43, so not sure if you're saying I should maximize my youth or keep grinding b/c i'm "younger". For my selfish interest, i'm assuming the former. :) Also single, no kids.
 
refi said:
I'm 43, so not sure if you're saying I should maximize my youth or keep grinding b/c i'm "younger". For my selfish interest, i'm assuming the former. :) Also single, no kids.
Click to expand...

Lol, actually, I'd say the latter, at your age, a few more months isn't taking that much away from your lifespan unless you're just absolutely miserable. I would try to lock down a bonus guaranty though, if that's a big part of any decision to stay.
 
Hold on, I think I'm seeing how you framed the question a little better. Seems like the options are take severance vs simply work a bit longer, earn your salary & bonus thru year end and then quit (no severance).

So, lets say your salary is $400K and bonus is $200K.

In option #1 you get $100K (3 months salary, no work) and $150K (pro-rated bonus thru Sept), for a total of $250K.

In Option 2, you get $100K (salary Sept-Dec you gotta earn) and $200K bonus, for a total of $300K.

If the difference is $50K, by all means please just take the severance package.

EDIT: Oops, forgot the $60K RSU's, so dif is more like $110K in my hypothetical. Ugh, now its a harder choice, but at $6M NW and retirement expenses covered by other income streams, another $110K is simply not going to make much difference to you, take Option 1.
 
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LateToFIRE said:
Hold on, I think I'm seeing how you framed the question a little better. Seems like the options are take severance vs simply work a bit longer, earn your salary & bonus thru year end and then quit (no severance).

So, lets say your salary is $400K and bonus is $200K.

In option #1 you get $100K (3 months salary, no work) and $150K (pro-rated bonus thru Sept), for a total of $250K.

In Option 2, you get $100K (salary Sept-Dec you gotta earn) and $200K bonus, for a total of $300K.

If the difference is $50K, by all means please just take the severance package.
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Yes, This. Only $25k more bonus + $60k RSU vest + whatever I earn working those extra months + being able to get real estate loans easier. Seems like nominal value given net worth and I hate work. One other thought was to ask for six months of severance and just see what they say. Can't hurt?
 
refi said:
Yes, This. Only $25k more bonus + $60k RSU vest + whatever I earn working those extra months + being able to get real estate loans easier. Seems like nominal value given net worth and I hate work. One other thought was to ask for six months of severance and just see what they say. Can't hurt?
Click to expand...

Yes, sorry about the 1st response, I wasn't thinking about the $ difference - projecting my situation onto yours. In my case, that differential is substantially higher.

Sure, ask for extra severance - can't hurt if you frame it properly like "Hey guys, seriously considering the severance package, tempting but would be a done deal with 6 months." See what happens.
 
Seems like ER could work, but I'm not sure about your cash flow requirements. For someone taking in $600K, you're only spending $5-6K monthly, WITH insurance? Would you consider moving from your VHCOL house (or does your real estate include investment properties) and cutting that off? Usually, a $3M house has monthly expenses topping $7K, with property taxes and repairs. Are you SURE you won't want any pricey upgrades in your life (increased travel, new hobbies, etc.). You may find that you need and/or want to spend a lot more if you're no longer w#rking!
 
HI Bill said:
Seems like ER could work, but I'm not sure about your cash flow requirements. For someone taking in $600K, you're only spending $5-6K monthly, WITH insurance? Would you consider moving from your VHCOL house (or does your real estate include investment properties) and cutting that off? Usually, a $3M house has monthly expenses topping $7K, with property taxes and repairs. Are you SURE you won't want any pricey upgrades in your life (increased travel, new hobbies, etc.). You may find that you need and/or want to spend a lot more if you're no longer w#rking!
Click to expand...

I'm honestly splurging more now than I've ever had. Again, would say 7-8k if i splurge even more in FIRE? Just alone from my RE income, it's more than enough to cover. So with the equities (4% SWR = 120k more, on top of $180k rental income), there's even more buffer. Would really need to amp up the spending to get to $300k+/yr.

Real estate value includes investments; my primary has 180k left at 2.5%, it's an in-city condo, so my core living costs are pretty low. Also have paid off car.

That being said... the only thing that could change course is if I got married and had kids and had to buy that expensive home the suburbs. I've discussed this in other threads, I just can't keep worrying about what if. I'll just be saving up for the family and kids that I'll never have. Also, I think I could manage still with current assets if I went down that path.

Yes, I do get the you're only spending $5-6k/mo making $600k a lot. I do have frugal-ish/simple life tendencies.
 
Looks like either decision would work well. Depends how much you want to quit. Since your RE income covers your high end estimate of spending, and you have a good chunk of other assets, you should be golden. No spouse or kids, at this point so no need to max out net worth. Cobra is only 18 months so you would need to figure out health care to carry you to Medicare. Only you can decide, but if I were in your shoes, I'd probably go in Sept.
 
You can always find another job you may like more if you choose to. I’d take the money and run.
 
Two cents from someone stuck in OMY -- that delta from staying is nothing. You are young enough that if the situation changes and you get married and have kids, you can still easily go back into the workforce (after your "sabbatical").
 
You can't retire without leaving money on the table. The goal of FIRE is not to leave your life on the table.
 
The math says to go ASAP. Is there something else holding you? Just the "fear of the unknown" so to speak?



Cash burn vs assets says it's a no brainer to leave with #1. YMMV
 
Koolau said:
The math says to go ASAP. Is there something else holding you? Just the "fear of the unknown" so to speak?



Cash burn vs assets says it's a no brainer to leave with #1. YMMV
Click to expand...

The only things that are holding me back are: the money left on the table, the prestige of a fancy work title, and that i've worked fairly hard to get here. Obviously I can go back to work if things fail, but not sure I could get the same salary easily.

Overall, the math makes sense and I would probably much happier not working, but the above just gives me pause; my FIRE goal five years ago was like $2M + paid off house, i'm far beyond that.

I have to make a decision this week, will let you know how it goes :)
 
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