Thinking about taking a buyout from Megacorp at 51

[GTFan]

Hi, I've been lurking here for a little over a year now, posted a few times but nothing substantial. Been humming along in life saving as much as we can, was planning on leaving Megacorp next year at age 52 but they recently announced a buyout with half a years severance pay (around $50k gross for me).

We currently have almost $1.4 mil saved up, roughly split 55% tax-deferred and 45% taxable. Our asset allocation was right at 2/3 stock 1/3 fixed income at the beginning of the year, with most of the fixed income invested in a 401k Stable Value fund (insurance contract fund). Almost all of the stock/bond investments are in low-cost broad market index mutual funds at Vanguard and Fidelity. I will also be getting a very small pension of around $200 a month starting in 2016 (was only vested 5.75 years before they shipped us off to a subsidiary with no pension). My wife also has some minimal part-time work which nets us around $10k a year.

Our current expenses are around $36k a year, not factoring in the health insurance I know we will have to buy on the exchange starting in 2015. From what I can see we can get a Bronze plan for around $700 a month without subsidies, which with the buyout is probably what will happen for 2015 because the severance payment will likely get pushed to then.

Going forward after 2015 I anticipate much lower reported income, think we can easily stay below 200% of the federal poverty level which will greatly reduce our out of pocket healthcare costs (I'm projecting $400 a month or less). And we will be getting a much better Silver plan to boot.

I think I'm ready to go and can easily manage to live within a safe 3% withdrawal rate ($42k a year) with our portfolio. We do want to travel some and I am a fiend at getting deals and stuff for everything (serious LBYM) plus we will be getting lifetime travel benefits from Megacorp.

I guess my only concern at this point is giving up that generous salary and stepping off into the new world of doing whatever I want to do. I do plan on volunteering some at our local food and clothing pantry plus I have tons of stuff to do around the house but know that won't last forever. But Megacorp makes it easy for us to stay, they treat us well and I work in a great group with not a lot of stress. I'm a software engineer and know that once I leave IT it's probably for good, there's no going back.

Thanks for letting me introduce myself, this is a great forum.

 

[omni550]

Welcome aboard, GTFan. Sounds like you're ready for launch.

omni

 

[travelover]

..........I guess my only concern at this point is giving up that generous salary and stepping off into the new world of doing whatever I want to do. I do plan on volunteering some at our local food and clothing pantry plus I have tons of stuff to do around the house but know that won't last forever........... .

Welcome. Giving up the status and the bennies is the hard part. Filling up your day is the easy part and you will laugh at this concern once you have been retired for a while.

 

[WannabeRetired]

How many years could you go paying normal living expenses, ACA health care premiums and max out-of-pocket health care expenses should a medical issue arise for one or both of you? That particular scenario is a big concern for me personally in deciding when to hang it up.

 

[GTFan]

Have you looked at the subsidies and greatly reduced max out of pocket for ACA as long as you stay below 250% of FPL? It is a very nice benefit of the law for early retirees living off of investments.

 

[courtjustshan]

Hi GTFan, I am from a similar circumstance and also spent my career in the field of I.T. I took a buyout a few weeks short of my 49th birthday. My department went downhill at the hands of a new CIO who I reported to. I decided to take an IT position at a small non-profit, so even though I work full time, it really feels like I am retired compared to what I used to do. I thought I would suggest combining IT and the non-profit world, non profits can typically benefit greatly from IT help. Its been great fun and I am a whole new person after doing this for 14 months. I plan on 'working' another 6 years and then retiring at 56. I am also planning on ACA, the silver plan as it stands today. I currently get healthcare through my wife (she works for a school district). Our yearly expenses are similar and my portfolio is also similar to yours. I did take a percentage of my portfolio and invest into a deferred income annuity just to make sure I had guaranteed income for life starting at age 60. So, my plan is to live off the consolidation of 2 houses to 1 (we will be moving to our Florida vacation home)

Anyway, thought I would pass along the suggestion of combining a passion for giving back with IT. I have been amazed at how much systems and software help that non profits need.

 

[GTFan]

Well I took the plunge, last day for the buyout offer was yesterday. After a lot of thought I decided to take it and go, looks like I'll be leaving somewhere around the end of the year.

I am so happy to have found all the great folks here that have *greatly* eased my mind while I've done so much research to see if I'm ready to leap. It's still a little weird to contemplate giving up that routine because I'm not sure exactly what all I'm going to do next, but I have a great spouse helping me along on that journey.

Time to close one door and open another one...

 

[MBAustin]

Congratulations! Glad that us folks here made it easier for you to jump in - it was the same for me. Can't believe it was 4 years ago this week that I gave notice to my boss...

 

[Live And Learn]

Congratulations on taking the plunge !

 

[robnplunder]

GTFan - seems like you are set to go. Congrats and don't forget to post how things go after you retire.

 

[MRG]

Congratulations. Sounds like your Megacorp had a good exit policy. I too left IT (29 years), about 24 were good to great, the last 5 were a nightmare.

Enjoy your new found freedom.

 

[Texas Proud]

If you had 52 as the number and they said we will pay you to leave... why wait the one year

IOW, you would work one full year for half your salary.... kinda low pay is it not And if you really want to work, see if you can get a part time job to fill in..

 

[GTFan]

I'm not waiting like I planned, I'm taking the buyout and leaving by end of this year. So I'm getting my first year of retirement paid for with the buyout (2015), which is a lot better than waiting till end of next year and getting nothing.

 

[MichaelB]

I'm not waiting like I planned, I'm taking the buyout and leaving by end of this year. So I'm getting my first year of retirement paid for with the buyout (2015), which is a lot better than waiting till end of next year and getting nothing.

Which is 2014 income. That gives you time to look at 2015 and analyze the trade-offs between converting tax-deferred to ROTH vs minimized income for ACA purposes. A few discussion here on that, but room for more, and I'm sure interest in this will continue. Good luck with the buyout.

 

[Milton]

I guess my only concern at this point is giving up that generous salary and stepping off into the new world of doing whatever I want to do. I do plan on volunteering some at our local food and clothing pantry

From a financial perspective, it doesn't sound like a huge dilemma: there is not much difference between working an extra year for $100,000 or taking the ER package and trousering $50,000 for leaving immediately. Whichever path you decide to take is unlikely to make a huge difference in your overall situation.

Re transitioning, I suggest that you consider limited volunteering (e.g., every other Sunday morning, etc.) before pulling the plug. Might as well 'try before you buy' (see immediately below).

I'm a software engineer and know that once I leave IT it's probably for good, there's no going back.

Sadly, that is the reality for so many (most?) middle-aged workers. Occasional posts on this board seem to imply that any reasonably hard-working employee with a good track record can easily change their mind post-retirement and return to work at their former occupation and salary; but in very many industries, things are not so easy.

Megacorp makes it easy for us to stay, they treat us well and I work in a great group with not a lot of stress.

That's a good gig (lucky you!). In those circumstances, I would't be in any hurry to accelerate your ER plans unless (i) you are really, really bored at work, or (ii) you really want to pursue some incredible extended travel opportunity that can't wait until next year or be accommodated within your vacation entitlement.

This is the ER forum and I don't see the point in people 'hanging on' in unhappy employment situations just to unnecessarily buttress their savings with surpluses; but if someone is essentially happy at work, there should be no shame in deciding to continue paid employment. FI are the two more important letters in FIRE, RE is optional.

 

[GTFan]

Which is 2014 income. That gives you time to look at 2015 and analyze the trade-offs between converting tax-deferred to ROTH vs minimized income for ACA purposes. A few discussion here on that, but room for more, and I'm sure interest in this will continue. Good luck with the buyout.

The severance is actually going to be 2015 income I think, since it won't get paid out until a month or so after I leave. So next year I'll be paying full boat for a Bronze plan (and probably Roth convert up to top of 15% bracket), then decide what to do for 2016 as you said.

I've seen the arguments for both and am still leaning towards subsidies and cost-sharing, mostly because I'm not that concerned about needing to give away money to good charities after RMDs kick in at 70 (to lessen the tax bill). I also don't have a lot of money in traditional IRAs now, 90% of my tax-deferred is in a 401k and I want to keep it that way for legal liability reasons. But I don't know if my Megacorp plan (run by Fidelity) offers a Roth 401k conversion option, need to check that.