Update re: High-Paying Job Hoping to Retire in 2016

[Texan1636]

A couple of years ago, I started a thread (link below) about my hopes of retiring no later than the end of 2016, in my early 50's. In that post, I described that I am in a very high paying (but stressful) occupation. I explained that I thought my organization's management was about to start cutting my compensation, to make more room to increase pay for the slightly younger people nipping at my heels. I explained the struggle I was going through as to whether it was worth it to stay through 2016 and risking the hit to my pride of my colleagues knowing my compensation has been reduced, if that happens, as opposed to quitting earlier with somewhat less $ than hoped. I was hoping to retire with around $8 million of investment assets if I stuck it out through 2016. Various folks on the forum gave me helpful input.

About a year ago, I updated the thread. In the update, I explained that my compensation had not been cut (to that point) and that I was feeling better about holding on until the end of 2016.


As a further update, there has been a bit of a twist that I didn't expect. A couple of months ago, I told my organization's management that I wanted to retire on 12/31/16. However, management doesn't want me to leave so soon. They were honest that my compensation will likely be cut for 2017 (by about 10%) but they said that there is no precedent in our organization for treating someone as young as I am as a "retiree" (as opposed to someone who merely "quit"). The distinction is that retirees by custom have been allowed to continue, at the retiree's full cost, to participate in health coverage that otherwise is available to folks who are still working. There is no contractual requirement that the organization continue coverage for retirees, but they generally have done it, including for people only a couple of years older than myself. There doesn't seem to be an example of somebody calling it quits, as opposed to leaving for another job, at exactly my age.


The organization would like me to stick around longer (preferably at least 2 years), in exchange for guaranteeing that I would have "retiree" status at that time. The claim is that they don't want to create a precedent for continuing health coverage for people in their early 50's - they would like to keep the custom at closer to mid-50's so that people in their early 50's or younger may be more reluctant to bail out at that age. Also, while I am not critical to the organization, I think they believe there could be some disruption in certain client relationships whenever I leave, though I think those could be minimized.

I don't think I have it in me to work two more years unless I REALLY need to do so, but our options locally for privately purchased health coverage are pretty bad; a number of insurers have pulled out of the local market in the state and the only offered options are for HMOs or Exclusive Provider Organizations (zero coverage if you go outside the network). The local hospital we would most want to use is not on the plans that are offered, and our main doctors are not on the plans that are offered.

One possibility is that I stick it out for a shorter period in 2017 (maybe 6 months) and simply use the pay for that period (which would be high six figures for the six months, before taxes) to create a "healthcare fund" and understand that this pot of several hundred thousand dollars is set aside to pay for care that we may not be covered by the crappy insurance we can get in the individual market. In a way, I see it as a form of self-insurance. That amount of money may not be enough to cover, say, an expensive bone marrow transplant at a national cancer center, but it could cover quite a bit. Plus, we do have substantial assets otherwise and certainly could use up some of those assets (and cut other spending) if needed.

If others have thoughts about this, I would appreciate hearing them. Should I just buckle down and work a couple more years even though I really don't want to do so, and accept the hit to my ego of my colleagues knowing that my pay is being cut (which they all will know)? Or, given that we expect to have a high 7-figure portfolio without counting the healthcare fund, is it a reasonable decision to take the risk of trying to partially self-insure as I've described above?

Thanks in advance!

http://www.early-retirement.org/foru...6-a-73745.html

[Senator]

Buy your own insurance until you hit "their age", likely 55. It will not be that much.

[2017ish]

You weren't counting on the health insurance before (or at least didn't mention it). Why do so now? Has the situation in the TX private market changed that much? Have you inquired into non-exchange private insurance? Those networks tend to be better.

Compare yourself to our situation: We are quitting next summer at 57/56 with roughly half your portfolio and tentative spending plans of 4.5% of portfolio as of each 12/31 market close. Vast majority of spending will be for travel.

We have no retiree health insurance (doctor/lawyer jobs) and our insurance market (TN) is terrible. We've soft budgeted 2500 a month for medical--our highest non-travel item by far (subject to Roth conversion costs). Our thoughts are that if a true health disaster hits that mandates big out of pocket spending, our travel budget for that year and the next would go down precipitously anyway, and we could shift it over to medical.

Has your portfolio passed 8mill? If so, just sequester the excess into the same type of pool you are considering if you keep working. Alternatively, maybe consider what other spending could shift if you needed, for example, bone marrow transplant.

P.S.--I am in commercial litigation and have a pretty good idea of the type (and maybe the name) of firm that you are with. No wonder they are shocked that you are leaving. :-)

[pb4uski]

If you have an $8 million nut then you can probably do whatever you want.

Is it an option for you to downshift to part-time, focus mostly on maintaining client relationships and let the younger partners do the heavy lifting? I did something similar... I downshifted to 80% and then to 50% and was in a subject matter expert role. Other partners led the projects, but I was one of the guys at the table with some gray hairs and experience.

None of my clients knew I was only part time since we all worked on multiple clients anyway.... at least until one of our clients had a big acquisition and wanted me on their project full-time for the filing... we worked out that I upshifted to 80% for the 9 months and then downshifted back to 50%... a win-win for everyone.

I was in a situation similar to you in that I would have had to hang in for many more years than I wanted to to become a retiree... so I just quit.

[RockyMtn]

I was in a similar situation as you (age/assets) and I was able to "pre retire" at age 51 by transitioning from full time to part time and still retain my benefits as an "advisor" to the company.

Nice way for them to get a non compete, even though I was not planning to work again. My plan all along was to get to 55 and the retiree health. Also allowed me to pad the pension, 401k and have some remaining options vest. In the beginning I lived off the salary, which was significantly more than my retirement budget. In the last couple of years it was not enough to live off but it was close. I also had the right to do other work if it was not competitive to what they were doing.

The interesting thing was that they never really used me for much after the first year or so. Phone calls/assignments were fewer and fewer each year. Finally, after 6 1/2 years they cut me off! The last two years the only time they called was to discuss the deal for the next year.

My first three years were guaranteed. Then I asked for a two year deal to get me to the 55 for retiree health. They kept lowering my annual pay as they too realized they were using me less and less. In the end I was fine with that as I was going to more than make up for it with options, retiree health, pension, etc.

You might try and set up something similar in your situation. Wish you the best of luck. Yes, the money is nice but not dealing with all of the BS and having time to one's self is even nicer!

[Texan1636]

2017ish,

I didn't mention health insurance in my prior posts, but I had assumed (naively) that I would get the same treatment as people of similar (but not identical) age who have called it quits in the past. Also, I assumed that the available individual market coverage would be better than it is. We now have had a broker do an analysis of the available coverage (including off the exchange) and it's not a pretty picture in terms of hospitals and doctors on the networks.

Your perspective from your situation is helpful - thanks. Like you, a big piece of our planned spending is for travel, and I agree that we could cut that back substantially to pay for health needs in a given year if that became necessary.

The portfolio would be a bit over $8 million at 12/31/16 if the market stays where it is now, but it isn't significantly over $8 million due to the fact that we unexpectedly needed to put a chunk of money aside last year to cover a long-term care need that developed for a parent.

[Texan1636]

Also, in response to posts by pb4uski and RockyMtn, I may see about exploring some sort of nominal "part time" or "consulting" position if it would mean they would let me keep the insurance, but I don't think it would work to try to go 50% time (or anything like that), as I think it's all or nothing in terms of client demands. I don't know if the organization will have an incentive to work with me on a nominal/consulting arrangement, given that it sounds like they want to discourage people from retiring in their early 50's or earlier.

[RockyMtn]

Quote:

Originally Posted by Texan1636 Also, in response to posts by pb4uski and RockyMtn, I may see about exploring some sort of nominal "part time" or "consulting" position if it would mean they would let me keep the insurance, but I don't think it would work to try to go 50% time (or anything like that), as I think it's all or nothing in terms of client demands. I don't know if the organization will have an incentive to work with me on a nominal/consulting arrangement, given that it sounds like they want to discourage people from retiring in their early 50's or earlier.

I'm convinced that one of the reason's that I got away with it is that it created a nice precedence for some of them to take advantage of down the road. Might want to use that approach!

[Lakewood90712]

It's time to go.

You have given them ample notice. If they want to be C.S about insurance that will cost them $ 0 , all the more reason.

You have ample resources to ride out whatever happens to your private insur. rates until you qualify for medicare. Advise to get some sort of coverage, don't go bare.

[Katiek]

Given your assets, I think you could choose whatever you wanted. However, I'd definitely try to explore some option to make work more palatable if you decide to stick around. They want to cut your pay but they also want to incent you to stick around longer? Then they should find some way to make it more enjoyable /less stressful for you. Consider if someone else could assume some responsibility to that you could go parttime, or maybe longer vacations so that you could take longer after a project completes?

[2017ish]

Quote:

Originally Posted by Texan1636 ... I don't think it would work to try to go 50% time (or anything like that), as I think it's all or nothing in terms of client demands. ....

I agree. First time a TRO/Preliminary injunction (or similar situation) rears its head for one of your clients, "half time" be damned. You'd still need to do 7 day weeks.

[cathy63]

Regarding insurance -- you would have COBRA for 18 months, which gives you some time to figure out other options. A lot may change with ACA in the next couple of years.

If the hospitals/doctors you want to use are not available on either the exchange or off-exchange plans, I have to wonder where they're getting their customers. Are they limiting their patients to corporate group plans? If that's the case, could you establish a corporation to do consulting and have your "company" purchase a group plan to provide insurance to its "employee"? I have no idea if that's even possible, just an idea.

[eastnortheast]

There is also no guarantee that retiree health care will still be there in 2, 5, 10, etc. years. Would not surprise me that this benefits would get taken away future. Plan your retirement based on the fact that you will have to provide your own insurance.

If having to provide your own insurance is really the tipping point (though based on your assests and expected spend, it would seem somewhat doubtful), then stay at your job. If it is a "nice to have" but not a deal breaker, then the choice should be easy.

[kimcdougc]

Seems like you have enough assets to take care of whatever may come up. Do Cobra for 18 months and re-evaluate then. You can not get back the time you might have had if you choose to continue to work. Life is short. Good luck with your decision.

[brucethebroker]

When I considered taking "early SS" at 62, I looked at all the math and advice from the talking heads and "experts", who promote not taking it until 66, or even 70. Then I asked myself, "what if you knew you would die in the next few years? Would you really want to keep working during that time?"

Personally, that was the most important question. You might want to consider the same.

[broadway]

Whether one is married or not makes a difference when deciding to take SS early or not.

Since I am not, I am going to take SS early.

I have a meager pension of $200/month at age 55 or $400/month at age 65.

If I started taking the pension at age 55, I would accrue $24,000 to age 65.
If I started taking the pension at age 65, I would have to live to age 70 to break even on the $24,000.
If I die at age 65 and had started taking the pension early, I would have $24,000 for my heirs versus 0 for the other path.
Of course, if I live to age 70+, then taking the pension later makes the most sense.
The problem is we don't know when we are going to die.

[Bryan Barnfellow]

Texan,
One thing to consider: how carved in granite is this commitment to retiree health benefits? Companies merge/get bought out and sometimes, as you know, these things are put on the chopping block. So, factor that in. That said, if it were I, I would seriously consider their offer (in writing, using the CEO's blood). Those months can go by quickly and you would still be very young and in better financial shape than even now.

-BB

[Tallman4123]

I would check your Summary Plan Document (SPD).

Your firm's approach to offering health insurance to "retirees" at what seems to be an undefined and arbitrary age is legal, but dangerous practice. There should be a written policy in the SPD that specifically details the circumstances (age and/or years of service) under which a retiree would be offered coverage.

Without such a written policy, there are usually contractual restraints imposed by insurance companies that would only allow coverage if it is offered to ALL retirees and if the employer pays a significant percentage (normally at least 50%) of the annual premium. This protects the insurance companies from adverse selection; particularly in a fully-insured plan.

I don't know how hard you are willing to push back on the fact that they're balking at offering you coverage solely based on your retirement age, but without a written policy, you may be in a position to put some pressure on them.

[Texan1636]

As a final update, my organization has agreed that I can retire on 12/31/16 and be treated as a retiree for medical insurance and other purposes! I will make myself available as needed for a few weeks to consult and insure smooth transition of matters on which I've been working.

Thanks for all the input!

[2017ish]

Excellent!

Now to discover life on the other side of full-time++ law.