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what to do....retire at 46?
Old 01-06-2017, 11:55 AM   #1
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what to do....retire at 46?

Hi all,

I am considering retiring someplace less expensive than the Northeast. ....or perhaps a career change where money isn't a big consideration.

Recently laid off at 46, but with full pay for the rest of 2017. I'll be 47 when the severence stops. I did 25 years in corporate america.

My net worth is about 3m if you add in pre tax retirement savings.

-700k in pension lump sum (or 50k per yr at 65)
-825k in 401k (about 150k is post tax)
-125k in roth ira
-1,100 In brokerage account mostly mutual funds
-200K in equity (house worth 525k with 325k left on morthgage)

Single, no kids, light spender.

Appreciate any wisdom....
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Old 01-06-2017, 12:34 PM   #2
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No medical insurance as part of your severance package?

Subtracting the $700K lump sum for your pension, you would have about $1375K not counting house equity to take you to age 65 when your pension kicks in and $675K from your 401k.

Do you know what is your yearly expense?

Also, is your $1100K in a few stocks or it is widely diversified in index funds?
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Old 01-06-2017, 12:54 PM   #3
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Is the pension COLA'd? How strong is the plan? (Although at 50K, you are under the PBGC limit if plan fails: PBGC Maximum Insurance Benefit Level for 2016 )
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Old 01-06-2017, 01:03 PM   #4
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The benefit is fixed, so there is no cola. The plan is well funded. I think in the 90% range at the moment. The company is stable.

Taking the lump sum would allow me to diversify and hopefully increase the future benefit. ... Albeit not with ought some risk.
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Old 01-06-2017, 01:17 PM   #5
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I will not have any health coverage after 2017, so that would be an added cost. I am healthy.

My brokerage portfolio is 65 % Mutual funds....30% stocks....5% cash. The mutual funds have been on the growth side with tech sector. The stock is mostly from my former company which has a 3% div yield.

I'd like my budget to be about 5k month in today's dollars. Out of that amount, I would cover medical, dental, food, entertainment, housing, and taxes (cap gain, prop, etc). I could survive on less I think. I will grant you that this is an area I need to think about in more detail.
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Old 01-06-2017, 01:21 PM   #6
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Downsize, take a break, relax. No need to decide at your age. Can you decide later about the pension?
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Old 01-06-2017, 01:28 PM   #7
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Welcome!
I assume your 1,100 is 1,100k.
What does light spender mean to you. Without that information it is hard to say, but a SWR of 3.33% for $3M is $100k, so if your spend including taxes and healthcare is less than that I would say congratulations and enjoy.
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Old 01-06-2017, 01:46 PM   #8
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Thanks

Right. It is 1,100k.

As a light spender, I would say I buy what I need, but not always what I want.

I do need to think about this more, but here are some idea of what I am thinking

Food / entertainment .....1.5k per month
Medical dental........1.0k per month
Housing. ......1.5k per month
Taxes and other 1k per month
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Old 01-06-2017, 01:47 PM   #9
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I don't have all the paperwork on the pension yet, but I assume I will have other chances to opt for the lump sum. with interest rates low, this may be the best offer I get.
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Old 01-06-2017, 02:01 PM   #10
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Welcome and sorry to hear about your layoff. The good news is you are financially all set for this next phase if retirement is what you choose. Single with no kids could get pretty lonely without the social life that working provides. That would be my biggest concern if I was in your shoes.

Financially, I would suggest you get ahold of a good retirement calculator such as ESPlanner and find out what your assets will provide. Then adjust your living standard accordingly. BTW, are you social security eligible? That is quite a bit more for someone who may have been a relatively high earner for 20+ years. Some discard SS in the equation, but I believe that's extra, extra cautious.
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Old 01-06-2017, 02:23 PM   #11
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Do you really want to w*rk? Would you still be w*rking if it were up to you? If you want to keep w*rking, it looks like you have substantial assets so that you can wait for something worthwhile.

Retirement is a huge change in terms of lifestyle. I retired at 45 after working a couple of decades in one place. It helps to have something you want to do and be comfortable defining your own goals, not having a boss or society define them for you. You'll have a lot of time on your hands if you retire. For me it has been great, but this depends greatly on your personality and circumstances.

Your 5K/month burn would give you a very conservative 2.2% withdrawal rate even without cashing house equity and without including social security. This seems very safe even at your young age. Honestly, your biggest challenge is determining what you REALLY want to do the rest of your life. In my view, this is a good problem to have!
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Old 01-06-2017, 08:37 PM   #12
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I'd suggest tracking your spending in 2017 to get a better handle on where your money goes - I use Mint and it's great. You can link all your bank and credit card accounts.
Then estimate one-off purchases such as car, roof, etc and new expenses once severance stops (e.g. healthcare, any new hobbies) and you should be pretty close to what you'll need in retirement.
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Old 01-07-2017, 06:22 AM   #13
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Originally Posted by Golfguy1455 View Post

My brokerage portfolio is 65 % Mutual funds....30% stocks....5% cash. The mutual funds have been on the growth side with tech sector. The stock is mostly from my former company which has a 3% div yield.

.

The stock in your former company is definitely a concentration of risk, which you should consider diversifying out of, with a deliberate program.....perhaps not all at once, but over the course of a short period of time, in order to manage the tax consequences.



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Old 01-07-2017, 06:03 PM   #14
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Ummm, I would take another viewpoint on your net worth calculation.

I wouldn't include house equity in the NW calculation. A $500k home is pretty standard in most of the US so in fact I would subtract the $325K mortgage from the NW calculation.

A big percentage of your assets (lump sum, IRA) are pretax. I am sure you will manage tax consequences, but the tax won't be zero - for sake of assumption say 20%.

Taking into account the above, your real 'investable' NW may be something more like $2 million. A SWR of 3% (to account for a late 40's retirement) sounds about right yielding $60K per year spend.

$60K per year spend including health insurance sounds a little light, your mileage may vary of course.

So while I agree with the comments there is no need to rush into something, I don't believe you are financially set for the back 9 at the moment.
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Old 01-07-2017, 06:29 PM   #15
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Taking into account the above, your real 'investable' NW may be something more like $2 million.
I am not sure where you are getting $2M from his original post.

He has $1.25M ($1.1M + $ 150K post-tax 401(k)) to generate the income for him to live on until age 59 1/2.
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Old 01-07-2017, 07:14 PM   #16
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Quote:
Originally Posted by Golfguy1455 View Post
Hi all,

I am considering retiring someplace less expensive than the Northeast. ....or perhaps a career change where money isn't a big consideration.

Recently laid off at 46, but with full pay for the rest of 2017. I'll be 47 when the severence stops. I did 25 years in corporate america.

My net worth is about 3m if you add in pre tax retirement savings.

-700k in pension lump sum (or 50k per yr at 65)
-825k in 401k (about 150k is post tax)
-125k in Roth IRA
-1,100 In brokerage account mostly mutual funds
-200K in equity (house worth 525k with 325k left on morthgage)

Single, no kids, light spender.

Appreciate any wisdom....
I think you're in good shape.

I'd not count the home equity in your portfolio; leaving you a $2.75M investable portfolio if you take the pension LS. You'll have to live somewhere & will likely use that $200k to buy your next place; especially true if you want to keep your total monthly housing costs to your estimated $1.5k

Quote:
Originally Posted by Golfguy1455 View Post
The benefit is fixed, so there is no cola. The plan is well funded. I think in the 90% range at the moment. The company is stable.

Taking the lump sum would allow me to diversify and hopefully increase the future benefit. ... Albeit not with ought some risk.
I would take the lump sum. If my quick NPV calc is correct, you'd only need 3.25%/yr return on the $700k LS to come out better; a pretty easy hurdle.

Quote:
Originally Posted by NgineER View Post
Welcome!
I assume your 1,100 is 1,100k.
What does light spender mean to you. Without that information it is hard to say, but a SWR of 3.33% for $3M is $100k, so if your spend including taxes and healthcare is less than that I would say congratulations and enjoy.
A $2.75M portfolio would produce $80k/yr @ a 2.90%/yr WR, which seems a conservative enough "starting point" for a 46 yo. I say "starting point" for a couple of reasons: (1) you would have a 50yr+/- planning horizon, and that will take adjustments, financial & otherwise; (2) you don't seem to have a good handle on your expenses, and that's very important (I agree with the early post on using Mint [or another app] to track that). To understand how important knowing your expenses is, your multiplier is 400 @ a WR of 2.9%/yr. So, for every additional $1,000/mo you spend in FIRE, you will need $400k more NW to sustain it. So, get a handle on your expenses.

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Originally Posted by Yarnstormer View Post
Downsize, take a break, relax. No need to decide at your age. Can you decide later about the pension?
But, in your (excellent) financial position...what he said. Take a break, relax, take some time to decide the path for the next stage of your life.

Also, since you're a golfer, join us over @ the "Golf Talk Tuesdays" thread. I'm sure Big Hitter, gcgang & others can encourage and entertain you.
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