ER with big mortgage

[Renderdog]

Hi All,

I'm a single Government employee who may have an opportunity to take an early-out at 45, roughly a $35K/year pension. I have a house I like a lot and want to keep, so my first 10 years in retirement would be very tight (though I live very inexpensively) with a $20K yearly mortgage/taxes/insurance. After paying off the mortgage I'd be able to travel more and live comfortably.

My job isn't bad but this early-out opportunity may be the last one I'll get for 10 years so I'm considering it. I have lots of hobbies I'd like to pursue full time, including cycling and computer programming (possible income from that). Work has been good and interesting but I've been doing it for 25 years so I'm ready for a change.

So my options are 10 more years at a decent job with a pretty big payoff (full CSRS retirement) or a more relaxed lifestyle and time for hobbies and (limited by $$$) travel. I'd consider not keeping a car and riding my bicycle to save more money for travel. I currently have $100K in savings I'd try to keep as a buffer.

Finally, I grew up out west so I might consider re-locating there, but the early retirement would limit my income and options.

Thanks for any opinions,
Mark

[ag4gt]

In a nut shell, I would not take the early out. I am within 30 days of a full retirement at 55. I wanted to take an early out about 11 years ago and I am glad I did not. I even had to move because of BRAC ’93. All of the people I know that did are now working someplace else at a job that is not as good as the one the left. With a $35k income and a $20k house, you will not have much remaining. You still have to pay income taxes, med insurance etc. I would tough it out for another 10 years then take the roughly 64% and smile.

[Spanky]

Quote:

Originally Posted by Renderdog So my options are 10 more years at a decent job with a pretty big payoff (full CSRS retirement) or a more relaxed lifestyle and time for hobbies and (limited by $$$) travel. I'd consider not keeping a car and riding my bicycle to save more money for travel. I currently have $100K in savings I'd try to keep as a buffer. Finally, I grew up out west so I might consider re-locating there, but the early retirement would limit my income and options. Thanks for any opinions, Mark

Mark,
When will your mortgage end? Can you live on $15K before tax per year? If you can, go ahead and pursue your own interests. Your programming hobby could very well supplement your pension income.


With regard to wether to wait for another 10 years, it is really completely dependent on your ability to live on $35K before tax and the ability to acquire more income from other sources, e.g., programming jobs. Good luck.

Spanky

Spanky

[vic]

Why not ditch the house for something cheaper? I am not married to stuff, including a house. The choice of working for another 10 years or an early out would be easy for me. The early out and keeping the house seems almost impossible, at least if you want to eat and have some hobbies.

Or why not pick up something PT on the side, convert a hobby into some income or whatever. Early outs may be gone forever if you don't take it now.

Vicky

[unclemick]

Only you can do the POGO thing - look yourself in the mirror - time or money?

ER isn't for everyone - in fact it's probably a small minority.

I orginally planned to retire 'early at 63 - layed off at 49 - became an 'accidental ER?' Looking back - very happy it turned out that way - the time value exceeded the money value.

So ala Joeseph Cambell's 'follow your bliss' - try to take a realistic look at 'your numbers' and follow your gut instinct.

[retire@40]

If you want to keep the house, it will be much more difficult to retire at 45. *Since you only have $100K at age 45, you sound like you're using up most of your earnings as it is.

If you could sell the house, pay off the mortgage, pay cash for a smaller dwelling, and have some leftover profits from the sale to add to your savings, you may have a more comfortable retirement.

If you have had a car for your whole life, don't give it up to be able to retire. *You can use it less if you wish, but stay in your comfort zone with the basics with which you've become accustomed.

Renderdog,

My situation is almost identical to yours:* 47, single, slightly higher pension, $2k/mo mortgage and taxes, and a very high cost of living area.* *It was a difficult decision for me, but I took the VERA and will be out the door in a couple of months.* CSRS decisions are difficult, because the benefits are really sweet at age 55+.* But if you look around the board, others would kill for a fully COLA'd pension with guaranteed health benefits, and the opportunity to try something else.* I ultimately viewed it as a really, really great severance package and chance to take some risks and become alive again.

My increasingly solidifying plans call to finish fixing up the (older) house, and sell.* This will hurt somewhat but I am increasingly certain the real estate bubble will pop soon as the media reports tend to become a self-fulfilling prophesy.* I rode the last real estate bubble down the dark side and it wasn't a pleasant experience.* Then I will have one of the bigger yard sales in Boston, catch a plane for Thailand, Malaysia, or maybe South America, and figure the rest of it out later...*

(Good luck)

tozz

[Caroline]

Your question has me thinking. If you take an early out and make 35K per year, that's got to be a fair part of what your salary would be if you stayed. Put another way, if you're making 100K now, and will make 100K in the future if you don't take the 35K, won't your hourly rate go way down, as you're making only 70K more than you could have if not employed?

Is it possible to do both -- quit this job, take the early out, and get another job elsewhere that pays the same / similar? By doing that you could accelerate house payments until you were out from under the mortgage, and then retire for good.

I'm sure there's a flaw in my logic somewhere, but I'm equally sure other posters will find it for us! ;-D

Other idle thoughts included:

1. getting roommates to ease the mortgage burden,
2. renting the house and living more cheaply elsewhere until it is paid off
3. variation of 2, above -- buy a camper and travel the country for a while -- you can camp free on national forest land, BLM land, etc. and live very cheaply

I'm not likely to be offered anything but the door by my company -- the cheapskates -- but when I hear from people who have these offers I always lean toward going -- life is short and my friends are dropping like flies!

Either way, it's a nice problem to have, and good luck to you!
Caroline

[Renderdog]

Some great comments and recommendations, thanks!

The timing for me is obviously sketchy. I've always loved my work and never thought about early retirement until a few years ago, which is why I don't have much personal savings. Currently I have no debt other than the house and I actually do live on about $35K a year, so my savings rate is very high.

Pursuing my own interests is the payoff, but maybe I will have to give up too much security for it. Also, they might offer another buyout in a few years and I could retire comfortably. Right now I'm at the bottom edge of having enough money to live as I'd like. A few years at my current saving rate and the CSRS pension (going up almost $3K a year) would be ideal.

The house has several things going for it. It's in an area I love, great for cycling. I built it custom for myself, low maintenence and utility bills and it has lots of windows and nice neighbors. At 2800 square feet it's too big for me (I built it with a family in mind) but it does allow for company and family visits comfortably; the open architecture makes it mentally refreshing. I put a lot of extras that make life nice but would not return their value if sold.

Balanced against all of that is I feel like I'm spinning my wheels at work, and I think I can accomplish some "great things" if I had more time. The "take some risks and become alive again" may be my biggest driver for considering ER. I actually like the idea of riding my bike to get groceries (whether the reality would pale I don't know :-).

Since my current job is not bad and the CSRS pays so well late in the game, staying would be wise if I plan to continue working. Maybe I just need to take steps at work to make sure it's more interesting and become alive again at this job.

I really appreciate all the replies, it has sparked several lines of thought for me.

[cute fuzzy bunny]

Renderdog - I left my big mcmansion behind shortly after ER'ing, as it made the most sense. Working all day to pay for the house left empty while I'm out working made little sense to me at the time. Still does. But it sounds like there are things about it and the area you live in that make you happy. I have few regrets about my decision.

Sounds like you're at the bleeding edge...anytime I encounter such a situation it makes me nervous. Way too many things can make you cut yourself on that edge. Since you like the job and better things are ahead, I'd stick with it.

[JonnyM]

Quote:

Originally Posted by Renderdog A few years at my current saving rate and the CSRS pension (going up almost $3K a year) would be ideal.

That is indeed the decision and the potential trap of the DBP Cola'd Pension. You won't get tons of sympathy from the Invester/Savers camp.

In your place I would perform the following calculation first. You imply a special circumstance that is not an every year opportunity. Consider how much longer you'd have to work to get to the same place, i.e. the same payout as you're contemplating if there was no rare opportunity. A year, two years, and then think in terms of is it "worth" it to you in the scheme of life to work those years, plus how many extra years (at that 3K increase per year) you'd be willing to go before you'll be content.

I ask because that's a decision anyone in your position (OK our position as I'm in a similar place) has to consider. Sure there's always more Pension income for more years worked. I get about 6K more for this last year I'm working right now. After that it's about 4K per year difference. I will finish the year, but th-tha-tha that's all folks. :

[Renderdog]

I'd be happy to retire in a few years but that will probably not be an option. My agency will likely offer a (rare) optional early retirement this month but if I don't take it I'll probably have to work until I'm 55 (for an immediate annuity). The CSRS is commonly known as the "golden handcuffs."

[HFWR]

Besides the minor detail of needing quite a bit more nest-egg, the longer I stay at my current position, the more the co. will pay toward my retirement insurance benny, assuming, of course, they don't cancel it...

Goal is 2010 (which seems like an eternity).

[Dreamer]

I'm CSRS also. Our agency has been having early outs for several years now. Last year there was a rumor going around that it was going to be the last year for early outs and a few people jumped out due to that rumor. They just announced another early out and also stated that there would probably be one next year also.

I almost wish that they would quit offering them, because of the agonizing that I do over it each year. My pension would not be as high as the other CSRS pensions that people have been posting and I do still have a 16 year old at home and all that that entails. I am going to keep plugging away for now.

Good luck in your decision!

Dreamer

[Michael Moore]

Or you might get stuck when your agency offers early outs, but they pass over your division (as happened to me last Friday - what wonderful news to take into a 3 day weekend).* Don't forget that as the years go by more and more boomers will be taking regular retirement, presumably reducing the perceived need to offer EOs.

You must be a GS15 or above to be able to get $35K after 25 years with the big reduction for age 45.* If I could go this summer (and right now I'm waiting to see if current and former bosses can arrange for me to transfer into the EO side in time to meet the cutoff and go) with 29 years, age 52, and as a GS12-8 with San Francisco locality pay, I'm looking at $40-40.5K/year according to EBIS.

We had an EO two years ago that I was eligible for, but I'd have been in the $32-35K range at that time and that was just too low for me* with the lower TSP levels and much lower personal savings.* It was tempting, but not quite tempting enough.* Now I'm looking at a good likelihood (though I've not given up hope yet, but the next couple of weeks will be a rough as I'd have to be in place and file by June 30) of at least one more year and possibly having my outfit get passed over yet again, sticking me until 2008.

The extra bucks would be nice, but what I'd get if I could go now would be plenty good enough to want cut and run.

It isn't any fun to have to make the decisions when the numbers are just not quite where you want them to be.* But retiriing and taking another full time job for less money/benefits seems less worthwhile than staying where you are with the accumulated seniority.

cheers,
Michael

[sailor]

Quote:

Originally Posted by Renderdog At 2800 square feet it's too big for me (I built it with a family in mind) but it does allow for company and family visits comfortably;

If you are planning to quit your job and you are short on cash you might consider room mates.
I don't know how much is rent in your area, but here you can get about $500 per month per room mate, so if you had two of them in your house that could be another $12k per year.

[vic]

Wow, you government workers have a very high needfor lots of stability and security. $35K guaranteed + health is unbelievable

If my employer would give me $12K/year + health insurance, I would be out of the door right now - and that is obviously never going to happen. I might even settle for health insurance only. There are so many other opportunities out there. No problem to find some fluff low stress side gig to supplement it.

Vicky

[Renderdog]

For me the (happy) problem is my work is good by many measures. The only reason I'm considering ER is I'm incredibly spoiled and demanding. After leaving the government I don't want to work for anyone but myself.

[cute fuzzy bunny]

You use the name 'renderdog' on other sites? I think I may have seen you around...

You might get an appraisal of how much you could sell the house for.

Would you enjoy building a new one yourself? Build a nice small house that's very energy efficient in a place that has low expenses. You'd have lots of time to work on it.