Just found out I am losing my job

[paraman]

I am 55 and will be recieving an early retirement lump sum of 600,000. I need some help on what to do with it to recieve monthy income starting in the next year and the half. I can't be to risky with my choices. I am losing my job and not counting on finding one to soon.
Thanks, Paraman

 

[jIMOh]

I am 55 and will be recieving an early retirement lump sum of 600,000. I need some help on what to do with it to recieve monthy income starting in the next year and the half. I can't be to risky with my choices. I am losing my job and not counting on finding one to soon.
Thanks, Paraman

Do some reading on this site and others, focus on two things.

1) Asset allocation
2) withdraw rate.

Asset allocation is how you define how much risk you take- usually expressed in terms of % stocks and % bonds. There is more than one type of risk, the asset allocation defines how you handle most of the risks, not just one risk in particular.

Withdraw rate is how fast you can tap the money. Usually expessed in terms of % of assets. A 4% withdraw rate is a good place to start (meaning 4% of 600k is 24k per year). If you use withdraw rate to express your expenses, the calculators on this site can help you establish how long the money will last for a given asset allocation.

For example you might see things like 4% withdraw rate and a 60-40 allocation has money lasting 35 years with an 80% success rate.

4% withdraw rate and 40-60 allocation has money lasting 40 years with a 85% success rate.

Or something like that.

How much are your annual expenses?
Do you have any other savings other than the 600k severance?
Are you looking to retire, or bridge the gap until you find more employment?
Can you work part time to supplement income?
What is your SS benefit and when can you start collecting it?

 

[samclem]

You'll need to figure out your present monthly expenses, anticipated future expenses, and also look ahead to any other sources of income you may have coming later (Social Security, any other retirement or pension money from previous jobs, etc).

Look in the FAQs section of the board (here) for topics that you can use.

As a rough guide, most people here count on withdrawing from 3-4% of their nest egg each year. If history is a guide, that will allow a portfolio to last 40+ years if the investments are diversified and if they are of appropriate risk. FIRECalc can be helpful in letting you test out various allocations and seeing how your portolio would have survived in previous markets.

Good luck.

 

[MasterBlaster]

Fidelity and Vanguard have some mutual funds designed for just what you describe. Fidelity offers their "Income replacement Funds" and Vanguard offers their Managed payout funds.

 

[paraman]

retirement information

Thanks for the tips and please keep them coming. I have lots to learn in the next month or so before I get my severence.
paraman

 

[Texas Proud]

Wow.... I have not heard of anyone getting that kind of severence.... except for high level management...

Wonder if this is the auto industry Hope not since we own a lot of it...

 

[jwkde]

I am 55 and will be recieving an early retirement lump sum of 600,000.
Thanks, Paraman

I assume the lump some is taxable?

 

[Rustward]

paraman, You might consider posting an introduction Hi, I am... forum with some of your details.

Also if you surf through the forums you will likely see answers to some questions you may be having as well as other topics that have not yet occurred to you.

 

[rescueme]

Wow.... I have not heard of anyone getting that kind of severence.... except for high level management...

Wonder if this is the auto industry Hope not since we own a lot of it...

It might include all sources (both private - IRA, plus company 401k, and termination benefits).

Hopefully the OP will tell us. The amount is not out of line for a lifetime of accumulation....

 

[unclemick]

Well now - to be brutal and to the point - in deferance to the early days of this forum. 600k times 4% is 24k.

Do what it takes to get your expenses well under 24k/yr all in - AND meditate on: drum roll please - pssst Wellesley.

heh heh heh - easy peasy . Ah brings back fond memories of the early 90's when I was canned and sent out the door with maybe 250k net worth. Boy was I a cheap (and frugal) SOB - to use her words. She drew the line at no electricity or running water.

 

[ziggy29]

Wow.... I have not heard of anyone getting that kind of severence....

Sounds like it could include cashing out a DB pension with a lump sum, but I could obviously be wrong.

 

[Texas Proud]

Sounds like it could include cashing out a DB pension with a lump sum, but I could obviously be wrong.

OK... read the first post again.... and it does say an early retirement lump sum, not a severance lump sum... WHEW.... that makes more sense to me....

 

[paraman]

I have worked at Pfizer for over 30 years. The 600,000 is my retirement and my severence is 2 years pay which I will use to reduce debt. My 401 is terrible at about 144,000 so I can add that to my retirement.
Thanks,

 

[samclem]

. . . my severence is 2 years pay which I will use to reduce debt.

I recommend that you wait to pay off any debt until you've thought things through. Even that small 2 weeks of pay is "liquid" and you're probably going to need that liquidity in the short term, if nothing else than to pay the monthly bills while you figure out how to structure your finances. Paying off bills to save a few bucks in interest may not be a good idea right now.

 

[JBmadera]

best of luck! must be very tough leaving after 30 years, a lot of that going around these days.

I've spent a lot of time watching Dave Ramsey as well as reading books by Joe Dominguez and Vicki Robin - they are good resources to help figure out how/what debt to pay off and how to figure a realistic budget.

jb

 

[Amethyst]

Sorry, Paraman, it sounds like you weren't expecting this. I have 30 years in with my employer, too. If I had to go before my chosen time, I would be unhappy. If you've been reading this site, though, you've found a number of people who think 55 is way past time to retire

Meanwhile, I'm hoping the forum folks will give you advice about what to do with your 401K. It sure would be great if you are able to leave it alone, to grow/recover tax-deferred. Please read up on taxes and retirement accounts, and give a lot of thought to the best course for your particular situation.

Good luck,

Amethyst

 

[Dawg52]

I have worked at Pfizer for over 30 years. The 600,000 is my retirement and my severence is 2 years pay which I will use to reduce debt. My 401 is terrible at about 144,000 so I can add that to my retirement.
Thanks,

A good buddy of mine just got canned with Wyeth(now Pfizer). He is in his early 50's and was a regional manager. I think he got an 18 month severance deal. Not happy though, he says he needed another 5 years to be where he wanted to be financially.

 

[jIMOh]

I have worked at Pfizer for over 30 years. The 600,000 is my retirement and my severence is 2 years pay which I will use to reduce debt. My 401 is terrible at about 144,000 so I can add that to my retirement.
Thanks,

Outline the following

1) total retirement account balance
$A

1a) value of severance
$x
1b) value of 401k
$y
1c) value of any IRAs
$z

include any other assets which you can use to invest for retirement and generate income (for example if you live in a 400k house, but do not plan to sell it, then don't include that for retirement income, if you plan to sell the same 400k house and buy something cheaper for 250k, add 150k (the cash out) to the total).

Where the money is, and whether its taxable can change withdraw rates in small amounts (for example if you have $750k in a Roth IRA, you have one set of problems, if you have $750k in a 401k or tax deferred plan, you have different problems, and if you have $375k in a Roth, $375k in a 401k that is a different set of problems).


2) Outline your expenses
a) monthly budget
b) annual budget
c) other expenses (kids college, kids weddings, once in a lifetime vacation..)

3) What is most important to you
a) maintaining current standard of living
b) not having to return to work
c) living stress free
d) something else

 

[Texas Proud]

I have worked at Pfizer for over 30 years. The 600,000 is my retirement and my severence is 2 years pay which I will use to reduce debt. My 401 is terrible at about 144,000 so I can add that to my retirement.
Thanks,

Are you sure you get your severance in a lump sum? I had 7 months and they kept paying me like I worked there.

 

[ziggy29]

Sorry, Paraman, it sounds like you weren't expecting this. I have 30 years in with my employer, too. If I had to go before my chosen time, I would be unhappy.

Yeah. This is a big reason why I am an advocate of more than the usual "3-6 months" recommendation for an emergency fund and liquid savings/investments. Yes, current yields on savings suck, but they suck a lot less than getting a pink slip when you don't enough saved up. Frankly, I'm an advocate of 6-12 months in *good* times and 12-24 months in bad. It doesn't all have to be in 0.4% yielding cash; a CD ladder would work pretty well for providing a cushion of over 12 months as long as you had a chunk maturing every 3-6 months.

 

[Emeritus]

Just one thought, to add to all the great help in other posts. Be very very very careful about financial advisers and fees. I can't tell you how many horror stories I have had to deal with for colleagues in your situation. I'm talking about situations that made investing with Bernie Madoff a better deal.
I use Vanguard but there are several other equally well regarded places to "park" money until you get sorted out.

 

[DeborahB]

I am 55 and will be recieving an early retirement lump sum of 600,000. I need some help on what to do with it to recieve monthy income starting in the next year and the half. I can't be to risky with my choices. I am losing my job and not counting on finding one to soon.
Thanks, Paraman

Something I haven't seen answered: is this $600K something you can roll over into a self-directed IRA? Or is it money you are going to have to pay taxes on? That might really affect what you do with it - and how much is left after taxes. Ouch if that's the case. You also might not want it all invested with one company.

Another thing: does your severence include health insurance other than COBRA? And do you want to work again?

 

[paraman]

The 600,000 can be rolled over. I will add my 401k to it as well. I can wait ~ 1.5 years to pull any money out of retirement in the worst case. Insurance is free for 1 year after that it's going to be tough. I will work on that in the next several months to figure that out. My warning period ends on July 5 and then I will start to collect unemployment. I am going to look for some sort of job after the summer.

Again thanks so much for all your comments

 

[paraman]

Should I persure discrimination

I should of mentioned early on that I was asked if I would accept an early retirement package by my boss in order to save an younger worker. I have all the proof to back up this. Should I persue this or just move on and forget about it.
Thanks
paraman

 

[RonBoyd]

I should of mentioned early on that I was asked if I would accept an early retirement package by my boss in order to save an younger worker. I have all the proof to back up this. Should I persue this or just move on and forget about it.

This sounds suspiciously like a legal question best asked of an attorney -- preferably one specializing in labor disputes. Nevertheless, it is probably something that you should pursue -- and soon... because it may be a time-sensitive issue.