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-   -   Pull the Plug at 47? (https://www.early-retirement.org/forums/f26/pull-the-plug-at-47-a-16287.html)

tozz 03-29-2005 06:53 AM

Pull the Plug at 47?
Hey folks. I just stumbled across this forum and have spent a few hours poring over the posts.

I have been offered a COLA'd "Early-out" pension and need to make my decision within a couple of weeks. I never thought this decision would be so difficult. For years now, it has been an unquestioned fact that I would bail at the first opportunity. Now I am getting cold feet: Someone, anyone, speak wisdom to me!

Here is a little background: 47 years old, single. Pension would be $45K annually with inflation adjustments. Health insurance is included. I have approximately $100K in a TSP (401K) account. I have about $250K equity in my home, but a fat mortgage. My hobbies are not expensive, and though I travel quite a bit, I am a frugal traveler and tend to steer towards the less expensive destinations. Although it would hurt, I would consider getting rid of my auto since public transportation and by-the-hour car rentals are fairly good here, and the auto insurance in my neighborhood is outrageous ($4000+/yr).

I do live in an expensive area and am not particularly flexible about moving, though I could downsize a bit home-wise.

What questions should I be asking myself? After taking some time off (perhaps a year), I plan to return to some form of work albeit with a more flexible schedule.

I suspect this forum gets zillions of vague inquiries like this, but I figured I would go to the experts.

brewer12345 03-29-2005 07:17 AM

Re: Pull the Plug at 47?
A few things occur to me:

- What is your expense base like? Could you live on 45k a year and be happy? If not, what could you cange that would get you there, either by reducing expenses or increasing income?

- How sure are you that the healthcare insurance will be there for the long run? An awful lot of retirees have been surprised by former employers getting into trouble and dropping retiree coverage.

- I know you say you don't want to move, but carrying a big mortgage isn't likely to work. Downsizing might work. What is even more likely to work is relocating. $250k will buy you a very nice place in a large number of pleasant places to live. I would suggest investigating some alternatives here. If you have to stay where you are, get ready to find another job.

Nords 03-29-2005 07:47 AM

You're not pulling the plug...
... you're plugging into a better deal!

Before we look at the numbers, think about it this way-- if you don't take this offer, will you spend the rest of your life wondering "What if?" Since you don't have to support spouse/kids and if you're considering returning to the workforce anyway, then there's nothing wrong with an extended sabbatical. It might even turn into a permanent one.

Once you're not tied to the workplace (and all the commuting overhead) you'll be able to get enough sleep, relax from the stress, and take a more objective look at your situation. There are several books recommended by this board on ER lifestyles and finances, among them Ernie Zelinski's "How to Retire Happy, Wild, & Free" and Bernstein's "Four Pillars of Investing". Both are worth a read when you have plenty of spare time to think.

With only $100K of your "own" savings (plus home equity), it sounds like you're even more employer-dependent than us retired military. Correct me if I'm wrong, but if you're carrying a TSP then I'm going to presume that your $45K/year and your healthcare are coming from the U.S. govt. If that's the case then you probably don't have to worry about losing pension or healthcare coverage. (If your pension & healthcare are being paid by ANYONE else then I'd be extremely reluctant to make the leap without additional savings. Look at the steel, airline, & auto pensioners.)

Even with coverage on inflation & healthcare, you still might not have enough savings to cover expenses. You haven't said how much of your income will be consumed by mortgage payments. We're carrying a retirement mortgage too but it's only 70% of my pension and we have savings to pay it off if necessary. How important is the home to your lifestyle? More to the point, is there a cheaper home somewhere else that's an even better fit? An extended sabbatical will give you the time to do the research.

Concur with getting rid of the car-- next to the mortgage it'll make the biggest difference in your expenses. Even if you're renting limos to buy your groceries you'll come out ahead.

The TSP is one of the lowest-cost index funds around, and I believe it has different withdrawal terms than the traditional 401(k). You'll want to know all the ways to withdraw TSP money before age 59.5 before you consider whether to roll it over to your own IRA. I'd leave it there for now.

playaman 03-29-2005 11:02 AM

Re: Pull the Plug at 47?
Tozz -- Take the offer and move on with your life.

With health insurance and a low-but-livable amount of money coming in monthly you are well poised to decide how best to build for the future. The advice in the above posting is sound.


ER@40 03-29-2005 01:44 PM

Re: Pull the Plug at 47?
Without knowing all the details it still sounds like enough $. Go for it - Tomorrow is promised to no one.

yakers 03-29-2005 02:12 PM

Re: Pull the Plug at 47?
If I were in your position I would go for it. I like my job and I am supporting my family and I am still planning on how soon I can transition on to things I would rather be doing. I may have a buyout offer in 2006 and I would take it. I have saved enough, would get enough CSRS pension and have medical coverage. Key issue, for me, is last son is currently in high school and I want to be more sure about college costs. But if I get the buyout I will take it. If costs look a bit too much after a couple years I can work a little.

With your pension and medical coverage you can go and try it and see how it all works. Then if you find you need more money or find some work you really want to do you can do that for a while. Just my 2 cents but you have the elements I would find adequate to try retirement.

tozz 03-30-2005 06:51 AM

Does everyone make decisions like this?!
One day I will be in a "bail now!" frame of mind; the very next day I will ask myself, "are you crazy?!?"

Thanks for all the great comments. Rather than answer some of the specific questions above, I will attempt to simplify my two options.

I would be receiving the older Civil Service retirement, not the newer Federal Employees retirement. Medical benefits are reasonably well assured since Congress if covered by the same system. My options are to retire now at 47, or wait until the first "sweet spot" in the pension vs. years equation at age 55.

Yearly gross if I retire now will be $46,000, which represents 40% of my current salary. If I wait until age 55, I will receive the equivalent of $73,000 in today's dollars. I have always invested the maximum in the Thrift Savings Plan (401K), but individuals under my retirement plan were significantly constrained in the amount they can contribute. So the $100K will remain in the TSP until I can withdraw it without penalty in my late 50's. This will be contingency money. I am not eligible for Social Security.

I am "over-housed" in a large turn of the century home, and though it would kill me, could probably resign myself to something less expensive. If I took this tack, I would sell the house now, rent for a couple of years or however long it takes for the local real estate bubble to burst, then buy a humbler place outright.

Though single now, I assume this will not always be the case. However, that could cut either way financially so I consider that a wash.

My heart says "go now!" Do something different. Life is too short. I have never been particularly materialistic (though I do somehow manage to blow whatever I earn) and feel pretty well assured that I can shrink my expenses to fit my income. I would eventually return to work after some time off, but that is a whole seperate topic.

However, then my left brain kicks in and tells me to play it safe and stick around until 55. I will receive a great livable pension--so good that it has locked me into my job thus far. I am fairly compensated for my work, and my main complaints are not unsimilar to the indignities suffered from anyone who has prostituted themselves to a large organization for 25 years. And if I retire now, what am I going to whine about???

I've been wobbling back and forth like this for almost a month now. Make it all stop! Help.

yakers 03-30-2005 10:23 AM

Re: Pull the Plug at 47?
tozz said in part: My heart says "go now!" Do something different. Life is too short. I have never been particularly materialistic

I can only say that if I applied my values and personality to your situation (which I can understand because my CSRS and TSP are about where yours are) I would go because of what you said above. And I like my job. But I can get satisfaction in the same subject area without full time employment. IMHO you may be in a "perfect storm" situation WRT real estate. You can actually sell now, rent and be mobile, and buy again when the market adjusts or if you move. I have a wife & one son left in high school so I can not make such a move right now, but if the buyout comes next year I will take it when my son would be finishing his third year of HS. I do have some concern about his college costs but have saved a bit for that. I would LOVE to sell my Southern California mansion (just kidding, 1,000 SQ FT house) and rent but it is too much change when my wife is retiring next year and my son will be done with HS in 2 1/2 years, a natural transition time.
But this looks, IMHO, like a good transition time for you.

Actually you can't lose either way (unless you get hit by the proverial car crossing the road) but you CAN go financially so it is up to where your heart lies.

tozz 03-31-2005 06:40 AM

Re: Pull the Plug at 47?
Thanks, yakkers. I suppose, given the forum emphasis, I should have known that everyone would suggest that I take the early retirement. My only reservation is that I would get the best bang for the buck at 55 or later due to the under-55 age penalty. But that doesn't mean much if I get hit by a car in a couple of years....

Thanks again, everyone. I'm leaning towards taking the ER. However, I'll check in in a week and let you know if I bailed or wimped out!

azanon 03-31-2005 06:42 AM

Re: Pull the Plug at 47?
Going on only what you told me, you're not financially ready yet. * Not so much because you don't have enough income to sustain "some" kind of life, but because you don't have enough income to sustain the kind of live you're living atm for your potential retirement lifespan. *So i recommend keep saving and maybe take another look 5 years from now (52 would still be plenty "early" by a generalized standard). *The "average" person here falls slightly on the recklass side, financially speaking.

Perhaps try to at least eliminate that mortgage before pulling the plug?


(edit) I'm an ER girlie man tozz, thus my response. I dont much care for work. But I hate worrying (about pontentially not having enough money) even more.

laurence 03-31-2005 06:56 AM

Re: Pull the Plug at 47?
I agree, you want your mandatory expenses lower, get rid of that mortgage if you can, that way if you have a "down" year you can batten the hatches. The mortgage company won't care if your portfolio is underperforming, but you can always skip the trip to Cancun.

JonnyM 03-31-2005 07:05 AM

Re: Pull the Plug at 47?
I take that offer in a heartbeat.

I'm in a somewhat similar position (without the way-cool offer) working almost 22 years for just one Government Agency. I'm not as high up the good chain, nor did I start at such an early age, so my payout when I pull the plug next year will not be quite as attractive as your offer.

Having paid medical is HUGE, ask anyone on this board that doesn't have it, and they'll tell you it's the major concern for ER's. We've got that covered, so one potentially devistating unknown future expense is removed from the equation.

That is way too good an offer to turn down. All your other issues are just details to be worked out, and you'll have the "time" to do that. Go for it.

grumpy 03-31-2005 07:55 AM

Re: Pull the Plug at 47?

I think you should take the early out. Think of it this way:

If you take the immediate (lower) pension and then work somewhere else for the next eight years, how much more will you pull in (combined pension and job) over that period than if you had stayed in the civil service? Now divide that amount by the difference in the pension amounts. That will give you the number of years you would have to collect the higher pension amount to break even. I suspect that the answer will be at least 10 years or maybe even twenty (depending on how much you think you can earn in an "outside" job). Since you never know how long you will live, I say "take the money and run".

If the combined total of pension and outside earnings are greater than your living expenses, you can sock away a substantial amount to grow over 8 additional years. Or, alternatively, you may find (as I did) that working just part time gave me more than enough money and also gave me time to enjoy a more relaxed life style. This also made the eventual transition to full retirement at age 57 very smooth.


Caroline 03-31-2005 09:57 AM

Re: Pull the Plug at 47?
Greetings, Tozz:

I'm a year older than you and my immediate response to your question was "if I had that fat pension and guaranteed healthcare, I'd be gone in a heartbeat."

After thinking about it a little further, however, I'm not so sure. I notice that your post and the valuable replies you've gotten have all involved the financial side of the equation. I know how important that is -- I've got a nice set of financial spreadsheets covering my own situation.

But when I sit down and focus on what I'd be doing INSTEAD of work, I have trouble imagining it. Or put another way, I have trouble being sure that the huge number of things I'd like to do could be accomplished with my income fixed from here on forward. (Example, I traveled to Africa this January -- climbed Mt. Kilimanjaro and went on safari. It was expensive, but worth EVERY penny, and every minute I had to work to earn every penny!)

I guess I'd be more willing to bail out with a small but reliable income if I knew that what I was jumping INTO would be covered.

You mention inexpensive hobbies and traveling, but also say you think about leaving the job "to do something else." I wonder if you spent some time (next week, for example) thinking about that "something else" instead of going over the finances again, it might help. If you asked about the "what am I going to do with all that lovely time?" side, that might help to make the decision for you.

My own plan has been to move to part-time work to maintain income / continue to save, while having enough time to REALLY examine the "what will I do... " and "how much will it cost?" questions. I'm hoping that the answers might make it easier to jump when I finally do it.

Either way, the VERY best of luck to you! I can sympathise with the struggle you're having but I'm pretty sure you'll do the right thing, whatever that turns out to be!


ER@40 03-31-2005 08:29 PM

Re: Does everyone make decisions like this?!

I've been wobbling back and forth like this for almost a month now. *Make it all stop! *Help.
Seems pertinent to ask, are the numbers stated - net or gross with regards to tax?

Has your job ever kept you from doing something you ever wanted to do? Maybe its Art based? . . Write a book, film script, make an independent movie or album, learn an instrument, act, paint a picture?

I would desperately try and identity some niggling unfulfilled goal, even if you have to regress back to childhood to find it. Hopefully you will find something in there to focus on, and progress to finding an outlet to explore it, even just start with an evening course perhaps, and try to focus on that instead.

Its tragic, how few people ever get to close to their childhood dreams because they never manage to free themselves from the shackles of work or debt or fear of either, or they just go with the flow too much. Do you have a passion for anything in particular, you haven't indicated whether or not you like your job?

MRGALT2U 04-01-2005 05:02 AM

Re: Pull the Plug at 47?
I would "take the offer in a heartbeat" also.

It's interesting that I frequently strain my brain
to the max over seemingly mundane stuff and then
second-guess myself mercilessly. However, the ER
idea hit like a thunderbolt. An epiphany if there ever was one. Certainly one of the biggest decisions of my life and never had a doubt about it's correctness.
Still don't.


bruce1 04-02-2005 04:18 AM

Re: Pull the Plug at 47?
As Chilliwack sang in the early 70's gone gone gone.

tozz 04-06-2005 12:01 PM

gurgle, gurgle, glug, glug...
Hey folks,

I didn't respond earlier because this was starting to feel pretty self-indulgent. However, I greatly appreciate all the responses.

Caroline made a great point about most of the responses (and certainly my cryptic description of my situation) concentrating mainly on the finances. For the respondees, this is understandable. More than understandable, it is probably unavoidable given the amount of information I am able to put forth in a couple of messages for folks to dissect. For myself, this "financial" focus is probably something akin to my behavior when confronted with a grave illness. I will go into left-brain mode, learning minutae about the disease, managing health care options, exploring alternatives, and generally revert to a decision making busy-body. Realistically, though, this is probably an avoidance response to the greater emotional reality--the possibility of losing a loved one.

Now, obviously, taking a retirement package is quite different than my example above. But the reaction is similar--concentrating on number-crunching. The long and the short of it is that I can certainly survive (if need be) on my annuity, even in a very high cost living area such as Boston. There will be some serious belt-tightening including the possibility of selling my home, or even going car-less (not as daunting as it sounds given public transportation here, and easy access by-the-hour car rental services). But this can be done.

The bigger question, which Caroline and ER@40 zeroed on on, is "what next?" It's unsettling (but exciting) feeling this way again. Once again I am 19 years old. It feels like my zig-zag college major choices--philosophy to mechanical engineering to economics to an accidental but reasonably successful 25 year career. I have several options that I'm playing with, with the usual satisfying vs. $$ return compromises, but certainly don't claim to have a clear direction. But that will come. And enough navel gazing for now...

Anyhooooow. I accepted the offer, and have to be out the door within a few months.

Making the decision was tremendously more difficult than I ever imagined it would be. However, I finally got down to viewing it as leaving a job that I don't love, nor do I hate. But I have "done" it, and want to move onto something else for the latter half or third of my life. And rather than view the early retirement offer as an annuity, I just view it as a well overdue change with a really, really great severence package.

You've all been a great help. Thanks again!

uncledrz 04-06-2005 02:11 PM

Re: Pull the Plug at 47?
Great. Sounds exciting. Life is meant to be lived!

ER@40 04-06-2005 02:53 PM

Re: gurgle, gurgle, glug, glug...

do I hate. *But I have "done" it,
Congrats and good luck!

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