48 yr old megacorp atty - is it time to ER and move to Italy?

[forza]

Thank you to all of the posters who provide great advice on this forum...I've learned quite a bit about the psychological aspects of cutting the cord early but I would like specific opinions from like-minded folks about my situation.

My background:

- 20 years current legal experience at West Coast megacorp.
- JD/MBA.
- wife is originally from Northern Europe...all of her family is still there.
- my family is scattered around the East Coast so I don't see them regularly.
- no kids.
- currently renting a nice condo on the beach. Not into buying a $1.5M-$2M house in our area.
- $1.2M liquid investments. $ would be higher but had to pay off $200k in student loans.
- i own a 3bdr, 3bth house on the water in the Amalfi Coast between Amalfi and Positano...All paid off, no mortgage...wife and I spend nearly a month each year in Italy and know this part of Italy very well. House will be worth 500,000+ euros when we are done with improvements. Had been waiting for the Euro to get near even with the $ and found a local who had to sell.
- current pension if i left today would be $72k per year starting in 2033.
- pension increases by $4k per year for each OMY.
- can do my job in my sleep, not very challenging. Comfortable but somewhat bored.
- wife (49) wants to get back to Europe. Misses family and friends and would love to be 2 hour flight away from them.

I'm having serious thoughts about leaving in early 2017 and starting a new life in a new but familiar country. Plan would be to spend a year traveling around the country learning the language and then a few years of living in the house and traveling the world.

The problem is that $1.2M + the pension and SS$ is cutting it very close with respect to being able to fully retire. Based on what I've been reading, many people would likely continue to save another $100k/yr post-tax and stay at megacorp another 5 years to get to $1.7-$2.0M plus the house equity. Then again, we don't have kids so no expenses there.

Working against that scenario is that I'm a big believer in that we don't know when our time is up or health problems interfere with daily life. Wife is ready to go but it's tough for the type A achiever in me to hang it up even when bored and unchallenged (golden handcuffs so can't take another position in the industry). I'm worried that I'm failing myself as I have such a strong work ethic.

Tons of hobbies so I'm not worried about being bored.

I know that I could get work in the EU (won't need a work permit as I get wife's EU right to work benefit) in a few years if I get restless or need more $, but it would never be at the level I'm at right now.

If megacorp was awful (they treat me very well) or if I had another $500k liquid right now I would go tomorrow. But that's not the case and I'm really fighting giving in to a few more OMY's beyond 2016 which I'm already doing as the house remodel will take until mid-2016 to finish.

I know these are personal decisions but you are smart folks who think through similar scenarios.

Any thoughts on the multiple OMY's in my specific situation?

Thank you!

 

[aaronc879]

Are you able to figure out a good estimate of what your expenses would be in Italy? You'll have a paid off home and no kids so it's seems like you should have enough but only you can decide what "enough" is for you.

 

[forza]

Yes, Southern Italy has a lower cost of living so using the home as a base for 6 months in summer/fall with the rest of the year renting in other low cost areas (Southeast Asia, etc) would help keep the withdrawal rate at 5%. Basic healthcare would be included as part of residency. Double taxation issues will be addressed. Currency risk is a factor with the pension and SS being in $ while living expenses will be in Euros. Most executives I work with are obsessed with getting more, working through 60, not having enough, etc., so it's hard to mentally go against the collective cultural norm. That's why this forum is so helpful as it gives me another way to look at these decisions.

I think I could do it sooner rather than later...just dealing with the OMY issues and fighting the risk aversion mentality that's part of my job function.

Just wondering what experiences others have had with leaving a professional career a bit early right in the middle of the "payoff" period for all of the years of school and hard work. Did anyone have regrets?


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[chris2008]

Former legal counsel here. ERed 2 years ago at 55 when DH started to receive a pension.
I, just like you, did not suffer at work but wanted to get back more of my time and be able to draft my own schedule. No regrets.
Financially the key was for us to get a clear view at the expenses. We tracked in detail for several years. That made it easy for us to know when it was "enough".

 

[daylatedollarshort]

Most executives I work with are obsessed with getting more, working through 60, not having enough, etc., so it's hard to mentally go against the collective cultural norm. That's why this forum is so helpful as it gives me another way to look at these decisions.

I think I could do it sooner rather than later...just dealing with the OMY issues and fighting the risk aversion mentality that's part of my job function.

Just wondering what experiences others have had with leaving a professional career a bit early right in the middle of the "payoff" period for all of the years of school and hard work. Did anyone have regrets?

Part of being able to ER if you are at a high paying white collar job is being able to think different and learn to value time over money, time for areas of your life like family and friends, community service, travel, healthy living, nature, creative pursuits, pets and hobbies. That might mean a different life than TV show and advertisers view of success and probably very different than your neighbors and coworkers view of success who are still climbing the corporate ladder and into more money and more things money can buy. We're herd animals so I think some of this is normal. You have to just view the posters here and maybe other ER forums as your new herd. Although I do think living on the Almalfi coast actually would fit in most people's ideas of success, highly paid co-workers or not.

I have no idea what your expenses would be in Italy so I can't comment on what would be enough. You'd have to estimate your expenses and run the retirement calculators. If you are sure you could get employment maybe you could consider downshifting instead of retiring completely or doing some type of digital nomad type work if you are concerned about money. Personally I've never regretted going from salary to 1099 type work. I've made per hour not being on salary.

 

[MooreBonds]

- wife (49) wants to get back to Europe. Misses family and friends and would love to be 2 hour flight away from them.
...
I'm having serious thoughts about leaving in early 2017 and starting a new life in a new but familiar country. Plan would be to spend a year traveling around the country learning the language and then a few years of living in the house and traveling the world.

How often would she be visiting family? First you say that you would spend a year traveling around Italy, then a few years traveling the world. Would she be flying home monthly to visit family? Doesn't really sound like it....so then you have to ask yourself, how much of a pain is it, really, for her to spend a few extra hours flying once or twice a year currently, versus those first few years living in Italy? It doesn't really make sense to me to retire with that as a major consideration, since it sounds like it's maybe, what, 24 hours total of extra flying once or twice a year for her in the current setup?

Also, as others have noted - what is your approximate cost of living in Italy one month a year currently? Extrapolate that out, adding in EVERYTHING (utilities, insurance, vehicle, etc.) that you would be paying if living there, plus traveling around the country. Just from a gut feeling, while I could probably make do with about a $50,000+ budget traveling around Italy with my extremely low COL girlfriend, I don't know if you could maintain a 500k Euro home and do all the traveling you want (depends on lifestyle).

Consider how that pension will be lower in 18 years time due to inflation, coupled with what your unspecified plans are AFTER your years traveling around with your Italian base - will you be coming back to the US in your late 60s/70s? Where would you have assisted living care at if you need it?

And don't forget the impact of US Citizens living abroad - many forms you have to file or risk MASSIVE fines/penalties, in addition to double taxation issues.

Have your accountant prepare a rough draft tax return for last year if you lived in Italy full time and paid both US taxes on ALL investment income plus paid Italian taxes.

And most important of all - does that pension have survivor's benefits? What will your wife have to live off of if you pass on first?

Given that you could do your job in your sleep, and you recognize that you will never have as lucrative of a job now if you need to work later on, I'd strongly look at what exactly my budget (including taxes) would be while living in Italy and traveling and see how many more years you'd need to work to have a comfortable margin - especially taking into account your wife's future income if she is a widow.

 

[Mulligan]

Yes, Southern Italy has a lower cost of living so using the home as a base for 6 months in summer/fall with the rest of the year renting in other low cost areas (Southeast Asia, etc) would help keep the withdrawal rate at 5%. Basic healthcare would be included as part of residency. Double taxation issues will be addressed. Currency risk is a factor with the pension and SS being in $ while living expenses will be in Euros. Most executives I work with are obsessed with getting more, working through 60, not having enough, etc., so it's hard to mentally go against the collective cultural norm. That's why this forum is so helpful as it gives me another way to look at these decisions.

I think I could do it sooner rather than later...just dealing with the OMY issues and fighting the risk aversion mentality that's part of my job function.

Just wondering what experiences others have had with leaving a professional career a bit early right in the middle of the "payoff" period for all of the years of school and hard work. Did anyone have regrets?


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I left 7 years early from max pension payoff. I was able to shorten that chasm by purchasing 4 years, which cut the differential down to about $10k a year less than max pension (and draining my cash $100k to buy them). Regrets? No.
The key to me wasn't how much I left on the table, but how large my monthly cushion was. I do not have anywhere near your assets, but my pension is a bit higher. Plus it is just me living on it. I have a 40% monthly leftover cushion, so I felt safe. Six years later, the cushion is the same and I have no regrets leaving money on the table.
In fact, I am saving more per month now than I ever did while working, despite Obamacare really escalating my premiums. Eventually my mortgage will be paid off and then the cushion will be even larger.


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[nycboy1950]

In my humble opinion you have more than enough income and assets to live very well in Italy especially if you simply live like a local and not a tourist

Keep in mind the average monthly salary in Italy is approx 2,400 a month

Just got back from 3 months traveling in Italy and throughout Europe so I think I can offer some sound advice

Consider part time retirement in Italy not full time as you will at some point miss American Culture i.e. a baseball or football game American cuisine tv etc

Think part time retirement in Italy would be wonderful and sort of the best of both worlds

Ken


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[traineeinvestor]

Another lawyer chipping in.

Sounds like you have a great retirement plan but, as others have pointed out, you need to get a handle on the expenses - especially with all the travel you have planned. Have you been tracking your expenses and done a budget to adjust historical outgoings for what you expect to be doing once you leave the corporate reservation?

Given that (1) your pension and assets are in USD and a significant part of your expenses will be in EUR and (ii) you didn't mention inflation indexing on your pension, I suggest taking a very conservative approach to estimating expenses. Once you leave it could be very hard to go back.

 

[TallTim]

Another recovering corp counsel here ...

Based on your post, I strongly second the comments of others to scrutinize and model your expenses including the double taxation items (even if it nets to $0, you need to pay an accountant to sort it out for you), as well as the costs and hassle of being a US national living and banking abroad (and also possibly in US); it's a real pain post 9/11 and the Patriot Act, etc. Once you've got that down, then use the online calculators to get a better read (Firecalc, etc.).

As to regrets leaving the corp legal world at what ought to be peak earning years, I have none at all about 5-6 months into it so far after leaving at age 48 from a public company GC job.

We had a very good handle on expenses from years of Quicken/Quickbooks data, a good cushion in the underlying numbers and a couple of contingency/back-up plans in case things get too close for comfort.

Based on my experiences working and living in Europe, you've probably got enough depending on the kind of lifestyle you want to set up and maintain; only you can (and spouse/partner) can really assess that.

 

[Ian S]

One thing not mentioned so far is how much you are capable of saving in your current situation. If you're able to save $50K a year, then a few more years of doing so will get you to a more comfortable financial situation in which to retire: significantly higher pension, more savings, and fewer years to live off those savings before the pension/SS kick in. However if you're only saving $5K a year then clearly that won't help much.

Others have given good advice as to getting the best possible handle on what your expenses in Italy would be. A little more effort in that regard and you'll be in a far better position to decide.

 

[StuckinCT]

One option would be to leave the $1.2 alone, reinvest the dividends and interest, and live on supplemental income in Italy- you mentioned you could find work there. I think the pension is an excellent cornerstone but depending on your expenses and potential healthcare costs down the road, you might feel more comfortable letting the liquid assets compound for say 10 years, potentially doubling in value.

 

[daylatedollarshort]

For a starting point on your expenses, this OECD Index may be helpful:

OECD Better Life Index

We have considered doing something similar, also are able to settle and work in the EU and have family there. But in our case we do have a house we like here and adult children born and raised in the U.S., so at least for now we've decided to stay in the U.S. for our semi-ER. It is a tempting choice though. In your shoes I would certainly consider moving if financially the numbers work out for you.

 

[forza]

Many thanks to everyone for such great advice and follow-up questions for me to work through. I'm gathering information (e.g., I have a journal of expenses/costs of goods and services from my past trips to Puglia, Sicily, Calabria and the Naples region of Southern Italy where the house is located) and will speak with my Italy based attorney about a few open issues. I will put together another round of questions/answers shortly. This is all very helpul.


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[Closet_Gamer]

+1 on sorting out expenses

With that great pension you've got flexibility. I would point out that if OMY gets you another $4k/yr in payout, that's the equivalent of saving $100k/yr under the 4% rule. Pretty sweet. Not sure about current savings rate, but given your comments about the job and your lifestyle I would be surprised if you can't pound money away on an after tax basis as well. The $1.2M in assets just gives me pause at a gut level. Another 1-2 years could go a long way to feathering that nest a bit more.

One person's opinion. Good luck and congrats on being in a spot with great choices.

 

[WestLake]

48 is still young. Having been to Europe many times (having house in Amalfi is sweet) I would put in the five more years and be more comfortable. There are many places to go and hang out over there, and many are not cheap. Amalfi is gorgeous but it could get a bit boring at times when there is so much not so far away.


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[sailor]

As a plan B, do you think your could do your current job remotely, from Italy? maybe part time?

 

[Totoro]

Keep in mind the average monthly salary in Italy is approx 2,400 a month

You mean gross right?

In Napels it's 800 euros disposable income net roughly (<900 USD). Rome is 1,600 USD a month.

Not that it has any bearing on the OP situation.