Help with a 3 year exit plan

[anothercog]

I have my sights on joining all you fine people in retirement in 3 years. Though this past Monday I was telling my wife I should just quit now but she said I should stay for 3 more years until the youngest is off to college. So 3 more years it is. So that will put me at 58/59 when I go.

With any luck I'll be given a voluntary separation offer in the next 3 years. This would give me 1-2 years of cash for expenses plus a bit of a healthcare subsidy.

But lets assume no package and leaving anyway.

FireCalc says I'm good. I know my spending and what I would like to spend in retirement with more travel. I don't plan on touching my 401k/IRA until RMDs start and won't start Social Security until at least 68. No pension.

Right now my portfolio is 95% equities so I'll be reducing equities a bit over the next few years but what else should I be doing? And how?

Anyone willing to share your plan or what you would do over again 3 years to launch?

 

[livingalmostlarge]

Why not go now if firecalc says your good?

 

[anothercog]

Why not go now if firecalc says your good?

A few reasons:

1. Wife says no
2. want to help kids get internships
3. want to build up my team to take over
4. Wife says no

 

[Dash man]

Build up your cash/cash-like reserves in a taxable account to give you 3-5 years living expenses in case the market tanks for a while. With delaying social security until 68 and no pension, you need this cash cushion.

 

[anothercog]

Build up your cash/cash-like reserves in a taxable account to give you 3-5 years living expenses in case the market tanks for a while. With delaying social security until 68 and no pension, you need this cash cushion.

what are good cash like reserves? I don't want too much sitting in a bank account. Is VTP good?

 

[COcheesehead]

Great time to build a ladder to bridge to your goals. Rates are dropping. 10 year went under 4% today. Cash is not king, cashflow is.

 

[TheWizard]

what are good cash like reserves? I don't want too much sitting in a bank account. Is VTP good?

Agree that too much cash is not necessary.
Invest mainly in stock index funds in your taxable account and you'll be fine, especially if you are overfunded, which we don't really know.

Also, leaving your tax-deferred accounts untouched until RMDs at 75 is not generally a good idea, assuming those accounts are decently large to start with.
Much better to withdraw at least 5% per year for some combination of spending and Roth conversions.

Goal should be to levelize your AGI, having it grow around 3% per year through your late 70s, with no big jumps at start of SS or RMDs...

 

[COcheesehead]

Research and understand return sequence risk.

 

[brett]

I was in a similar position. Loved my job. Ready to go financially but no rush.

Smelled a package. Waited a year and rec'd a 2 year package. But it was more than that. My DB was credited with the one year that I worked and 2 years based on the package....an extra three years. It pushed me over the top for some additional DB benefits because of age and service.

The package came at 58. Lots of package money to see us through for 4 years (and more) four years of retirement. DB paid out in full at 62. Even better, all of my stock options were immediately vested.

If you do smell a package in the wind be prepared to go at any time.

 

[NomDeER]

FireCalc says I'm good. I know my spending and what I would like to spend in retirement with more travel. I don't plan on touching my 401k/IRA until RMDs start and won't start Social Security until at least 68. No pension.

Right now my portfolio is 95% equities so I'll be reducing equities a bit over the next few years but what else should I be doing? And how?

Anyone willing to share your plan or what you would do over again 3 years to launch?

I would have a plan for health insurance and how to fund it.

It sounds like you have non-retirement funds to tap before you turn 59.5, so you don't have the same problem some people have. Think about which of your non-retirement funds you want to tap and how much, including for health insurance costs and taxes as well as college costs. (The taxes part includes figuring out if you are going to convert to Roth IRAs.)

If you are going to start reducing your equities allocation now, you could use proceeds to set up a bit of a bond/CD ladder now. That might reduce the amount of cash that you (or your wife) feel like you need at retirement to feel comfortable with sequence of returns risk. But, it will increase taxable interest if you have the ladder in a brokerage account. With 20/20 hindsight, I probably would have put more of the ladder in my retirement account rather than taxable, but that's based on my own tax situation; it would have opened up more room in my lower tax brackets for capital gains and Roth conversions. See if that makes sense for you.

I think a lot of people don't do enough research on all the tax consequences of waiting (or not waiting) to do anything with their tax-deferred retirement accounts until RMDs. (That would include me, though a crystal ball would be necessary to figure it all out.) Since you have kids, you may want to make some of these decisions with them in mind.

You will get a lot of conflicting advice, but a lot depends on your particular situation and your (and your wife's) risk tolerance.

Maybe if you show all this to your wife, she would feel more comfortable with you retiring sooner?

Kid still at home could cut both ways. You might want to retire sooner to spend more time with your youngest. But, maybe the teenager is perfectly happy to have you at work. Lots of teens are.

Either way, it's good to know that you're good to go. Congratulations!

 

[FlaGator]

Advocates of staying fully invested are correct in that doing so provides the best returns over time. Overfunded, especially well-overfunded, gives you a lot of options.

When I bailed at 55, I didn't have the stomach to remain at 85/15. I had some notice with the wife's terminal illness 2 years before I quit and stopped investing and began building cash, bring it down to 70/30, later reduced to 60/40 when I was a solo parent and retired.

That worked out for me. I had a lot of flexibility when out-of-plan expenses popped up. I occasionally thought I was too conservative, but every market downturn in the last 10 years was a reminder that surviving on my stash was the important goal.

No matter your allocation %, having adequate liquidity at a low tax cost for the first several years, at least, will make things easier.

 

[anothercog]

I was in a similar position. Loved my job. Ready to go financially but no rush.

Smelled a package. Waited a year and rec'd a 2 year package. But it was more than that. My DB was credited with the one year that I worked and 2 years based on the package....an extra three years. It pushed me over the top for some additional DB benefits because of age and service.

The package came at 58. Lots of package money to see us through for 4 years (and more) four years of retirement. DB paid out in full at 62. Even better, all of my stock options were immediately vested.

If you do smell a package in the wind be prepared to go at any time.

I think a package within the next 3 years is a high probability. Not certain how generous it will be but the company has made a commitment to shareholders to cut costs and cutting headcount is the only way to achieve the targets.

The job itself is not terribly time consuming and pays well but is stressful nonetheless.

In any event I’m in a good position to ride it out. I’ll start ramping up vacation time and travels.

I need to better position my portfolio as well as work on my health and figure out what to do after I leave the workforce.

 

[Patience]

I second the cash-like reserves, but 3 years worth is sufficient. If you're confident an exit package includes 1 year, perhaps you only need to build up 2 years worth yourself.

 

[Dash man]

what are good cash like reserves? I don't want too much sitting in a bank account. Is VTP good?

VTP looks good. Treasury Bills, High Yield Savings, short term CDs. They’re all good.

 

[mystang52]

I think a package within the next 3 years is a high probability. Not certain how generous it will be but the company has made a commitment to shareholders to cut costs and cutting headcount is the only way to achieve the targets.

The job itself is not terribly time consuming and pays well but is stressful nonetheless.

In any event I’m in a good position to ride it out. I’ll start ramping up vacation time and travels.

I need to better position my portfolio as well as work on my health and figure out what to do after I leave the workforce.

I'll leave the financial advice to others, and just "bless" the italicize bold comment you wrote. Since you could theoretically leave now, consider the next 3 years as vacation time interspersed with something called 'w*rking.' If that package offer comes along, so much the better!

 

[anothercog]

I would have a plan for health insurance and how to fund it.

It sounds like you have non-retirement funds to tap before you turn 59.5, so you don't have the same problem some people have. Think about which of your non-retirement funds you want to tap and how much, including for health insurance costs and taxes as well as college costs. (The taxes part includes figuring out if you are going to convert to Roth IRAs.)

If you are going to start reducing your equities allocation now, you could use proceeds to set up a bit of a bond/CD ladder now. That might reduce the amount of cash that you (or your wife) feel like you need at retirement to feel comfortable with sequence of returns risk. But, it will increase taxable interest if you have the ladder in a brokerage account. With 20/20 hindsight, I probably would have put more of the ladder in my retirement account rather than taxable, but that's based on my own tax situation; it would have opened up more room in my lower tax brackets for capital gains and Roth conversions. See if that makes sense for you.

I think a lot of people don't do enough research on all the tax consequences of waiting (or not waiting) to do anything with their tax-deferred retirement accounts until RMDs. (That would include me, though a crystal ball would be necessary to figure it all out.) Since you have kids, you may want to make some of these decisions with them in mind.

You will get a lot of conflicting advice, but a lot depends on your particular situation and your (and your wife's) risk tolerance.

Maybe if you show all this to your wife, she would feel more comfortable with you retiring sooner?

Kid still at home could cut both ways. You might want to retire sooner to spend more time with your youngest. But, maybe the teenager is perfectly happy to have you at work. Lots of teens are.

Either way, it's good to know that you're good to go. Congratulations!

Yeah, the healthcare worries me. We'll see what happens with ACA subsidies but I'm not optimistic. Floated the idea of moving abroad for awhile to save on healthcare costs but wife and I are not on the same page and kids still need their parents nearby.

Wife's concern is less financial vs. she doesn't want me sitting around doing nothing while we wait for our youngest to graduate so we have more free time to travel. Youngest is pretty busy with school and activities and my work is no so demanding that I can't leave at any time to go to one of his sports/school events.

I'm in a good spot. Despite some frustrations at work, it's not intolerable and I think 3 years will go by quickly. Also, I'd put the odds of voluntary package within 2 years at better than 60%

 

[pb4uski]

what are good cash like reserves? I don't want too much sitting in a bank account. Is VTP good?

I've been using IBHF, a target maturity bond ETF, as a high yielding cash reserve. It is an exchange traded fund that holds high yield bonds that mature over 2026 and yields about 6.5%. In early 2026 I may sell and buy IBHF, to version that matures in 2027.

There are risks. Some credit risks but I'm less concerned about that given the 1-2 year remaining term. I think I'm getting well compensated for the increased credit risk.

 

[pb4uski]

...Right now my portfolio is 95% equities so I'll be reducing equities a bit over the next few years but what else should I be doing? And how?

Anyone willing to share your plan or what you would do over again 3 years to launch?

One way to reduce your equities is to divert new money from future contributions to fixed income investments and let the equities ride. Ditto for investment income. IOW, new money goes to fixed income which reduces the equity exposure over your 2-3 years.

 

[teej1985]

Yeah, the healthcare worries me. We'll see what happens with ACA subsidies but I'm not optimistic. Floated the idea of moving abroad for awhile to save on healthcare costs but wife and I are not on the same page and kids still need their parents nearby.

Wife's concern is less financial vs. she doesn't want me sitting around doing nothing while we wait for our youngest to graduate so we have more free time to travel. Youngest is pretty busy with school and activities and my work is no so demanding that I can't leave at any time to go to one of his sports/school events.

I'm in a good spot. Despite some frustrations at work, it's not intolerable and I think 3 years will go by quickly. Also, I'd put the odds of voluntary package within 2 years at better than 60%

If your wife is capable of not sitting around and doing nothing, certainly she should trust that you can similarly entertain yourself for a few years? Would you regret staying if you don't get a package?

 

[anothercog]

If your wife is capable of not sitting around and doing nothing, certainly she should trust that you can similarly entertain yourself for a few years? Would you regret staying if you don't get a package?

Actually she’s pretty bored right now too. Without the kids needing her at much she’s uncertain what to do with her time. She’s considering a temp job but she does volunteer and goes out to help her parents quite a bit.

I don’t think I’ll regret staying a few more years even if I don’t get a package. I’m going to start pushing the bounds on how flexible the job is and am now taking some afternoons off to go out to lunch with my wife. This summer I may work part time remotely for a month to visit east coast relatives.

 

[RetMD21]

Some folks will be pay less tax by doing some IRA/401k withdrawals before RMD. You might want to run the numbers.

 

[TheWizard]

Some folks will be pay less tax by doing some IRA/401k withdrawals before RMD. You might want to run the numbers.

Definitely true, as I explained in #7...

 

[SecretlyFI]

Build up your cash/cash-like reserves in a taxable account to give you 3-5 years living expenses in case the market tanks for a while. With delaying social security until 68 and no pension, you need this cash cushion.

…and to enable you to control your income to qualify for healthcare subsidies. Keeping your income below 400% of the federal poverty level for your family size could mean the difference between very small monthly premiums (couple hundred $ or less) and $2000-$3000 a month premiums. Open enrollment is going on now, so you can go to healthcare.gov and enter various income amounts to see the results (don’t have to create an account, just enter location, birthdates & income).

 

[anothercog]

…and to enable you to control your income to qualify for healthcare subsidies. Keeping your income below 400% of the federal poverty level for your family size could mean the difference between very small monthly premiums (couple hundred $ or less) and $2000-$3000 a month premiums. Open enrollment is going on now, so you can go to healthcare.gov and enter various income amounts to see the results (don’t have to create an account, just enter location, birthdates & income).

I’ve already screwed that up. I have deferred income that will paid over ten years when I leave my company. That alone will probably put me over 400% FPL. Dividends will put us well above it.

 

[livingalmostlarge]

then why bother waiting? Tooo much money and not enough time