I think I need to go back to w*rk

[Badger]

Laid off at 55, delaying pension to age 56 in 2024 ($2272/month). (Plan to live on vacation payout until then. No severance.)

But I can't live on that unfortunately and I don't want to spend 401k yet as I am afraid I will run out of money. Not to say I have any clear idea when I'd start . . .

I am not so fond of w*rking my real job I can be excited to go make less working somewhere else . . . But I sort of maybe have to.

I do have cash savings earning very little I could use to supplement the pension or maybe even delay it further but I can't quite work out how to think of this. It doesn't feel right to spend it on something that is not urgent especially when I don't have a clear idea how much I could safely spend.

Edited *27K pension in 2024, not infl. 401k 1M.

The first question I would be asking myself is why do I need to spend this money. The next question is what are my necessary expenses and what are not and understand the difference between need and want. I was laid off at about the same age and the first thing I did was to go on a serious austerity program. Thermostat was changed so wore more clothes indoors in winter, used fan instead of air conditioning in summer, planned car driving with multiple stops, Eating out was not an option and grocery shopping was considerably more frugal (more beans, pasta, rice, less beef and more chicken/pork, etc.), entertainment was enjoying the outdoors with hiking and riding an old bike with occasional movie at reduced "first show matinee price", etc. I think you get the point.
If I was taking care of my necessary expenses and had money left over then I would be investing it for retirement. You can count on needing more backup for medical expenses once retired.

Cheers!

 

[Spock]

I was/am in a similar boat... "involuntary early retirement" at 55.
First off: You need to take an inventory of your financial assets (cash, savings, IRA/401K, etc) and total up "this is how much I got to live on for X years". You can this take this number to umpteen available free calculators on the web and see how much you can spend per year for those X years. The calculators are using the PMT function... it takes your total balance, an interest rate you think you're going to get, and the number of years you want it to last and will spit out a number of how much you spend every year.
To answer if you can live on that number, you need some approximation of how much you spend every year. You don't need details of what you spend it on. A crude number is to take your annual W2 income - your 401k/IRA contributions. How does that number compare to the PMT calc?
Depending on your income bracket, you'll have to decide how you're going to approach health insurance... ACA subsidy? Employer COBRA for X (18?) months?


That's the crude first steps. If the crude numbers are way off, I'd look for another job to maintain the status quo while you get a better handle on how much you need. Without knowing how much you spend a year you won't know how much you that job needs to pay.

 

[redraptor]

Well, you're 55 not 75; and if you have to go back to work for a year or two while you get your affairs in order, and beef up cash reserves - it's not the worst thing in the world.

The thing is - if you take another job, they can't hold you prisoner, you can always leave.

Good advice. The OP isn't ready even if it's only mentally. Gotta quit shredding bank statements for 6 months.

 

[target2019]

1) Look for a job. Take your time.
2) Go to bank and get a year end statement with all transactions for 2022.
3) Find a class or someone to help you enter transactions to computer program.
4) Monitor and categorize your spending.
5) Measure and monitor your income sources.
6) Track your investments monthly.

Without knowing how much you spend by month on average, or in a year, estimates will be more like guess-timates.

 

[aaronc879]

If you are single with no spouse or kids to support and live in a paid off house then there is no reason you NEED to go back to work. Live off your vacation payout this year then next year go on ACA, take your pension and then supplement your pension with your cash savings or a little bit out of your 401k. You have a million in your 401K so there is no reason why you can't start taking some out now. You have the pension and you will get SS in another 10 or so years. You should be just fine. Keep track of your expenses and don't spend extravagantly. Good luck.

 

[pb4uski]

Laid off at 55, delaying pension to age 56 in 2024 ($2272/month). (Plan to live on vacation payout until then. No severance.)

But I can't live on that unfortunately and I don't want to spend 401k yet as I am afraid I will run out of money. Not to say I have any clear idea when I'd start . . .

I am not so fond of w*rking my real job I can be excited to go make less working somewhere else . . . But I sort of maybe have to.

I do have cash savings earning very little I could use to supplement the pension or maybe even delay it further but I can't quite work out how to think of this. It doesn't feel right to spend it on something that is not urgent especially when I don't have a clear idea how much I could safely spend.

Edited *27K pension in 2024, not infl. 401k 1M.

Are you eligible for social security? If so, what does your SS statement say that your full retirement age benefit will be?

How much is in this "cash savings earning very little" that you refer to? $1,000? $100,000? $1,000,000?

You might be able to get a good idea about spending by looking at your take-home pay for a year less any savings that you did outside of your 401k... presumably any takehome pay that was not saved was spent. Or if you used savings rather than added to savings you should factor that in.

FIRECalc can solve for what you can safely spend given certain inputs. If someone had a $2,272/month or $27,264 fixed pension starting in 2024 and $1m in retirement savings in a 50/50 AA with a 45 year time horizon (to age 100) then FIRECalc indicates they could safely spend $47,368 a year in 2023 dollars. If you have social security coming to you it would be even more. And if you are interested in doing some part-time work that would be even more.

Once you stop working, you can focus a couple months on assessing whether you can retire or not and if you can't then look for work.

 

[TheWizard]

I'm not sure what bank statements have to do with anything when it comes to understanding what you're spending money on.
Perhaps combined with CC statements you can fill in the blanks on how much went to certain categories.

You can also take a top down approach: $100k gross annual income, minus $20k going to 401(k) and Roth IRA, minus $10k going to savings/taxable account, means you spent $70k for the year (including taxes).
So you would need to replace most of that $70k in this example...

 

[Toocold]

If you spend $100k/year, you should go back to work. If you spend $15k/year, you don't need to go back to work. If you don't know how much you spend/will spend, it's impossible to tell you.

 

[badatmath]

Single, yes.
Mortgage, no.
Not officially over
Defintiely some expenese will go up in retirement - medical, gas (currently WFH)
Retiree medical, no ACA
With all due respect for the people who think a/c is a luxury, I am not one of them. People die here in summer with no a/c. . . (AZ).
SS, yes ~ 2K at 62 if I assume no more w*rk. Never crossed my mind to wait, people in my family die young.
~125K cash just sitting there. Al18 was correct I should move savings for more interest.
Wondering if I can make better use of cash to delay pension another year to 2025

 

[pacergal]

-Start tracking every penny you are spending now--even go so far as to keep a little notebook with you so you don't forget.
-Do figure out how to get monthly statements from bank, credit company, credit union to start a look back for 6-12 months.
-Do file for unemployment. The worse thing would be they say no. You won't know until you try.
-Give yourself permission to spend from that savings for a month or two to decompress from your toxic work, to gather some info, refresh and relax. Then reassess if you need to go back to work. Maybe you need only part time? 55 is still young, there are lots of jobs out there and employers looking for folks. Perhaps look at something totally different than what you are doing.

 

[latexman]

Not officially over - what does this mean?

~125K cash just sitting there - where is it sitting?

I’d get most of that cash in a money market fund Monday/ASAP. MM’s are making between 4-5% now and they will probably go higher this year. It’s a no-brainer.

 

[Go-NoGo]

I found a budget worksheet to be quite helpful when I first started to plan for retirement to help me ballpark how much I was spending each month (or year). I followed up with downloading credit card end of year summaries to see if they were more or less the same.

It might be useful to you estimate what your current expenses are:

https://www.tiaa.org/public/pdf/tc_life_insurance_budget_worksheet.pdf
(BTW the file name has nothing to do with life insurance - don't be put off by the name)

 

[Fermion]

Single, yes.
Mortgage, no.
Not officially over
Defintiely some expenese will go up in retirement - medical, gas (currently WFH)
Retiree medical, no ACA
With all due respect for the people who think a/c is a luxury, I am not one of them. People die here in summer with no a/c. . . (AZ).
SS, yes ~ 2K at 62 if I assume no more w*rk. Never crossed my mind to wait, people in my family die young.
~125K cash just sitting there. Al18 was correct I should move savings for more interest.
Wondering if I can make better use of cash to delay pension another year to 2025

How much is retiree medical? ACA can be free if you meet the income requirements, although being single and having at least $2300 a month coming in, I guess you would not get a full ride. That is the one benefit I guess of not having a pension. We are able to adjust our income to whatever level we need it to be.

 

[badatmath]

latexman - not officially over means I am still getting paid a couple more weeks though it hardly feels like it because I upped the 401k deduction.

Cash is earning under 2% in a "real" ie not online bank.

 

[Spock]

A couple of comments on unemployment:
1. I think you mentioned no severance pay, but the vacation pay might be taxable. It's been a couple of years so you'll have to check for yourself, but for me I waited to start unemployment until Dec of the year I got laid off (May 31st). That way most of the unemployment benefits went on the following years taxes (and the 0% tax bracket).
I think there was a 6 month time limit to start is why I started in Dec instead of Jan of the following year.
2. AZ unemployment is capped at $240/week. They say it's 50% of your prior wages, but the cap makes it less than minimum wage.

 

[Fermion]

latexman - not officially over means I am still getting paid a couple more weeks though it hardly feels like it because I upped the 401k deduction.

Cash is earning under 2% in a "real" ie not online bank.

You can just transfer that cash to a Fidelty account and it will earn well over 4% just sitting there, easy to access.

 

[badatmath]

Didn't know you could delay unemployment. Vacation pay is definitely taxable.

 

[aaronc879]

If people in your family die young then why hold off spending down that 401K? You could take $50K/yr out at least until SS starts then maybe drop it down a little. Worst case is you run out of money in 401K before you die but still have SS and a pension worth over $50K/yr combined. I wouldn't even think about going back to work if I was in your position. I would love to be in your financial position.

 

[Fermion]

If people in your family die young then why hold off spending down that 401K? You could take $50K/yr out at least until SS starts then maybe drop it down a little. Worst case is you run out of money in 401K before you die but still have SS and a pension worth over $50K/yr combined. I wouldn't even think about going back to work if I was in your position. I would love to be in your financial position.

He doesn't even have to do a 72t right? If he is retiring past 55.

Just put the whole damn thing in treasury bonds and take out 50k a year, added to your pension, that is 77k a year, not inflation adjusted but in 10 years you will still have 1 million in your 401k.

About as risk free as one could get. You would be 65 years old, able to collect SS, and still have pension and 1 mil in 401k.

Or continue to work if you like working.

 

[latexman]

You can just transfer that cash to a Fidelty account and it will earn well over 4% just sitting there, easy to access.

Bingo! To get it back in your bank as you need it, I have a wire transfer already set up at Fidelity to my CU checking account. If I initiate a withdrawal from my Rollover IRA during a business day, the cash is usually sitting in my CU account in under 2 hours. And, the wire transfer is free on both ends!

 

[Fermion]

Bingo! To get it back in your bank as you need it, I have a wire transfer already set up at Fidelity to my CU checking account. If I initiate a withdrawal from my Rollover IRA during a business day, the cash is usually sitting in my CU account in under 2 hours. And, the wire transfer is free on both ends!

Leaving $125k in a sub 2% account when you could earn risk free 4% with same easy access is essentially taking two twenties and a ten out of your wallet each week and using them to wipe your rear.

 

[RetiredAndLovingIt]

Congratulations, with no mortgage you are way ahead of most people that find themselves in your situation already.
Pull the paperwork for you current health insurance policy so you can compare to the ACA plans. I found one that was exactly the same as my company plan and went from paying $800+ on Cobra to around $250 on my first ACA plan after the government kicked in a nice subsidy and now it's even less I'm only paying $110 for a Kaiser plan with tiny copays and government kicks in a big subsidy of $800+. You might find something cheaper than your retiree medical or if it helps you to delay pulling the plug on the benefts for a year to get a higher payout it might be worth taking another look. I'm not sure how retiree benefits work so I might be totally off base with this suggestion.
My stated income for tax purposes is around 23-24K. That's 15K from my IRA and $9K in savings interest. I have a lot of cash savings so I can spend a lot more if needed but that's all that will show up on my tax return. I don't have a 401K but I imagine anything pulled out of it will be taxable so keep that in mind as well.
In your current situation, you want to keep your taxable income as low as you can.

 

[Al18]

latexman - not officially over means I am still getting paid a couple more weeks though it hardly feels like it because I upped the 401k deduction.

Cash is earning under 2% in a "real" ie not online bank.

Upping your 401k deduction? Your mind is still in savings mode, not spending mode. This is the reason you are stressing. You need need to ease into spending mode. Consider cutting your 401k deduction in half, to put more money into your savings account.

Keep 5K in your local checking account, and move the rest to an online savings account. Setup automatic monthly transfers.

(27K + 24K SS) -10% Federal taxes -2.55 Az tax = 44.6K per year or $3716 per month. Try living on this budget a few months. Try out retired living.

 

[pb4uski]

Laid off at 55, delaying pension to age 56 in 2024 ($2272/month). (Plan to live on vacation payout until then. No severance.)

But I can't live on that unfortunately and I don't want to spend 401k yet as I am afraid I will run out of money. Not to say I have any clear idea when I'd start . . .

I am not so fond of w*rking my real job I can be excited to go make less working somewhere else . . . But I sort of maybe have to.

I do have cash savings earning very little I could use to supplement the pension or maybe even delay it further but I can't quite work out how to think of this. It doesn't feel right to spend it on something that is not urgent especially when I don't have a clear idea how much I could safely spend.

Edited *27K pension in 2024, not infl. 401k 1M.

Single, yes.
Mortgage, no.
Not officially over
Defintiely some expenese will go up in retirement - medical, gas (currently WFH)
Retiree medical, no ACA
With all due respect for the people who think a/c is a luxury, I am not one of them. People die here in summer with no a/c. . . (AZ).
SS, yes ~ 2K at 62 if I assume no more w*rk. Never crossed my mind to wait, people in my family die young.
~125K cash just sitting there. Al18 was correct I should move savings for more interest.
Wondering if I can make better use of cash to delay pension another year to 2025

So, $1,125k in financial assets ($1m 401k and $125k of cash), $27k of pension starting in 2024, $24k of SS starting at 62 in 2030. Assuming a 45 year time horizon (100-55) and a 50/50 AA, FIRECalc indicates safe spending of $69,395 annually in 2023 dollars. Do you need more than $69k to live on during retirement?

At a minimum open a brokerage account with Schwab or Fidelity, move the $125k of cash to it and put it in a MMF that yields almost 4.5%.

 

[38Chevy454]

You need to file for unemployment. Not doing that is leaving money on the table. You won't get it if you don't apply. Vacation pay is *NOT* severance, that is your earned time off and is not a factor in the unemployment. If the company challenges it, go to the unemployment office in person and show them that they eliminated your position and you had to stay working to lock in your retirement benefits. Taking the outside job would cause you to lose out on those benefits. I am pretty sure the state unemployment would approve you, it's $240/week per the previous post. That's approx $1000/month extra money to supplement any savings withdrawals.

As to using cash now, did you have other plans for it? Or your 401k, what did you expect to do with it? Once your pension kicks in, at 56 next year, you get that money to offset withdrawal reqts. At 62 SS income offsets additional withdrawal. It's an emotional vs logic transition that you have to make. Going from savings and accumulation to withdrawing and spending.

You absolutely do need to have a better idea on your expenses. Get signed up online with your bank (checking) and you should be able to access statements back for several years. Plus go through your memory and receipts and write down any other bills you may have paid not through checking, such as with credit card. You need to know your expenses so you can determine the best way to get the total income each month. I understand the shock to your stability and your current lifestyle with being laid off and facing retirement a little earlier than you planned. You will do fine, and if your decision is to get another job for a year or two, that is OK. But base that decision on whether you really need the working money income vs just working because that is what you are used to doing.