Take A Hit on IRA For a One Year Break?

[mikex]

I'm single and 49 and worked the same Company for 22 years. I have a pension that I am going to use starting at 55. I also have $326k in IRA/401k funds. House and cars are paid off - no debt. I calculated I need $18k to live for a year absolute minimum (including a health and dental policy), but also have an emergency cash fund 0f $30k.

The thing is I'm burned out at work, and want to get out for a while. I would say 6 mo. to a year and then get another job to take me to 55, when at that time I can procede with retirement.

I realize I would pay taxes and a 10% penalty for a withdrawel from IRA. So say I took out about $20k and took a break. Even though it will take a hit, the IRA will grow back for a good many years anyway. What I want opinions on is how "dumb" would it be for me to this?

 

[tiredofwork]

I calculated I need $18k to live for a year absolute minimum (including a health and dental policy), but also have an emergency cash fund 0f $30k.

I wouldn't do it. I would use the emergency cash fund and maybe after a few months take a low stress part time job until you're ready to go get a "real job" again. Sounds like this is an "emergency", since you're willing to take the penalty on your retirement savings.

You could also look at the IRS 72t option for withdrawing early (before 59 1/2) from retirement plans without penalty. Just make sure you've done the research and calculated the withdrawals properly.

 

[LOL!]

Why not use your emergency fund of $30K? If you can live for $18K, then you only need $9K for a 6-month emergency fund, $18K to live and that leaves you $3K for a new beater car.

 

[brewer12345]

Yeah, I would hit the e-fund. You can always tap the IRA later should it become necessary.

 

[Brat]

Consider asking for a leave of absence of 3-6 months. The first month just take long walks and breathe fresh air. Then take a look around for other employment options. The worst your employer can do is to deny your request for LOA.

Don't get yourself pre-programed for a one year break, and then look for a job. Give yourself a one month break and then start looking. You never know when the perfect opportunity will present itself.

Unless you are taking off for a 1-year trip around the world, or for some other specific activity, it will be difficult to get back on track after dropping out completely for a year. Support for my statement is from studies of people on workers compensation. An injured worker (including workplace stress) recovers much quicker if after the immediate crisis they are engaged in a work or other socially productive activity (including public service).

BTW, several major employers who know they have a frenetic workplace, have programs for long term employees to take as much as a year off to do public service work. See if your employer has such a program, even informally. If you work for a large employer who is profitable consider what that employer's culture values... propose a public service leave of absence that might sell in your setting.

Don't tell me that the Fed's don't do that, look up the Loaned Federal Executive Program. The difference between that program and private industry programs is that the Feds usually want the person to go away permanently while a private employer wants to build relationships with the community. In a nutshell, loaned Feds are usually PIAs while loaned private industry folks are nice.

 

[free4now]

I would be careful of the possibility that you'll like not working too much and find it hard to go back. That is what is happening to me... when I left work a year ago I said I'd take a year off before looking for a "next job". After about 6 months I started saying "a year or two". Now I just say I'm off work "until I want to go back to work".

 

[loosechickens]

yeah.....be careful, because you may never want to go back. We left in 1992, "just to take a year off" to travel in Mexico and Central America......we were so successful in living on very little, that at the end of the year, we had almost 70% of our allotted money for one year left......stayed on for two.......and then resigned from the career and never went back.

We lucked out because we lived frugally all these years, left the retirement savings and the brokerage account to grow without tapping them, took occasional projects and work on short term that kept us going, and all of a sudden realized that the magic line had been crossed. Even without further growth, there was enough for us to start living on our dividend and interest income without touching the goose that was laying the eggs, pretty much forever.

Then my mother died and we inherited from her, which made it even more ridiculous to think about working.

Once you're used to having your own time and your freedom, it's VERY hard to ever pick up that harness willingly. Even when we "worked", we never took regular jobs in that fifteen years.....just too restrictive.

And I wouldn't trade those "free" years for any amount of money in the world. We dropped out when I was 50 and my husband was 42. Young enough to have really enjoyed some major adventures that I probably wouldn't contemplate now at 65. Wouldn't trade those years for anything.........when I think that we COULD have been slogging along working all that time, I shudder with relief that we just jumped out into thin air and LIVED instead.

Good luck....life is short. If you want our advice, we say do it, but NOT using your retirement account. Tap that emergency fund instead, live cheap and keep your eye out for fun ways to either cut expenses or generate a bit of income. You'll be surprised at how long you can make that $30,000 last when the alternative is putting on a suit and tie and harnessing yourself to the wheel again. It becomes like the miracle of the loaves and fishes, I swear. You learn inventive ways to dribble money IN and inventive ways to keep from dribbling money OUT, and you manage to have your cake and eat it too.

LooseChickens

 

[W2R]

When I'm doing cardio at the gym, sometimes I think, "That's it, I can't do any more - - I just HAVE to stop".

It helps if I tell myself, "One minute more. Just one more minute. I can do one minute." Then when I finish that minute, repeat, and do that several times. At the end of the last minute, I'm down to "Ten seconds. Just ten more seconds." :

Kind of silly but it works. How about "Just one more year. I can do one year." Repeat until 55.

 

[Olav23]

I'd just ask if there is another project or area you could work. Maybe you are burned out by a particular situation, stagnation, or horrible work environment. You'd be surprised what changing things up can do. And hell, if you decide the other project is just as bad, or worse, you're back to where you started and can leave then. And in the process you've worked another few months.

 

[mikex]

Thanks for all the replies folks - really made me think. I suppose I can go a few more years, it's not an emergency I quit, but I may just save up a bigger cash reserve and then pull the chocks a couple years before 55, since I have an extremely low budget now that I paid off the house this year. Yea if I quit, it would be hard to set that alarm after 6 months! I'll continue to listen to you all, that's why I joined to make sure I am not missing something or doing something real dumb.

 

[Alan]

When I'm doing cardio at the gym, sometimes I think, "That's it, I can't do any more - - I just HAVE to stop".

It helps if I tell myself, "One minute more. Just one more minute. I can do one minute." Then when I finish that minute, repeat, and do that several times. At the end of the last minute, I'm down to "Ten seconds. Just ten more seconds." :

Kind of silly but it works. How about "Just one more year. I can do one year." Repeat until 55.

That is me exactly. Within my megacorp I took a sideways move 3 years ago which included a relocation and DW RE'ing. The change in location and situation helped a lot. The new job helped some but it quickly gets back to being a slog. Now with 34 months to go that finish line is much closer and with FI almost achieved we have set closer milestones in the form of interesting vacations to look forward to and get keep on going. (several vacations a year is possible with my 22 years service).

I moved jobs and location at 49 and now have 34 months to 55..... just one more year and I'll feel better

 

[kcowan]

When I was approaching early retirement from Megacorp, I was reluctant to change jobs because I really liked what I was doing. But I had been at it for 4 years and I had never stayed in a position that long so I could do it with my eyes closed.

I volunteered for a company-wide initiative and devoted 2 days/week to it. It overcame my staleness and helped bridge to ER 2 years later. It was also a major extra item on my ER consulting resume.

 

[teejayevans]

I'm single and 49 and worked the same Company for 22 years.

I second the LOA/sabbitical option for you or anybody who isn't
quite about retirement for whatever reason. Nice to have a
fall back position.
TJ

 

[simple girl]

And I wouldn't trade those "free" years for any amount of money in the world. We dropped out when I was 50 and my husband was 42. Young enough to have really enjoyed some major adventures that I probably wouldn't contemplate now at 65. Wouldn't trade those years for anything.........when I think that we COULD have been slogging along working all that time, I shudder with relief that we just jumped out into thin air and LIVED instead.

LooseChickens

Hey Loose Chickens, just wanted to say your post really "spoke" to us...you are doing exactly what we are dreaming about doing! Hoping to be starting an adventure just like yours in 3 to 5 years...I'll be 42, DH will be 46 (if we make it in 3!).

 

[Coach]

Mikex, is the pension enough to support you from 55 on? If so, I don't think you should give up on your original idea if it still appeals. Talk them out of a sabbatical if you can, but if that won't fly, quit. If you can't drag yourself back to work in six months or a year, it sounds like you've got enough to make it anyway. You'll never be 49 again, and stuff happens.

Coach

 

[mikex]

Mikex, is the pension enough to support you from 55 on?

No it wouldn't be enough if I quit now. I probably won't do it, I need to let my IRA/401k cook for 5 more years. I could get another job, even if it paid a lot less I would be OK, as I don't need much money right now to live on. We'll see. Thanks.

 

[heyyou]

My motivation for saving was knowing I only needed to work until I could afford to leave. Saving lead to reduced living costs so the pension was a slight pay raise--a double benefit from saving. So we were practicing for retirement, prior to it, without being aware. Can you sell the house for a good price, then move to somewhere cheaper, whether it is across the street or further away? We picked up a few multiples of our income needs that way, not enough to ER on that alone, but enough to help the cushion.