Author Topic: FIRE after being laid off? wasn't really ready.  (Read 2776 times)

GNR

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FIRE after being laid off? wasn't really ready.
« on: January 23, 2018, 06:01:29 PM »
After 15 years with the same company Iíve been laid off.  Iíve reading MMM for about 3 years, and have made many of the small adjustments, which had a pretty significant effect on our finances, but didnít do many of the large adjustments, such as moving closer to work to kill the long commute.  We currently live in a rural area where the shortest errand is a minimum drive of 15 minutes one way. My commute was 45-60 minutes

Iím debating what course to take.  More specific questions at the end.

Married, OP 44, Wife 36, kids 3 and 6; on the outskirts of a HCOL area, west coast

Current income ?; no debt but mortgage

Net worth ~2M according to personal capital, includes houses

Combined 401kís, IRAís - 1.1M
Taxable accounts (cash, brokerage) - 400k (generates about 700/mo in dividends)
HSA - 47k

Rental house - 143k mortgage, market value ~400k, 3.875/15 year fixed; it isnít a very good rental, currently rented for under market value; income is $150/mo

House - 433k mortgage, market value 700-800k, 2.875%; 5/1ARM; adjusts beginning of 2020

Monthly costs

Mortgage         1950
Property taxes         584
Property insurance      50
HOA fee         84
Groceries         400
Internet         52
Electric         300 (electric heat so this is a max; will drop to 15 in a couple months because of solar panels and warmer weather)
Propane         probably have enough to get us through the winter
Garbage         25
Car gas         80 (with sudden lack of commute)
2 Cell phones         80
Car insurance         153 (3 cars - will drop to 103 soon with sale of 1 car)
Preschool         150
Healthcare on exchange   1000

Total            4903

The reason for the large amount of cash is that we were going to pay the house off in a lump sum; kept it in cash because of concerns about job stability and the need to get out of the ARM.  No longer a question mark, this will go into the (now expensive) market.

The old plan was to pay off the houses, save up for the Roth ladder, and retire.  Needed about 3 more years.  We werenít certain about staying where we are, but would have had the time to get the house ready to sell in the meantime.

The job was a gilded cage - nerve wracking and stressful, but about double the average pay for my industry.  Iím burned out and donít want to do what I was doing anymore.

The house may take some time to sell, and is going to require some significant maintenance to prepare.  Houses in this area can move very slowly.  This is a huge stressor for me right now.  It is a huge property and weíve accumulated mountains of crap.

Wife is stay at home mom, so we will be without healthcare very shortly. Severance puts our income at about 120k for 2018 already, so not sure how to figure what healthcare is going to cost.  On the exchange we are looking at 1000/mo with no subsidy.  Iím not sure how this works.  Former employer healthcare ends at the end of January.  I can get COBRA, but havenít been informed how much this will cost yet, or really have any idea how it works. I t Does the exchange pricing always look at the trailing 60 days income to calculate the premium? Is the rate locked in once per year?  Can I do 2 months of COBRA then move into the exchange with subsidies?  With a family, I want to know what Iím doing with healthcare, and the info Iím finding online isnít answering my questions.

We definitely want to get out of our current house and itís high cost.  The rental isnít a nice house, but itís well located for a mustachian lifestyle.  It has been rented to the same people for 9 years and will need some work.  From where Iím standing moving into the rental house is my most cost effective option, but Iím also not sure Iím thinking clearly.  I generally do all of my own work on houses, cars, etc.

I guess the question is do I attempt to stay in my industry, removing the immediate pressure to sell the house and deal with healthcare, but will slow down our exit from this house and exacerbate my burnout, or put up with the high cash burn and get out of the house and into the rental, where hopefully the stress levels will start to drop off?  We have no track record of living the mustachian lifestyle - weíve never been ridiculous spendypants, although weíve been other kinds of ridiculous.  It will be a move into the unknown.  We are expecting to spend about 30k/yr after getting out of the expensive house and into an area where most things are within bike riding distance, but this is really just based on mental comparison of what we do now and things Iíve read on MMM and this forum.

Sun Hat

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Re: FIRE after being laid off? wasn't really ready.
« Reply #1 on: January 23, 2018, 06:51:50 PM »
Being laid off is a punch in the gut. Fortunately, your finances are in good shape, so you have options. The real question is whether you want to FIRE now, because you certainly can afford to. A 120K severance will buy you a lot of time before you need to touch your savings - use that time to plan.

You're facing a lot of decisions, so I suggest taking them one at a time rather than all at once.

First off, you know that you want out of your current house and that you need to get rid of a lot of stuff. Give yourself 3 months to get your current place in order - and give your tenants 3 months notice to leave. Spend your 3 months decluttering your property, selling what you can. It's not that much time, so turn your current anxiety into momentum. Aim to have your current house on the market in 90 days.

Secondly, you want to know how Mustachian you are. Start tracking your spending, do it for at least a year. I think that you'll find that your current spending levels won't need to be cut much if at all.

Thirdly, early on, have a date night to muse about where you want to live. Discuss things like proximity to family, weather, hobbies, whatever you're in to. Use it more as a platform to learn one anothers "must have's / must not have's" than as an opportunity to decide. Revisit to discuss actual places in a month. You don't love your rental house, so while it makes sense to live there while you fix it up and wait for the primary house to sell, remember that there's no absolute need for you to stay in the area.

Fourthly: Hopefully by the time that you move in to the rental, you'll have an idea whether you want to fix it up for yourselves to stay in long term, or whether you want to fix it up to sell. If you haven't decided on move-in day, give it 2 weeks. You'll know then.

5th: By about month 4 or 5, think about whether you want to return to your old field or RE. This may impact your decision to relocate.

On a personal note, I stayed in my old field until I burned out, hard. I hope that you're able to unwind enough to resist the urge to go back (I'm not saying this snidely, the unwinding really is hard). You have enough money to live a really nice life - why go back?
"You need a little bit of insanity to do great things." ~ Henry Rollins

Finances_With_Purpose

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Re: FIRE after being laid off? wasn't really ready.
« Reply #2 on: January 23, 2018, 07:36:00 PM »
Really sorry to hear about it.  That's a blow. 

No reason to think you're doing this, but honestly, you may just want to take a week or two and decompress or something before actually making any of these big decisions, especially with your liquid savings.  But it's great that you're getting a severance. 

Thankfully, you're in a position of strength and can afford to get yourself into a more relaxed and decompressed space.  I know, at least, that it would benefit me to do so. 

For healthcare, you may want to check out things like Medishare as alternatives (referral/link), if your beliefs accommodate it.  It's far cheaper than the traditional route.  Many of my friends and family have been on it at one point or another - I almost was before another life change - and all reported back good things. 

Personally, I had an awful experience with Obamacare and think their base-level providers are pretty abysmal.  If you go that route, get a broker (free to you) like Health Sherpa or the like (no referral, just a great business I've used personally). 

I'd love to suggest some amazing solution that is cheap, but it's just a tough, heavily-regulated market.  The Medishare option above is the best I've found so far. 

But I hope you're able to take some great time for yourself. 

Sounds like you're weighing big things: you may want to try it incrementally, month by month, for a few months and see how it works out.  Life's too short to burn out too much - sacrificing your mental and physical health.  It's just not worth it.  Again, I hope you're able to just get away from it all for a bit before coming back to major decisions - though I really know how hard that can be.  I really wish you well. 

Blackeagle

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Re: FIRE after being laid off? wasn't really ready.
« Reply #3 on: January 23, 2018, 08:50:17 PM »
Lousy news, but you are in a really good position to deal with it.  Based on what you posted you're pretty clearly FI.

That said, I'd put the financial aspects of this aside for now.  Take some time to decompress and think about what you want to do in life.  Retirement is definitely on the table, but it's not the only option.  Do you want another job similar to your previous one?  Do you want to work in another industry?  Move somewhere else? 

Once you decide where you want to go, then you can start making financial changes that will get you there.  Between your savings and the severance, you've got plenty of cushion before you need to act.

Jesstache

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Re: FIRE after being laid off? wasn't really ready.
« Reply #4 on: January 23, 2018, 09:40:27 PM »
Holy smokes, are you my husband?!?  We are almost in the exact same situation you are, only we started the unemployment journey in December (Merry Christmas!).  We have similar ages (49 and 34, I'm also a SAHM), kids and ages (4 and 6 here), networths, rental house(s), HCOL west coast, severance (!), stressful job, plan to FIRE in 3-5 years, etc.  Seriously, I thought he posted the case study at first and did a double take at the details to make sure (I was pretty sure he's not on here but...)!

First, I'm really sorry this happened.  It can be stressful, even when you've done a great job saving and preparing for exactly this sort of thing happening (speaking from my own feelings).  For me, it's the uncertainty that make me stressed.  I can say that since the dust has settled, my husband is visibly much happier and less stressed and nothing could make me happier.  It will all be okay.

Second, you will get a letter soon from COBRA detailing what the continuation of your previous coverage will cost.   Your current coverage is paid through the end of the month you get laid off.  Our premium is $1543 for our family (ouch).  I had already looked at the exchange for the silver plan (bronze looked awful, honestly) and it was pretty much exactly the same price but had higher deductibles and didn't include vision like our medical plan did so I chose COBRA.  At a $120k level of income, you won't qualify for a subsidy (at least not this year).  So, just wait until you get the letter and then look at what your options are vs that on the exchange.  You have 90 days from a life "event" (layoff) to switch to one of the exchange plans and 30-60 days (can't remember, it will say in the letter) to choose or decline COBRA.  You can stay on COBRA for up to 18 months but I'm hoping we don't need it that long.  The health care situation sucks because it is now our #1 expense, about $200 more than our 15 year mortgage payment.  All our other expenses together are less than our mortgage, not allowing for any extras.

This is where everyone's advice to take some time to figure out how you really feel will really come into play.  In one month we've gone from "we love it here and we'll make it work no matter what" to "going somewhere else might be a great adventure for the family and we'll still get to FIRE in our most favorite place ever at the same time we had planned before... the move back!"  For us, it'll depend on what may or may not come up job-wise between now and the middle of this summer (our self imposed deadline to make some sell or not to sell decisions on one or all of our houses).  In the mean time, we've been preparing ourselves as if we may have to move (because we might!) and while the oldest is in school, we are going through each room, drawer, closet, etc and cleaning them out to get the house ready to be (potentially) sold.  If we end up staying then... great!

Also, see if you qualify for unemployment as soon as possible, even with the severance.  My husband qualified and every little bit helps.

Gone_Hiking

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Re: FIRE after being laid off? wasn't really ready.
« Reply #5 on: January 23, 2018, 09:59:12 PM »
Ouch!  I am very sorry it has happened to you.  I was in a similar position a year ago - laid off in mid-40s from a job with a large pharmaceutical company, and I feel for you.   Being laid off is a punch to the stomach at any age, and it is brutal in mid-40s when one enters peak of one's capacity and has given more than a decade to an employer.

Fortunately, you are in good shape financially.   Like others indicated, take time to decompress and give yourself space to think things through.   You don't have to find another job immediately, albeit I would suggest that, if you decide to look, start looking soon.  Not because of finances, but because momentum will be with you.  I'm rooting for you.

Linda_Norway

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Re: FIRE after being laid off? wasn't really ready.
« Reply #6 on: January 24, 2018, 12:14:56 AM »
I am sorry about your layoff. What a blow.

Maybe it has a good aspect in the long run for your health, but the thing you are planning to do is also stressful. I have understood that selling a house is in the top 10 for most stressful things. And losing a job is a lot higher in that top 10. The good thing is that you have your rental and that you can use that as a temporary house while you think about what to do in the future.

About selling the house. You said you accumulated a large mountains of crap. This sounds a bit like our old house that we sold after living in it for 15 years. What we did was: trying to look at the house with a eyes of a buyer. And then make a prioritized list of the things that will mostly disturb the first impression of the buyer. And the most severe technical issues a buyer will worry about. And then work hard for some months, starting at the top of the list and just see how far you get. The things lower on the list have a lower priority and are less important to fix if you don't make it.

We did some painting of ugly rooms and laid in new laminate floors instead of the stained carpet, we borrowed a hanger and drove away piles of stash to the garbage (probably 15 trips). And we cleared out so much stuff. We invested in a lot of flowers, both in the garden and inside the house to make the house look nicer. It was not very expensive to buy 3 bunches of flowers a week to make several nice bouquets.

What we did too late, was replacing one of the big windows. The window was leaking and had fog stains between the double glass. This was very visible. And this window was an eye-catcher. After the first round of getting many viewers, but not selling the house, we had the window replaced. The house was sold after that. The other thing we only did in round number 2 was repairing a concrete floor that had crumbled away. This was a thing we could fix ourselves. We also changed broker after the first round of not selling. I cannot stress enough that if you hire a broker, that you better hire a good one. Make sure you read the brochures that that broker writes to sell a house and go viewing one of the houses that the broker sells. Just check how that broker is doing his/her job. There is a big difference is how people do their job. Next time we will sell a house, I am also thinking about giving the broker a whole 10% of the sales price above a certain sum. This is to motivate the broker to work really hard for these last additional dollars. As you are perhaps starting your FIRE, anything extra you can get for your current house will be adding directly to your retirement stash, so try to get the most out of it.

Bicycle_B

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Re: FIRE after being laid off? wasn't really ready.
« Reply #7 on: January 26, 2018, 01:23:10 PM »
Was also laid off in 40s.  Never got around to getting another job.

Single, but stash about a quarter of yours.  Living in cheaper area, am FI.  I think you'll find as you detail things out that you are FI, and can establish a comforting safety layer just by making decisions and implementing them.  The specific decisions are up to you. 

If neither you nor wife has a specific pull towards spending, just explore and communicate, jointly clarifying which options are most satisfying to the two of you while keeping the expenses within reasonable bounds.  The COBRA thing is temporary, but I think the non-subsidized health care expense shows a reasonable upper bound for long term expenses.  At this point it seems like you've worked without giving yourself time to think.  So take the time, think it through, do what you decide to do.  I'd end up selling the most expensive property to reduce the heavy investment in real estate that produces little cash flow, and would move away from HCOL eventually, with your own rental as the short term destination, but the specifics are up to you. 

Overall, you could choose either work or not work, either one will be fine if you just take reasonable steps.  Keep us posted.  This journey really is the start of the rest of your life. 
« Last Edit: January 26, 2018, 01:24:54 PM by Bicycle_B »

lhamo

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Re: FIRE after being laid off? wasn't really ready.
« Reply #8 on: January 26, 2018, 04:35:09 PM »
If you are in the greater Seattle area and williing/able to live off savings for awhile, you might want to talk with a Healthcare Navigator about going on to Medicaid, assuming that the severance is going to be paid in one lump sum, you will not be getting regular unemployment benefits after you get the severance, and you are willing to change your investments for your taxable accounts to something that doesn't issue dividends more than once a year (my understanding is that monthly or quarterly dividend income over $150 will kick you off Medicaid, but once you are on it then if you get periodic taxable income less frequently than quarterly then you have to declare it but it won't get you kicked off).  A Navigator should be able to confirm.  In the Seattle area, I have not had trouble getting good care for my family (including vision and dental) on Medicaid.   You do need to get a referral from your primary care doc for any specialist visits, and the latter sometimes take time to get the referrals approved, but once you are seeing the specialist it is pretty straightforward.  I don't know how easy it is to get care outside the Seattle area, though -- the number of providers might be much more limited....

Also, if you are in WA make under I think $65k/year, your kids would qualify for the Apple Health program with a minimal monthly fee -- I think it is $50-100.  So you might also want to look into that for them and Cobra for yourself/your spouse as an alternative to the more expensive Cobra for the whole family.
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freya

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Re: FIRE after being laid off? wasn't really ready.
« Reply #9 on: January 27, 2018, 11:41:59 AM »
It must feel terrible to be laid off, but from what you've said it could be a blessing in disguise.  Give yourself time and you may well come to see it that way.  By the way, congrats on the foresight that led you to build up a considerable cash stash before  getting laid off.

As others have said, between your taxable cash, the rental house, and the severance pay, plus the big retirement account backing you up, you are in absolutely no financial danger.  Don't even think about moving from your current home yet!!! 

Take whatever time you need to decompress, catch up on sleep, and recover from your burnout and the shock of being laid off.   First order of business is to explore your health insurance options, but no hurry - take the COBRA in the meantime.  In your free time, enjoy starting the process of decluttering your house.  It will feel really, really good and will help clear out the mental cobwebs.  Start with one part of one room, e.g. a single closet, to make the task manageable.  Sell stuff on Craigslist, Facebook marketplace, or Amazon and count the proceeds against the COBRA costs.  Start a garden if you don't already have one, do things around the house and yard, etc.

The next order of business is to deal with the rental house - but again, no hurry.  You described it as "not a nice rental" which suggests you wouldn't want to live there.  You're getting less than 1% return on it, so it sounds like the only reasonable thing to do is sell it.  Talk to a broker before you sink even one penny into fixing it up - you don't want to sink a pile of money (and effort) into it until you're sure you'll get it back with a reasonable profit.

By the time you've done all this, you'll have a much better idea of what you want to do and whether (and where) you want to move.  You'll have enough to pay off your mortgage if you decide to stay put, or to go buy a home for cash in your ideal location without having to sell your current home first.

So in fact...congratulations!!!!




ShoulderThingThatGoesUp

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Re: FIRE after being laid off? wasn't really ready.
« Reply #10 on: January 28, 2018, 03:42:40 AM »
With a net worth of $2M you could be FI just by liquidating those houses and moving out of HCOL zones.

libertarian4321

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Re: FIRE after being laid off? wasn't really ready.
« Reply #11 on: January 28, 2018, 04:01:55 AM »
We have no track record of living the mustachian lifestyle - weíve never been ridiculous spendypants, although weíve been other kinds of ridiculous.  It will be a move into the unknown.  We are expecting to spend about 30k/yr after getting out of the expensive house and into an area where most things are within bike riding distance, but this is really just based on mental comparison of what we do now and things Iíve read on MMM and this forum.

If you've got that much put away, it's a pretty save bet your aren't a wild spender.

Use the opportunity to collect 6 months of "Funemployment."

Then, if you have a real fire to get back into the rat race, have at it.

Otherwise, enjoy retirement.

If you get bored, you can always go back to work later.

GNR

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Re: FIRE after being laid off? wasn't really ready.
« Reply #12 on: January 30, 2018, 10:49:53 AM »
These responses have been incredibly helpful in navigating the first few days of this change.  Thanks to everyone that chimed in.

I like the step by step list Sun Hat, it is a great framework to organize my thoughts into a plan.

that first line gave me a much needed laugh, Jesstache!  It is nice to hear the plans and experiences of someone in a similar boat, although I'm sorry you're in here with me.  I'm expecting the COBRA letter I get to have a very similar number to yours based on some things I've heard.  I qualified for unemployment so thatíll help. 

I read through MMM's recent post on health insurance.  The health ministry is sounding pretty good to us, but weíre still researching that.  We spoke to a Health Navigator, and it would seem that once my former employer has sent the final funds our income will effectively be zero and we would qualify for subsidized healthcare on the exchanges.  The subsidy seems to be based on anticipated income.  The Navigator seemed unsure if profit from selling the house would count as income but suspected it would, in which case apparently the subsidy would pulled back retroactively.  That would be an unpleasant bill.  The reviews on using the exchange healtcare vs health ministry are also really helpful.

That was a helpful point about top stressful life events, Linda_N.  Retiring is right in there with layoff/house selling as well.  The perspective of knowing how much stress I was potentially piling on is really helpful for pacing myself.  Weíre already working through getting rid of a bunch of stuff, regardless of what we do in the end, that will be a benefit.  Weíve interviewed a few brokers now - good idea on viewing some of their houses for sale. 

Overall, stress is starting decrease for the moment, Iím sleeping better, and getting some good exercise in everyday, which is awesome!

LifeHappens

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Re: FIRE after being laid off? wasn't really ready.
« Reply #13 on: January 30, 2018, 12:13:48 PM »
You're dealing with a lot, OP. As others have said, you have plenty of money and you don't need to decide everything today. Get the health insurance sorted first and work from there.

I strongly encourage you to do two things 1) Read "How to Retire Happy, Wild and Free" by Ernie Zelinski with your spouse and go through the exercises and 2) consider starting a journal here for interaction with some really supportive and smart people.

leebuckeye

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Re: FIRE after being laid off? wasn't really ready.
« Reply #14 on: January 31, 2018, 08:02:25 PM »
Similar situation to me, I was laid off in November after 12 years at a company. Got about $20k severance, live in Ohio and have about 1.5m in savings (800k 401k, iras and 800k cash).
My company gave me subsidized health insurance for the severance period 12 weeks. So you may want to check if they provide that or negotiate that. I also learned that CORBA can be carried without paying for it but once you use you have to back pay.
i.e laid off in Jan, you can sign up for CORBA but not pay if you get sick in March you would pay retroactively back to Jan.

I ended up interviewing for new jobs as I felt lost. I got two offers one for about 40% more than i was making and one for less. The good thing about getting FIRED when you are close to FIRE, you have options. I took the other offer less work and I don't have to move chasing money. I can do whatever I want. Someone on here recommended a good book Now What? Revised Edition: 90 Days to a New Life Direction got it from the Library and have been reading it. I figured I would work the easier job and see how I felt.