Just got laid off, what's next?

[Frugal D]

Hi all,

Just received notice of my role going away effective the first week of the new year. Curious to get the forum's opinion on next steps based on the current balance sheet:

Assets
401k: $440,000
Checking: $83
Taxable Acct: $695,000
Car: $25,000
House: $1,190,000 (purchased in Seattle in November 2016)

Liabilities
HELOC @ L + 3.50%: $217,000

Net Worth: $2,133,000

I am expecting my severance package to total about $26,000 excluding the 2 months worth of COBRA. 2018's expenses should come in around $55,000 which could obviously be trimmed. We are a family of 3 including a 2 year old child. Wife does not currently work.

Open to a wide range of ideas. I don't think I'm quite at FIRE status, though know I'm close with some shuffling of assets (downsizing the house).

Appreciate the forum's thoughts!

[SKL-HOU]

Did you already agree to the severance or can you negotiate? Another poster just negotiated from 8 weeks to 12 weeks. He asked for 18 weeks and the company said they are doing him a favor by giving him a severance blah blah but then upped the severance to 12 weeks anyway. But other than that, enjoy your baby!

[GuitarStv]

Sell your house, pay off your debts.  You should have well over a million and a half to invest which gives you 60k per year.  Sounds pretty comfortable.

[Frugal D]

Haven't signed anything, but apparently severance is non-negotiable.

[SwitchActiveDWG]

What are you expenses?

[Frugal D]

This year will come in at $55k which I know can be trimmed to $40k if necessary.

[Cassie]

Maybe get a part time job to make up the difference.

[SKL-HOU]

Haven't signed anything, but apparently severance is non-negotiable.

That is what I always thought. I couldn't find the post just now but this guy just successfully negotiated his severance.

[2Birds1Stone]

Sell the house.

Invest the $1.5M portfolio, and draw 3-3.5% per year......never have to work again.

[SKL-HOU]

https://forum.mrmoneymustache.com/ask-a-mustachian/getting-canned-how-to-negotiate-severance/

[terran]

Sounds FI. I'd move away from Seattle and call it a day.

[Luck12]

Just based on the numbers, you are definitely FIRE ,esp since you can cut down expenses.

[doggyfizzle]

Do your 2018 expenses include health insurance?  If not, part-time work (and light part-time work at that) might be all you need to qualify for a silver plan plus subsidy, service the HELOC debt, and live off your investment income.

[jim555]

Apply for unemployment.  Sign up for ACA or COBRA.

[Dee18]

Seems like your big decision is whether you want to keep the house.

[I'm a red panda]

Maybe get a part time job to make up the difference.

Keep in mind that if you are on unemployment, it can often be better to NOT get the job.  You need to research how that works in your state. Our state puts priority on not having people be underemployed, so it was not in my best interest to get a low paying job when first on unemployment.

[Loren Ver]

I think this all really depends on what you (and your family) want to do.  Given your money situation, a world of options is before you, when you really think about it, what do you want to do?  We can't tell you that.  Once you know, we might be able to help you make a solid plan to get there. 

[Villanelle]

Are you open to moving? 

In your shoes, I'd probably downsize the house. I'm guessing that much $$ is a pretty large house, even in a fairly pricey area.  And if you don't have to consider commute, you can probably also move somewhere cheaper.  Then both spouse and I would sign up to substitute teach (after doing some math regarding UI and when it would be best to sign up for that), assuming you qualify (which is often just having a college degree and passing a test). And then I'd consider it done. 

[Livingthedream55]

I think this all really depends on what you (and your family) want to do.  Given your money situation, a world of options is before you, when you really think about it, what do you want to do?  We can't tell you that.  Once you know, we might be able to help you make a solid plan to get there.

+1
Count your blessings - you have a wonderful opportunity here. You could make the math work (assuming you decide to sell/downsize house possibly relocate). Do you have strong ties to Seattle? Do you want to work for "the man"? You get to decide. The world is your oyster. You and your wife should have some heartfelt conversations about what your new life could look like. Congratulations on being in a very good place with many, many options.

[Lan Mandragoran]

Sure sounds fi to me. Sell house buy a ridiculous house somewhere else (500k buys amazing houses almost anywhere in usa). Live on 60k, or take a year or two before you pick up more work.

[robartsd]

Using the 4% rule, your current investment assets support about $45,400/yr, so if you cut to $40,000/yr you are at FIRE without downsizing. Assuming you'd prefer spending about $55,000/yr you need about $240,000 more invested which you could easily get by downsizing to a ~500k house. So it comes down to how much you are tied to your HCOL area. In any case, I wouldn't be too eager to go back to work with a young child at home.

[big_slacker]

The real decision is whether you REALLY love where you live or are willing to move. Personally I'd GTFO of Seattle but maybe you love it there.

If you like the area but have had enough city there are the burbs and smaller towns east on 90. Snoqualmie, north bend, etc. Or a little north in Fall city, carnation and duvall. Obviously you're committing to small town life but OTOH OMG MOUNTAINS. :)  FWIW I moved from bellevue to carnation and have no regrets. Love it out here, tractors and all.

Gig Harbor IMO is a hidden gem. Easy access to the water, not crowded, houses aren't crazy $$, pretty decent mountain bike park (if you care) and still not THAT far from the city for day trips.

[pecunia]

Tri Cities - no rain.

[WorkingToUnwind]

Go have some fun! Travel, relax, enjoy time with friends and family. You're FI. No rush to jump back into work :)

[BicycleB]

Sell house and retire, or keep house and touch up fine points. So - learn some more details, think deeply about what you want in life, and go for it.

"Think deeply about what you want in life" is to be done by you and your wife, obviously.

[blackomen]

Maybe I'm in the minority here but FIRE is my backup plan for job loss or being obsolete (I work as a programmer), not my end goal.  Although your net worth isn't going to go too far in Seattle, have you thought about FIREing in a lower COL area?

[Brother Esau]

You're FI. Good on you and congrats. You can enjoy sorting through what the next steps are with peace of mind.

[pecunia]

You know - with Seattle's minimum wage of $15 / hour.  If you work about 20 hours a week, that's $15K a year.  This could be a nice bump until you figure out what you really want to do.  Odd as it sounds, it could be an educational experience.

[big_slacker]

You know - with Seattle's minimum wage of $15 / hour.  If you work about 20 hours a week, that's $15K a year.  This could be a nice bump until you figure out what you really want to do.  Odd as it sounds, it could be an educational experience.

The wage isn't universally raised yet IIRC. It also might not be a good idea if the OP wants to go back to work in a higher paying field. Going from say an Amazon engineer to Starbucks for 2 years then start applying for engineering jobs again is a red flag for that often results in a resume being round filed. Much better thing to do would be setting up a consulting LLC in the same field and just doing a few small gigs here and there. It's super easy to make that same $15k and much more well regarded. 

[TomTX]

I am expecting my severance package to total about $26,000 excluding the 2 months worth of COBRA. 2018's expenses should come in around $55,000 which could obviously be trimmed. We are a family of 3 including a 2 year old child. Wife does not currently work.

Verify how COBRA and ACA signup eligibility work. It will almost certainly cheaper to go an ACA plan than continue COBRA.

I know if you pay for COBRA, you can't get ACA subsidies without finishing out COBRA. Not sure if your employer paying for it works this way or not.

[pecunia]

You know - with Seattle's minimum wage of $15 / hour.  If you work about 20 hours a week, that's $15K a year.  This could be a nice bump until you figure out what you really want to do.  Odd as it sounds, it could be an educational experience.

The wage isn't universally raised yet IIRC. It also might not be a good idea if the OP wants to go back to work in a higher paying field. Going from say an Amazon engineer to Starbucks for 2 years then start applying for engineering jobs again is a red flag for that often results in a resume being round filed. Much better thing to do would be setting up a consulting LLC in the same field and just doing a few small gigs here and there. It's super easy to make that same $15k and much more well regarded. 

I believe you are right  Why is that?  If someone strays from the common pattern does it scare them?

[big_slacker]

You know - with Seattle's minimum wage of $15 / hour.  If you work about 20 hours a week, that's $15K a year.  This could be a nice bump until you figure out what you really want to do.  Odd as it sounds, it could be an educational experience.

The wage isn't universally raised yet IIRC. It also might not be a good idea if the OP wants to go back to work in a higher paying field. Going from say an Amazon engineer to Starbucks for 2 years then start applying for engineering jobs again is a red flag for that often results in a resume being round filed. Much better thing to do would be setting up a consulting LLC in the same field and just doing a few small gigs here and there. It's super easy to make that same $15k and much more well regarded. 

I believe you are right  Why is that?  If someone strays from the common pattern does it scare them?

I think it's perception. If someone goes from a $200k job to barista it looks like they had a meltdown, or did something so bad they couldn't work in their field for a while, etc. But if you frame it as taking a year off to finish up that book you wanted to write, take that extended family trip of a lifetime or care for a terminally ill parent it's not such a big deal. I don't make any judgement on the fairness of that perception, I'm just saying if a market isn't desperate for experienced people something like that will definitely not be in your favor.

[liberty53]

OP - what do you and your family want to do? Do you want to work? Does your spouse want to work? Are you willing to relocate? Does the family want to relocate?

You certainly have enough assets to buy some time for planning and execution.

On first blush, with a 2 year old you probably have a little longer in your working life unless you want to fire at the bare minimum required for current reduced expenses. You seem to indicate this yourself.

[Frugal D]

OP - what do you and your family want to do? Do you want to work? Does your spouse want to work? Are you willing to relocate? Does the family want to relocate?

You certainly have enough assets to buy some time for planning and execution.

On first blush, with a 2 year old you probably have a little longer in your working life unless you want to fire at the bare minimum required for current reduced expenses. You seem to indicate this yourself.

Working for a paycheck is no longer absolutely necessary so I'm now really only interested in working on something I'm passionate about (don't know what this is yet other than running my portfolio). With the little one likely enrolling in pre-K next year my wife would probably like to find something part time she enjoyed. We love some aspects of Seattle but actively looking to get out of the city. The city has changed a lot as anyone who lives here knows.

That said, we do not want to move out of Washington. We love this state for many reasons; water, mountains, no income tax.

I'm definitely suffering "1-more year" syndrome along with general anxiety of not being employed. I also didn't want to leave the workforce until I had my son's college completely paid for in present value terms.

The dream is to end up on Bainbridge for all it has to offer. I know we could easily do this now, but struggling to pull the trigger during uncertain times.

[2Birds1Stone]

Make it happen! As a resourceful sales professional, there is not doubt in my mind that you will find some sort of rewarding and most likely highly paid work in the future. It's just in our blood. Enjoy the time with the family. Even if it's just the wife that goes and works PT, you are set for life (including your kids college), With over a decade till you have to pay for school, you can pivot in many different directions as you explore your passions and what you like to do outside of work.

[Linea_Norway]

That said, we do not want to move out of Washington. We love this state for many reasons; water, mountains, no income tax.

If you would decide to FIRE, it might be beneficial to live in a state with income tax (you will have no income), but lower property tax or other kind of taxes.

[fuzzy math]

Tri Cities - no rain.

As a native, I am shocked anyone would recommend living there.


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[Frugal D]

Update here: I went back into the workforce with someone I knew to be a difficult boss but was hoping things had changed -- they had not. After a few months the writing is on the wall and it looks like I'll be back where I started. Here's an update to the balance sheet:

Assets
401k: $473,000
Checking: $105
Taxable Acct: $901,000
Car: $23,000
House: $1,150,000 (purchased in Seattle in November 2016)

Liabilities
HELOC @ L + 3.50%: $212,000

Net Worth: $2,335,100

A note about the taxable account: It's fairly concentrated in some long term growth stocks that I really don't want to sell which is why working is still appealing as a means to pay for monthly expenses.

We're looking at a house in a great school district for $650-700k which would unlock between $200-300k of home equity after expenses. It's not the long term dream home, but if we pull the trigger I believe we are effectively FIRE. That said, taking the official plunge into FIRE with a 2 year old is a bit unnerving.

Probably a different thread, but how did the folks who are already FIRE finally make the leap? I always had $3mm in my head as the FIRE number for safety purposes. Now I could be forced into FIRE which could be the best thing to ever happen, but the thought of making a large miscalculation at age 33 is terrifying.

Appreciate the ideas and support.

[NorCal]

Haven't signed anything, but apparently severance is non-negotiable.

Everything is negotiable.  You have the FU money to negotiate it if you really want.  One of my early career lessons was to negotiate harder on things presented as "non-negotiable".

You can straight up tell them that $26K is too low and you're not coming in tomorrow unless they up it.

Of course, you have to be ready to make good on the threat if they say no.  But that's the power of FU money.

Obviously, only pick this fight if it's worth it to you.  Evaluate the outcomes of them saying yes vs. saying no.

[Cassie]

At 33 you certainly won’t be forced into fire. You could take some time off and distress. Then decide if you just need a break and return to work. If you love it then let it be permanent.   Are you planning more children because that can make a difference in your plans and are you planning to pay for college.   If you retire now you could spend 60 years in retirement which is a long time. As a former social worker it does bother me when people with significant assets use insurance designed for the poor. Now I realize you may not have a choice to pay based on the rules but I would keep working before I did that because I feel it’s not in line with my values.  Good luck with whatever you decide.

[use2betrix]

I may have missed it, but what’s your income? With your net worth, sticking it out for a year at $250k/yr is a lot different than sticking it out for $75k/yr...

[Frugal D]

Income is currently $100k. If it was my choice I probably would just stick it out, but I fear it's not going to be my choice very soon.

[Frugal D]

Are you planning more children because that can make a difference in your plans and are you planning to pay for college.

No more children.

[TempusFugit]

A note about the taxable account: It's fairly concentrated in some long term growth stocks that I really don't want to sell...

This would scare me.  If you are highly concentrated in specific stocks that is really hard to see as a good multi-decade strategy.   All of the studies that lead to our vaunted 4% SWR rule are based on diversified holdings.  While no strategy is without risk, diversificiation is the best we have.   

[fuzzy math]

1.3 mill and a paid off home. That's $52k a year at a 4% withdrawal rate. Why is that not achievable for you?

[libertarian4321]

You are a multimillionaire.

So you could do 6-months of funemployment, followed by early retirement?

[Frugal D]

1.3 mill and a paid off home. That's $52k a year at a 4% withdrawal rate. Why is that not achievable for you?

House still has about $210k on it at the moment. We're eyeing some properties between $650-750k to officially pay off the house while adding to the taxable account. At that point I do believe we would be FIRE.

[Frugal D]

A note about the taxable account: It's fairly concentrated in some long term growth stocks that I really don't want to sell...

This would scare me.  If you are highly concentrated in specific stocks that is really hard to see as a good multi-decade strategy.   All of the studies that lead to our vaunted 4% SWR rule are based on diversified holdings.  While no strategy is without risk, diversificiation is the best we have.

I enjoy taking calculated risks in concentrated positions. It is the only way I could have gotten to where I am today. I know it's not a Mustachian trait for most, but I truly enjoy the work and research that goes into it. About 20% of the portfolio is in diversified indexes. Doesn't go down much, but doesn't go up much either.

[Frugal D]

You are a multimillionaire.

So you could do 6-months of funemployment, followed by early retirement?

I don't believe I will qualify for unemployment as I will be walking away myself. The environment is too toxic for a multimillionaire to put up with.

Any suggestions on how I can extract some money on my way out or exit in a way that would qualify me for unemployment? 

[TomTX]

You are a multimillionaire.

So you could do 6-months of funemployment, followed by early retirement?

I don't believe I will qualify for unemployment as I will be walking away myself. The environment is too toxic for a multimillionaire to put up with.

Any suggestions on how I can extract some money on my way out or exit in a way that would qualify me for unemployment?

You're effectively FI. Start acting like it.

Do your job, ignore the bullshit. Stand up for yourself.

Worthless meeting? Walk out. Consider ignoring future appointments from the organizer.

Time-suck of a coworker annoying you? Walk away, or ask them to leave you alone.

Worthless busywork? Don't do that part anymore. Focus on doing the worthwhile work.

Politicking backstabbers? Let everyone else know who they are and what they're doing.

Basically, don't put up with whatever is making your work environment toxic. Either it gets better, or they fire you - likely  for reasons unrelated to performance.