Author Topic: If you were laid off at age 45...  (Read 1822 times)

Garrett B.

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If you were laid off at age 45...
« on: February 18, 2020, 11:04:20 AM »
If you were laid off at age 45 and had the following 2 options, which would you choose:

Option 1 - work another 5 years then cash in on a yearly pension of $20,000 per year at age 50.  I'd have approximately $10,000 safe withdrawal rate per year from my own investments at that time, so total yearly income would be around $30,000 per year.

Option 2 - work another 15 years then cash in on a yearly pension of $36,000 per year at age 60.  Would probably have around $20,000 safe withdrawal rate per year from my own investments at that time, so total yearly income would be around $56,000 per year.

Note that I am in Canada, if that makes a difference in your response.   

Valvore

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Re: If you were laid off at age 45...
« Reply #1 on: February 18, 2020, 11:29:06 AM »
It would depend on your spending. $30K is not a lot to live on, but if you had a paid off house, then that should be plenty.

I would choose Option 1 because I cannot imagine working another 15 years. Eeek! Shockingly simple math shows anyone can retire in 10 years, so you shouldn't have to work more than 10.

Ockhamist

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Re: If you were laid off at age 45...
« Reply #2 on: February 18, 2020, 11:49:29 AM »
If you were laid off at age 45 and had the following 2 options, which would you choose:

Option 1 - work another 5 years then cash in on a yearly pension of $20,000 per year at age 50.  I'd have approximately $10,000 safe withdrawal rate per year from my own investments at that time, so total yearly income would be around $30,000 per year.

Option 2 - work another 15 years then cash in on a yearly pension of $36,000 per year at age 60.  Would probably have around $20,000 safe withdrawal rate per year from my own investments at that time, so total yearly income would be around $56,000 per year.

Note that I am in Canada, if that makes a difference in your response.

It depends on how you feel about the work you do and how you feel about the money.   That's entirely a you thing.

If you are certain you can live the rest of your life happily with a C$30,000 per year income (not just for a few years ... forever) and you really don't like the work you'd be doing, then Option 1.

If C$30,000 as lifetime income ceiling for your remaining decades on this planet is too confining, or the work isn't something you mind all that much, then Option 2.

If you're like most people, how you feel about work says Option 1 and how you feel about money says Option 2.   There is often Option 1.5:   find something you like better, and do that until the work/income curves cross.
« Last Edit: February 18, 2020, 12:07:00 PM by Ockhamist »

Garrett B.

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Re: If you were laid off at age 45...
« Reply #3 on: February 18, 2020, 11:52:39 AM »
It would depend on your spending. $30K is not a lot to live on, but if you had a paid off house, then that should be plenty.

I would choose Option 1 because I cannot imagine working another 15 years. Eeek! Shockingly simple math shows anyone can retire in 10 years, so you shouldn't have to work more than 10.
If my current mortgage wasn't sucking $1400 from me every month, the shockingly simple math would work just fine. 

SunnyDays

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Re: If you were laid off at age 45...
« Reply #4 on: February 18, 2020, 03:36:14 PM »
Don't forget you will get CPP at 60, assuming you've paid into it and also OAS at 65.  That could be $1000 a month or more.  So if you can make it for 10 years on $30,000, then by all means, retire at 50.  You don't have any guarantee you'll live until 65 or that your health will be good, so take that into consideration.

Garrett B.

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Re: If you were laid off at age 45...
« Reply #5 on: February 18, 2020, 04:16:52 PM »
Don't forget you will get CPP at 60, assuming you've paid into it and also OAS at 65.  That could be $1000 a month or more.  So if you can make it for 10 years on $30,000, then by all means, retire at 50.  You don't have any guarantee you'll live until 65 or that your health will be good, so take that into consideration.

My pension is coordinated with CPP as a "bridge benefit, so once CPP starts, the bridge benefit ends.

Great point on the health.

Zikoris

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Re: If you were laid off at age 45...
« Reply #6 on: February 18, 2020, 07:42:30 PM »
I mean, they both suck but Option 1 I guess?

What I'd actually do is sell the house, put that money into investments, retire immediately, and whatever lifestyle I can afford on that (plus maybe some part-time/gig work here and there), that's how it's going to be. Because for me personally, 45 is waaaaay too old to work one more day at a full time job, let alone 5-15 years.

FatFI2025

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Re: If you were laid off at age 45...
« Reply #7 on: February 18, 2020, 07:46:10 PM »
I'd go for option 2 because $30K is too little for me. But I also wouldn't accept a financial plan where the difference in SWR for working ten additional years is only $10K per year. During the ten years of extra work the 'stache is only going to grow $250K?

So I'd go back to the drawing board and figure out how to work less than 10 more years, but get my combined income up above $50K.

Ready2Save27

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Re: If you were laid off at age 45...
« Reply #8 on: February 18, 2020, 07:54:11 PM »
I donít think option 1 is viable. I donít like option 2. Why canít there be a third option? Are you open to working part time after 5 years to make up for a low stash? Can you increase your income now? Can you reduce expenses now? I wouldnít accept a lose-lose scenario.

tawyer

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Re: If you were laid off at age 45...
« Reply #9 on: February 18, 2020, 09:23:38 PM »
Option 1 without a doubt. At age 50, you only have a 90% chance of being alive at age 60, all things being equal. I'd sooner spend that decade outdoors improving my health.

Even considering USD/CAD exchange rate and PPP that $30K is more than I need to live on in a VHCOL city. However, if that's too lean for whatever reason I would still take option 1 but look for minor income sources for fun, say $3K per year, and cut your expenses by 10%.

2sk22

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Re: If you were laid off at age 45...
« Reply #10 on: February 19, 2020, 02:49:07 AM »
When I was age 45, I would have unhesitatingly selected option 2. I enjoyed my job at that time and planned to keep working indefinitely. Now, in my 50s, I would select option 1.

Malcat

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Re: If you were laid off at age 45...
« Reply #11 on: February 19, 2020, 04:47:45 AM »
These are not the only two options and there isn't enough info to make any sense of them.

Do you love your work?
What do you want your retirement to look like?
Is there other work you could see yourself enjoying, even just part time?
If you left the day job, would you still have to live in a place where your mortgage is $1400/mo?
Are you flexible about where you live?
Are you open to further training/education to open more flexible career options?
Do you a family to support?

Etc, etc, etc

Garrett B.

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Re: If you were laid off at age 45...
« Reply #12 on: February 19, 2020, 05:53:41 AM »
These are not the only two options and there isn't enough info to make any sense of them.

Do you love your work?
What do you want your retirement to look like?
Is there other work you could see yourself enjoying, even just part time?
If you left the day job, would you still have to live in a place where your mortgage is $1400/mo?
Are you flexible about where you live?
Are you open to further training/education to open more flexible career options?
Do you a family to support?

Etc, etc, etc
Great points and considerations.  I'll answer your questions below:

Do you love your work?  While I have an amazing job that provides a high salary, great work-life balance, lots of flexibility, great boss and colleagues, I'm simply not passionate about my work.  I simply dont like working and the grind that goes along with it.
What do you want your retirement to look like?  I see myself having a daily routine, going to the gym, perhaps volunteering, taking some courses of things Ive always wanted to learn.  And travel...lots of travel, which is why I've budgeted $5,000 per year to travel. 
Is there other work you could see yourself enjoying, even just part time?  Possibly working 1-2 days a week if I enjoyed it and it had lots of flexibility. 
If you left the day job, would you still have to live in a place where your mortgage is $1400/mo?  I could easily sell my current home and live in a very nice condo mortgage free.  As it stands now, the mortgage in my current home will be paid off in 10-12 years. 
Are you flexible about where you live?  Yes, but I already live in a very LCOL area. 
Are you open to further training/education to open more flexible career options?  Perhaps.
Do you a family to support?  No, not currently. 

And just to be clear on my question, I am not being laid-off, and there is no indication I will be laid off.  I just like mentally preparing for the possibility I would be laid off, what my options would be if that were to occur. 

Malcat

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Re: If you were laid off at age 45...
« Reply #13 on: February 19, 2020, 09:40:19 AM »
These are not the only two options and there isn't enough info to make any sense of them.

Do you love your work?
What do you want your retirement to look like?
Is there other work you could see yourself enjoying, even just part time?
If you left the day job, would you still have to live in a place where your mortgage is $1400/mo?
Are you flexible about where you live?
Are you open to further training/education to open more flexible career options?
Do you a family to support?

Etc, etc, etc
Great points and considerations.  I'll answer your questions below:

Do you love your work?  While I have an amazing job that provides a high salary, great work-life balance, lots of flexibility, great boss and colleagues, I'm simply not passionate about my work.  I simply dont like working and the grind that goes along with it.
What do you want your retirement to look like?  I see myself having a daily routine, going to the gym, perhaps volunteering, taking some courses of things Ive always wanted to learn.  And travel...lots of travel, which is why I've budgeted $5,000 per year to travel. 
Is there other work you could see yourself enjoying, even just part time?  Possibly working 1-2 days a week if I enjoyed it and it had lots of flexibility. 
If you left the day job, would you still have to live in a place where your mortgage is $1400/mo?  I could easily sell my current home and live in a very nice condo mortgage free.  As it stands now, the mortgage in my current home will be paid off in 10-12 years. 
Are you flexible about where you live?  Yes, but I already live in a very LCOL area. 
Are you open to further training/education to open more flexible career options?  Perhaps.
Do you a family to support?  No, not currently. 

And just to be clear on my question, I am not being laid-off, and there is no indication I will be laid off.  I just like mentally preparing for the possibility I would be laid off, what my options would be if that were to occur.

Simple then, if you aren't happy with your current life and career and have no obligations holding to it other than your own priorities, then change those priorities and craft a life you would actually enjoy instead.

You are looking at a very long timeline before you can retire with a comfortable amount of assets, so it's very much worth reexamining your work options to better suit your desires.

There's a huge range of possibilities between starting to draw from your assets at 45 vs continuing to work your full time job until 60. Those are the two furthest extremes, and the moderate options in the middle are all very workable and quite attractive.

If there is some form of work that you could do in an ideal way, especially if it could cover your annual expenses, that leaves years and years for your invested assets to grow on their own. Also, do you have an option to defer your pension even if you leave your job at 45? DH has this option with his pension, and the annual amount jumps significantly.

If so, you could spend the remainder of your middle age years doing really interesting and fun work, with a very low tax burden, and then coast into some very cushy senior years if you no longer want to continue working.

Really expand your thinking here. You have literally every option imaginable open to you at the moment, and absolutely nothing in your way of living however you would like to live.

SunnyDays

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Re: If you were laid off at age 45...
« Reply #14 on: February 20, 2020, 09:58:17 AM »
Don't forget you will get CPP at 60, assuming you've paid into it and also OAS at 65.  That could be $1000 a month or more.  So if you can make it for 10 years on $30,000, then by all means, retire at 50.  You don't have any guarantee you'll live until 65 or that your health will be good, so take that into consideration.

Are you sure the bridging is standard?  I had the option of it in my pension, but didn't go for it, because the decrease in CPP wasn't worth it.  Now I will get a higher amount next year if I apply for it.  I decided to keep it in reserve as inflation protection.