Author Topic: Am I making a huge mistake?  (Read 2632 times)

ItsALongStory

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Am I making a huge mistake?
« on: July 09, 2020, 09:19:06 PM »
hey,

I clearly don't think we're making a mistake at this point, but want your input on our current plan of record.

Our situation:
38 (M) $130k salary with about $20k annual bonus. $50k in unvested stock that vests throughout the next 5 years, spread pretty flat across the years.
61 (F) $60k net pension that is COLA and health insurance premiums paid for (no spousal benefit)

Investments:
Roughly $560k invested between the two of us with over half in taxable brokerage

Our plan:
I'm planning to resign in the next 30 days, collect this year's bonus and one more quarterly vesting cycle ($4k or so). We just sold our house and will be investing the equity, the value is already reflected in the investments. My wife is amazingly fit and healthy for her age but has had skincancer (in 2010) and a minor stroke (2015 or 2016) that has reminded us of her age. We have planned out a budget that will enable us to comfortably slow travel on her retirement income, which will not be taxed in the EU beyond the US taxes thanks to my EU citizenship status and her ability to gain permanent residence in my home country. We might dip into our taxable brokerage for an exceptional opportunity but plan to keep it limited to a 1.5-2% ceiling of the entire portfolio.

My risk is clearly primarily associated with 2 things:
1. separation or death of my spouse in the early stages of our plan
2. sequence of returns risk in the first few drawdown years

My thought is to get some life insurance for her for 10 years so we can mitigate a lot of the risk associated with her death. I'd likely go back to work anyway at that point but it would be optional.

I'm eligible for Soc Sec (about $1k per month) and likely to inherit some property, both of which are not part of the plan. I also might work a bit in the next 10 years during the slower months.

Am I being stupid for giving up a lucrative career at my age? Time is of the essence, we may not have too many years left. I have a strong feeling that with conservative market returns I have enough to make ends meet on my own should things end badly and willing to roll the dice.

ixtap

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Re: Am I making a huge mistake?
« Reply #1 on: July 09, 2020, 09:33:23 PM »
It sounds like you have a sound financial plan. What I question is choosing to quit your career right now when you state that your plans are to travel.

ChpBstrd

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Re: Am I making a huge mistake?
« Reply #2 on: July 10, 2020, 09:40:38 AM »
How easy would it be to resume making $130k/y?

E.g. if you are a doctor, engineer, or a programmer, maybe a 2 year sabbatical wouldn't hurt much, especially if you can keep your skills and certifications current. If you are a specialist in one particular niche function that exists primarily within your organization, and whose value is based on your reputation within the organization, or if you are a small business person - could be another story.

As you know, you're not FIRE by yourself without the pension financial benefit. A $500k life insurance policy with a 10 year term would resolve much of this uncertainty and allow you to take a few years off, even with the potential loss of income, if that is what you want to do. If your SO died, at least you'd be very close to FI. The life insurance that would enable the travel might cost a fraction of the travel itself, so don't let the tail wag the dog. Check the price on lifequotes.com.

I'd consider trying to get the best of both worlds by negotiating some unpaid time off to travel. Given current events, a lot of companies might welcome the chance to save themselves $40-60k or so in exchange for a few months without you. Those savings might prevent someone else from being laid off!

ItsALongStory

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Re: Am I making a huge mistake?
« Reply #3 on: July 10, 2020, 10:10:53 AM »
It sounds like you have a sound financial plan. What I question is choosing to quit your career right now when you state that your plans are to travel.

Fair point, I won't quit until we have line of sight to the ability to travel to Europe though.

ItsALongStory

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Re: Am I making a huge mistake?
« Reply #4 on: July 10, 2020, 10:14:59 AM »
How easy would it be to resume making $130k/y?

E.g. if you are a doctor, engineer, or a programmer, maybe a 2 year sabbatical wouldn't hurt much, especially if you can keep your skills and certifications current. If you are a specialist in one particular niche function that exists primarily within your organization, and whose value is based on your reputation within the organization, or if you are a small business person - could be another story.

As you know, you're not FIRE by yourself without the pension financial benefit. A $500k life insurance policy with a 10 year term would resolve much of this uncertainty and allow you to take a few years off, even with the potential loss of income, if that is what you want to do. If your SO died, at least you'd be very close to FI. The life insurance that would enable the travel might cost a fraction of the travel itself, so don't let the tail wag the dog. Check the price on lifequotes.com.

I'd consider trying to get the best of both worlds by negotiating some unpaid time off to travel. Given current events, a lot of companies might welcome the chance to save themselves $40-60k or so in exchange for a few months without you. Those savings might prevent someone else from being laid off!

It would definitely be tough to get back to this earnings level but honestly I consider myself pretty much Coast FI and wouldn't necessarily want the higher stress roles. I am in a role that is pretty transferable but not always as easy to execute remotely, my current employer is a big tech firm so I think that should open some doors if I want to return to the workforce.

Given that we're such a large company they may not be in a position to offer me some creative solution, the sabbaticals are generally available at the higher echelons of the company. There are some COVID related leave options but I feel it'd be unethical to take advantage of those and then quit shortly thereafter. I'll float the idea regardless and see what the bossman has to say.

LifeHappens

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Re: Am I making a huge mistake?
« Reply #5 on: July 10, 2020, 10:25:01 AM »
I relate very strongly to your dilemma. I am 43 and my husband is 70. It's been a struggle to balance our need to make the most of our time together with our need to keep earning some income.

We don't have any desire to slow travel in the way you've laid out, so I have come up with a different solution. I am a remote contractor. In non-Pandemic times I average 24-30 hours of work per week. This level of work gives me the ability to keep saving into our IRAs as well as fund renovations on our current house (we're slow flippers).

When I want to take extended time off, I work ahead as much as possible and just go. No need to ask permission as long as I'm meeting my deadlines. We've had several 2-3 week trips together as well as many, many long weekends and week long trips. It is working pretty well for now.

Laura33

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Re: Am I making a huge mistake?
« Reply #6 on: July 10, 2020, 11:09:54 AM »
I would not get life insurance; with her age and health history, the premiums will be outrageous and take a huge cut out of her pension payments.  The good news is that you have sufficient assets to enjoy the time with your DW now and deal with whatever happens when it happens -- particularly if you can live off of her pension and leave your nest egg to grow.  As I see your two risk factors, if she dies soon after you quit, you will be in an excellent situation to go back to work, because you will have an updated resume with recent work experience.  OTOH, if she lives a long while and you live off the pension income, you can let your 'stache grow, and it will double or triple or more by the time you need it. 

Your worst-case scenario is actually the in-between:  your wife dies in 5 years or so, so your resume is out of date but your 'stache hasn't had the chance to grow to a level that can sustain you permanently.  But even if that happens:  you will still have well over half a million dollars to get by while you're figuring out your next step!  That doesn't exactly suck.

tl;dr:  You know that it is very likely that your wife will die significantly before you do.  If and when that happens, you might need to go back to some kind of work.  Don't let your fear of the "might" lead you to pass up on time that you know is limited. 

ItsALongStory

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Re: Am I making a huge mistake?
« Reply #7 on: July 10, 2020, 04:53:13 PM »
I would not get life insurance; with her age and health history, the premiums will be outrageous and take a huge cut out of her pension payments.  The good news is that you have sufficient assets to enjoy the time with your DW now and deal with whatever happens when it happens -- particularly if you can live off of her pension and leave your nest egg to grow.  As I see your two risk factors, if she dies soon after you quit, you will be in an excellent situation to go back to work, because you will have an updated resume with recent work experience.  OTOH, if she lives a long while and you live off the pension income, you can let your 'stache grow, and it will double or triple or more by the time you need it. 

Your worst-case scenario is actually the in-between:  your wife dies in 5 years or so, so your resume is out of date but your 'stache hasn't had the chance to grow to a level that can sustain you permanently.  But even if that happens:  you will still have well over half a million dollars to get by while you're figuring out your next step!  That doesn't exactly suck.

tl;dr:  You know that it is very likely that your wife will die significantly before you do.  If and when that happens, you might need to go back to some kind of work.  Don't let your fear of the "might" lead you to pass up on time that you know is limited.

Thank you for your well worded response, it's a dilemma but I am confident that my heart will win out here. I ran some simulations for life insurance and sounds like $300k for 10 years would only run us about $100 per month. Given the minimal impact on our budget, we are inclined to get the life insurance for roughly that amount since it would offset some of that growth.

ItsALongStory

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Re: Am I making a huge mistake?
« Reply #8 on: July 10, 2020, 04:54:44 PM »
I relate very strongly to your dilemma. I am 43 and my husband is 70. It's been a struggle to balance our need to make the most of our time together with our need to keep earning some income.

We don't have any desire to slow travel in the way you've laid out, so I have come up with a different solution. I am a remote contractor. In non-Pandemic times I average 24-30 hours of work per week. This level of work gives me the ability to keep saving into our IRAs as well as fund renovations on our current house (we're slow flippers).

When I want to take extended time off, I work ahead as much as possible and just go. No need to ask permission as long as I'm meeting my deadlines. We've had several 2-3 week trips together as well as many, many long weekends and week long trips. It is working pretty well for now.

You seem to have found a great balance between retiring extra early (based on standard calculations) and still having sufficient time to spend together. My wife has been traveling with girlfriends and by herself in the last few years to offset the wait time and while i'm not necessarily jealous of her experiences they are things I'd prefer to enjoy together.

Cassie

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Re: Am I making a huge mistake?
« Reply #9 on: July 11, 2020, 01:06:16 PM »
I agree with Laura. The insurance company will do a physical, bloodwork and then review her medical records. Then the price will be much higher than 100/month.

Dicey

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Re: Am I making a huge mistake?
« Reply #10 on: July 11, 2020, 02:15:33 PM »
Man, some of the replies on this thread are cracking me up. I am 62. I've had skin cancer a couple of times as well as a more rare and serious cancer in my twenties. I also have a heart condition. None of this is apparent to look at me. It's not like OP's wife is on death's door! Even a minor stroke isn't an automatic life shortener, especially if she received prompt treatment.

My answer to OP is that life is short and none of us knows how long we're going to live. The whole point of FIRE is to make the most out of the days we're granted.

Also, when I needed cheap Term Life Insurance, I went with WAEPA (Worldwide Assurance for Employees of Public Agencies). If either of you have a connection, it's worth checking out. My Dad worked for the FAA, which is how I qualified. They were great to work with and the premiums were cheap.

Just for reference, in case you don't know anyone who's in their early sixties, this is me last week.

ItsALongStory

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Re: Am I making a huge mistake?
« Reply #11 on: July 11, 2020, 06:28:55 PM »
@Dicey my wife would certainly agree with you, she is not planning on slowing down anytime soon.

We will apply for some life insurance and see what the outcome is. She is in good shape, not overweight and many of her issues go back a number of years (5+ for the most part).

The numbers I quoted were trough policy genius so not sure how accurate it would be.

frugs

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Re: Am I making a huge mistake?
« Reply #12 on: July 11, 2020, 06:50:33 PM »
Do not recommend leaving your career. Yes I do think you are making a mistake. Instead, have you thought about a remote job? Given that you are at the height of your career recommend conducting a serious search, including hitting up all your contacts, to find a remote job opportunity - part time or full time. Right now with the pandemic going on, traveling and seeing the world won't be much fun anyway with half of everything closed down and all the precautions one needs to take when going even down the street. Why not take a few months to see what remote options might be available? Even better can you work out a remote arrangement with your current company? You are at the height of your career, the momentum is there that you may be able to call the shots.  I have done a lot of hiring and I will tell you employers are very uncomfortable with employment gaps. Once the momentum is gone you are starting over. Once you at least explore the possibility of going remote, then you will at least know you really explored other options before quitting. I have been working remote for years while seeing the world including extended stays in Europe. I can't imagine I would have enjoyed the trips as much without the reassurance of a constant stream of income coming in.

BikeFanatic

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Re: Am I making a huge mistake?
« Reply #13 on: July 11, 2020, 07:00:25 PM »
If you can live on 60 K I say go for it, congratulations on your early retirement you and your spouse can travel and enjoy you lives (when this Covid is over).

spartana

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Re: Am I making a huge mistake?
« Reply #14 on: July 12, 2020, 10:16:21 AM »
One thing to consider is the cost of potential nursing home care and how that may impact your personal seperate stash. Many states will consider your income and assets, even if held separately, as joint assets and you run the risk of using up your stash as well as hers to pay for her care. Some states have protections in place so as not to leave the well-spouse completely impoverished but they still only allow you to keep a small portion of your seperate assets.

ETA this is only if you are legally married. Co-habitation generally doesn't count. Not sure how it works if she gains EU residency either but might be impactful if she is a US citizen needing long term care or a nursing home care in the US.
« Last Edit: July 12, 2020, 10:22:34 AM by spartana »

Laura33

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Re: Am I making a huge mistake?
« Reply #15 on: July 13, 2020, 07:45:10 AM »
Hey @Dicey -- just to be clear, it's the OP who brought up the "what if she dies in the next few years?" bit.   Given my own rapidly-advancing age, early 60s sounds downright sprightly to me.  ;-)

Dicey

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Re: Am I making a huge mistake?
« Reply #16 on: July 13, 2020, 09:03:26 AM »
Hey @Dicey -- just to be clear, it's the OP who brought up the "what if she dies in the next few years?" bit.   Given my own rapidly-advancing age, early 60s sounds downright sprightly to me.  ;-)
Yup. I was commenting on the pessimistic nature of some of the replies.

ChpBstrd

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Re: Am I making a huge mistake?
« Reply #17 on: July 13, 2020, 09:11:18 AM »
Hey @Dicey -- just to be clear, it's the OP who brought up the "what if she dies in the next few years?" bit.   Given my own rapidly-advancing age, early 60s sounds downright sprightly to me.  ;-)
Yup. I was commenting on the pessimistic nature of some of the replies.
Well, itís basically a thread about risk management. No need to dwell on it too much though. You buy your life insurance and then head off on vacation!

spartana

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Re: Am I making a huge mistake?
« Reply #18 on: July 13, 2020, 09:31:19 AM »
Hey @Dicey -- just to be clear, it's the OP who brought up the "what if she dies in the next few years?" bit.   Given my own rapidly-advancing age, early 60s sounds downright sprightly to me.  ;-)
Yup. I was commenting on the pessimistic nature of some of the replies.
I thought we all became ancient, crippled, and senile by 40. I mean at that advanced age how can we even go to the bathroom unaided ;-)!

Yes 60s isn't "old" but if the OPs spouse has had chronic medical conditions that will get worse or perhaps shorten her life then thinking of quitting your job to enjoy your time together is the right choice imho. I'm with someone quite a bit younger then me (although I'm healthy) who is FIRE and wouldn't want to wait around until to do FIREy things until we were both older.

ItsALongStory

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Re: Am I making a huge mistake?
« Reply #19 on: July 14, 2020, 07:17:09 AM »
Thanks everyone for your responses, we will continue to ready ourselves for the day when Europe opens its borders back up to immigrants and make the move. There will always be uncertainty but with some smart mitigation we can certainly reduce a lot of that.

My wife is super fit for her age so I may have made it sound worse than it is, I'm just more of the cautious kind with regards to health and financial planning.
« Last Edit: July 14, 2020, 09:00:48 AM by ItsALongStory »