Help please. Being forced to retire early..

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wetgear
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Re: Advice moving forward with Lump Sum

Post by wetgear »

Poisns1 wrote: Tue Jul 13, 2021 6:49 pm
wetgear wrote: Tue Jul 13, 2021 6:12 pm
Poisns1 wrote: Tue Jul 13, 2021 4:06 pm 1) Can I ask what portion of your 65AA is in US Stock vs. International Stock and do you think that the 2 Fidelity target date funds offered in my 401k are too high of an AA in International Stock at 30% and 35.33%. I've heard about the Life Strategy Funds but now sure if those funds are also "heavily" weighted towards International Stocks?

2) Also can you recommend a 3 fund portfolio (actual fund choices) to move my wife's expensive Fidelity IRA funds to please?
Can you edit your original post to show what percentages of your total portfolio each fund represents? Percentage of individual accounts isn't really useful information. Your AA and % international should be set at the portfolio level not the account level. There is much disagreement here about how much international is appropriate with people arguing anywhere from 0-50% is appropriate but most would agree 20% isn't a bad option. You may not need to hold all 3 of the funds for a 3 fund portfolio in every account and if your wife's IRA is small 1 fund would likely be fine.
Wetgear I'd love to do that but I honestly don't know how. It confuses the heck out of me. That's why I'm trying to simplify both accounts (my 401k and her IRA) prior to retirement. For example there is about 30% international built into 15% of my 401k balance in the Fidelity Target Date 2030 Fund. Then I have 20% of my 401k in the International Stock Index. The rest of the funds are split among Total Stock, Small/Mid cap, bond etc. I have no clue about the wife's IRA funds and what AA they carry as she picked those years ago when her original stock funds were closed and she was forced to pick new funds.

Here are the main retirement accounts. A 3rd account (IRA) will be opened up with Fidelity before the end of the year and I will transfer my company retirement money into that account. Like you said I would like to have all 3 of these simplified so I can easily monitor the AA. I just don't know how to get from point A to point B? Can you help me sort this mess out and fix everything? Wife's IRA is small and I agree, if I'm looking for a 65/35 or 60/40 AA can you recommend a good 1 fund choice to make her IRA simple? So confused and afraid I'm going to screw this up..

1) His 401k
401k current value about 1.24M (Asset Allocation 2030 fund 15%, Total Return Bond 7%, Total US Stock (large cap) 12%, AT&T US Stock Fund (large cap 10%, International Stock Index 20%, Large Cap US Stock Index 16%, SM & MD US Stock 20%). TOTAL = 1.14M

2) Her rollover IRA
Current value about 164K
Fidelity Value FDVLX 40%
Fidelity Equity Income FEQTX 30%
Janus Henderson Triton T JATTX 30%
Hi Poisns1,

Sure thing. I'll give you an example using her rollover and then you can do the same for your 401k and any other possible accounts. You then add up all the values for a total portfolio size and add up all the equities for total equities, divide the later by the former and multiply by 100.

Her rollover IRA $164,000

40% FDVLX is (40/100 = 0.4) ---------> 0.4 x $164,000 = $65,600
This fund is ~92% US stock/8% International/0% bonds
https://fundresearch.fidelity.com/mutua ... /316464106
$65,600 x 0.92 (this is 92% as a decimal) = $60,352 US Stock
$65,600 x 0.08 = $5,248 International

30% FEQTX x $164,000 = $49,200
~ 85% US stock/15% international
https://fundresearch.fidelity.com/mutua ... /316145101
$49,200 x 0.85 = $41,820 US
$49,200 x 0.15 = $7,380 International

30% JATTX x $164,000 = $49,200
~ 95% US/ 5% International
https://fundresearch.fidelity.com/mutua ... /471023549
$49,200 x 0.95 = $46,740 US
$49,200 x 0.05 = $2,460 International

So add up all the US:
$60,352 + $41,820 + $46,740 = $148,912

Add up international:
$5,248 + $8,380 + $2,460 = $15,088

Check your math by adding the two 148,912 + 15,088 = $164,000 (total account value BINGO!)
Now take US stock value and divide by total value:
148,912/164,000 = 0.908
Multiply that number by 100 to express it as a percentage
0.908 x 100 = 90.8%
so just call it 91% US stock

Same for international:
(15,088/164,000) x 100 = ~ 9% International stock

So just this account has a AA of 100/0 (stock/bond) and is 91% US/9% international but that's not what we are looking for yet it provides the building blocks for the process of determining a total portfolio AA.

You just need to repeat this process for all accounts and funds converting percentages to dollar amounts/asset class (US stock, international stock, bonds). Add up all the dollars for each asset class across entire portfolio and then divide that number by total portfolio value, multiply by 100 and you have your total portfolio percentage of that asset class.

If not including your cash position or lump sum, just invested money I'd guess your current total portfolio is close to 90/10 AA with around 15% of stocks in international (The AA including cash and lump sum is much lower). If you are trying to get to 60/40 then you may just want to sell everything in her IRA and buy FXNAX. It's a Fidelity low cost total bond fund and will get you about 10% closer to your desired AA but don't do that until you run the math. https://fundresearch.fidelity.com/mutua ... /316146356

The other two Fidelity funds for a 3 fund would be. (but as previously noted you don't need to have them all in all accounts)
FSKAX total US
FTIHX total international

Good luck and happy math-ing :beer
island
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Re: Help please. Being forced to retire early..

Post by island »

Poisns1 wrote: Wed Mar 10, 2021 6:49 pm Wow. Thanks so much for all the advice so far. I'm already breathing better, no joke!

I forgot to put my SS estimates:
Age 62: $2041/mo
Age 67: $2899/mo
Age 70: $3594/mo

As I understand it my wife's disability is inflation adjusted and she will remain getting it since she's totally disabled but will not get another payment or additional money once she reaches retirement age (62, 67 or 70). She is currently 54.

Also to answer the question asked:
Question for the OP: did you act on the recommendations provided to you here four years ago?
Yes I did. I used the recommendations to pick the funds for my wife's rollover 401k

"They can take away medical, but not the money. I also want to point out that they can drop the medical benefit after he retires. Hopefully they will not."
Exactly! They don't have to continue offering the retiree health subsidy. They also drastically reduced the CAM (pension and annuity retiree payout amount) starting Jan 2022 if you don't retire. See the trend here? They can take away my health benefit right after I retire. I thought about staying at the company for this reason but there is no guarantee at all in my position and I could likely be laid of shortly after Jan 2022, so thought I'd lock in the health subsidy and hope they don't cut it.
Hi OP,
I just discovered this thread, hope you're still responding to it. I have family and friends that work for ATT.

Regarding the pension, my understanding is the pension multiplier of 1.6% will be reduced to 1.0% in 2022, BUT all years prior will still be calculated using the 1.6% so the pension you've already earned is not getting reduced. But obviously retiring before you want, eliminates the opportunity to add anything to it. That's self imposed.

Are you actually planning to take your pension at the end of the year when you're 55-56y/o or are you going to wait to start it at 65y/o?
Because if you take it early your pension is reduced 50%, 5% for each year below 65.
Have them run the calc based on if you took it now or postponed until 65.

Seems like if you really don't want to quit your job, just working a couple more years will give you enough income to self pay your health insurance and increase your pension.

But maybe I'm missing something else?

And I agree, no matter what you do steer clear of those self serving "advisors".
Good luck.
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TexasPE
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Re: Help please. Being forced to retire early..

Post by TexasPE »

Boglechicago wrote: Fri Mar 12, 2021 9:02 am I probably did really well dollar-wise in the market over the last 15 years, but you get this amazing sense of security seeing that guaranteed payout amount.
+1

In my case (wife, no children) taking the pension with 100% survivor benefits lets me sleep at night :happy . Pension + my SS covers our expenses including travel, etc. 401(k) rolled over into IRAs is a low seven-figure cushion. Mid 6-figure taxable is also available for a new car, house re-roof, etc.
At 20: I cared what everyone thought about me | At 40: I didn't give a damn what anyone thought of me | Now that I'm 60: I realize that no one was really thinking about me at all | Winston Churchill (?)
wetgear
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Re: Advice moving forward with Lump Sum

Post by wetgear »

Poisns1 wrote: Tue Jul 13, 2021 6:49 pm
Any luck with this?
JDave
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Re: Help please. Being forced to retire early..

Post by JDave »

Your wife will get Social Security Disability until she reaches Full Retirement Age. Then she will get regular Social Security. Social Security Disability stops at Full Retirement Age.
egrets
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Re: Help please. Being forced to retire early..

Post by egrets »

I haven't had time to read all the replies but you seem to be in fine shape. Stay far away from "financial advisors" like EJ.

When I have had to choose between lump sums and having a company dole things out for years, I have always taken the lump sum. Then no one controls it but me. Also I may be wrong but I think the pension benefit agency may have a limit on how much it protects.

I know it's a psychological trauma to be laid off. However there are many fine employees that this happens to. Perhaps you can find some satisfying volunteer work.
VanGar+Goyle
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Re: Help please. Being forced to retire early..

Post by VanGar+Goyle »

The rumor is that some AT&T employees retiring after 2022 will lose all the medical coverage usually given to retirees. AT&T will no longer supplement monthly premiums for medical or dental. My first thought that this could be age discrimination, as people under 50 would not trust companies for benefits, people over 65 may be grandfathered in, but some could claim that this is worse for young employees who can not retire.

You should get estimates for the cost of at least 10 years of individual health care, under ACA or any other group that you may belong to.
I suspect that you already did that, hence you feel that you are being forced to retire early.
Don't to forget to include medical coverage for your wife, specially if the proposed retiree plan would cover her.

Or if you love your job, apply for a higher position, that would not lose the retiree benefit.
Well, you pay a little bit, we're a little bit tough. | You pay very much, very much tough. | You pay a too much, we're too much a tough. | How much you pay? ... Well, then we're plenty tough. - Marx
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riverant
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Re: Help please. Being forced to retire early..

Post by riverant »

I echo all the comments in this thread.

1. Avoid these financial advisors like the Plague

2. You’re in a good position

3. Regarding lump sum vs pension, I’m adamantly against pensions. I worked hard for my retirement benefits and I’m not going to shortchange my family by having some company avoid payouts if I kick the bucket. Taking the lump sum and investing conservatively enough with responsible withdrawal rates is plenty safe. This may be dramatic, but it generally makes me nervous if some entity benefits by my and my spouse’s early demise…
Jags4186
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Re: Help please. Being forced to retire early..

Post by Jags4186 »

Go see a fee-only advisor (one you pay by the hour). You might have to spend $3000 or so to have a plan set up.

https://www.garrettplanningnetwork.com/

Then you’re done and you can check in once or twice a year to the tune of a few $100s instead of even the 0.3% Vanguard charges (which on $1.2mm is $3600/yr).

You are in an excellent position to retire with the income and assets you have, even if you have to take on your medical expenses.

One thing I would consider is your wife’s situation. She is on disability. Is this a disability that is going to shorten her life or simply prevents her from holding a job? You might want to consider taking the highest paying pension amount with the 50% survivor now and get a small term life plan over a 30 year period to bridge the gap if you predecease her.

Example:
50% of $3187 is $1593.
75% of $2709 is $2,032.
The gap is $439/mo.

$439 * 12 * 25 = $131,700 which is the amount of assets needed to generate $439/mo in income.

Assuming you’re in good health and insurable now, you can get a 30 year term plan for $200,000 at the age of 55 for like $1200-$2000/yr. You can have $5736 more income every year NOW (($3187*12) - ($2709*12)) , pay the insurance premium out of that additional income and still come out ahead about $4000 every year you live. If you predecease, you’re wife gets a smaller pension, but a $200k lump sum check which more than makes up the difference. And if she predecease you, you have the higher monthly payment and you drop the insurance policy.
Last edited by Jags4186 on Sat Jul 17, 2021 8:42 am, edited 2 times in total.
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Re: Help please. Being forced to retire early..

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phxjcc
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Re: Help please. Being forced to retire early..

Post by phxjcc »

Poisns1 wrote: Wed Mar 10, 2021 6:49 pm Wow. Thanks so much for all the advice so far. I'm already breathing better, no joke!

I forgot to put my SS estimates:
Age 62: $2041/mo
Age 67: $2899/mo
Age 70: $3594/mo

As I understand it my wife's disability is inflation adjusted and she will remain getting it since she's totally disabled but will not get another payment or additional money once she reaches retirement age (62, 67 or 70). She is currently 54.

Also to answer the question asked:
Question for the OP: did you act on the recommendations provided to you here four years ago?
Yes I did. I used the recommendations to pick the funds for my wife's rollover 401k

"They can take away medical, but not the money. I also want to point out that they can drop the medical benefit after he retires. Hopefully they will not."
Exactly! They don't have to continue offering the retiree health subsidy. They also drastically reduced the CAM (pension and annuity retiree payout amount) starting Jan 2022 if you don't retire. See the trend here? They can take away my health benefit right after I retire. I thought about staying at the company for this reason but there is no guarantee at all in my position and I could likely be laid of shortly after Jan 2022, so thought I'd lock in the health subsidy and hope they don't cut it.
Re: your wife's disability from the SSA...

When you are on SSA Disability you receive your full retirement age (FRA) payment.
When you reach full retirement age, you will continue to receive this payment--it is simply paid out of a different account.

Both benefits are subject to the SSA COLA increases as approved by congress.
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LadyGeek
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Re: Help please. Being forced to retire early..

Post by LadyGeek »

Poisns1 - In order to give appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread.

If you have any questions, ask them here.

(Thanks to the member who reported the post and provided a link to this thread.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

island wrote: Thu Jul 15, 2021 6:07 pm Hi OP,
I just discovered this thread, hope you're still responding to it. I have family and friends that work for ATT.

Regarding the pension, my understanding is the pension multiplier of 1.6% will be reduced to 1.0% in 2022, BUT all years prior will still be calculated using the 1.6% so the pension you've already earned is not getting reduced. But obviously retiring before you want, eliminates the opportunity to add anything to it. That's self imposed.

Are you actually planning to take your pension at the end of the year when you're 55-56y/o or are you going to wait to start it at 65y/o?
Because if you take it early your pension is reduced 50%, 5% for each year below 65.
Have them run the calc based on if you took it now or postponed until 65.

Seems like if you really don't want to quit your job, just working a couple more years will give you enough income to self pay your health insurance and increase your pension.

But maybe I'm missing something else?

And I agree, no matter what you do steer clear of those self serving "advisors".
Good luck.
[ quote fixed by admin LadyGeek]

Island, you are correct. They won't change the pension/annuity that I've accrued but they decreased how much it will grow after 2022. I've ran calculations retiring end of this year and commencing my pension/annuity immediately versus deferring until I'm Full Retirement Age. They don't penalize me for taking it early ( no 5% reduction per year prior to 65) so I would be starting my pension/annuity immediately. I see that as a definite PRO but like you said I've love to work another 5+ years to pad my 401k and savings, but I may be laid off anytime after Jan 2022. It's like gambling at the Roulette Wheel!
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

TexasPE wrote: Thu Jul 15, 2021 7:52 pm
Boglechicago wrote: Fri Mar 12, 2021 9:02 am I probably did really well dollar-wise in the market over the last 15 years, but you get this amazing sense of security seeing that guaranteed payout amount.
+1

In my case (wife, no children) taking the pension with 100% survivor benefits lets me sleep at night :happy . Pension + my SS covers our expenses including travel, etc. 401(k) rolled over into IRAs is a low seven-figure cushion. Mid 6-figure taxable is also available for a new car, house re-roof, etc.
Texas PE, Thanks! I am in a similar position with my balances. I've gone back and forth so many times considering taking the Pension to let me sleep better at night vs. being in charge with my own money and not having to rely on the company's longevity, as well as trying to work a few more years or try and get another PT or FT job. It's dizzying and the more I think about it and analyze it, the more it gets muddier and confusing :(
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Poisns1
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Re: Advice moving forward with Lump Sum

Post by Poisns1 »

wetgear wrote: Fri Jul 16, 2021 3:04 pm
Poisns1 wrote: Tue Jul 13, 2021 6:49 pm
Any luck with this?
Wetgear Thank you so much for the explanation and help regarding the numbers. I haven't made any moves yet after reviewing your calculations. I'm still in the deciding phase of what I'm going to do. Hopefully this will get clearer for me and I can march down one path before the end of the year. Still trying to sort it all out.
Topic Author
Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

egrets wrote: Fri Jul 16, 2021 5:24 pm I haven't had time to read all the replies but you seem to be in fine shape. Stay far away from "financial advisors" like EJ.

When I have had to choose between lump sums and having a company dole things out for years, I have always taken the lump sum. Then no one controls it but me. Also I may be wrong but I think the pension benefit agency may have a limit on how much it protects.

I know it's a psychological trauma to be laid off. However there are many fine employees that this happens to. Perhaps you can find some satisfying volunteer work.
Thanks Egrets. I agree and am leaning toward the lump sum because I just don't know what's going to happen with the company over the next 25/30 years. If I do retire and find another job it will be paid so I can sleep easier at night, not that I have anything against being a volunteer :)
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

VanGar+Goyle wrote: Sat Jul 17, 2021 1:29 am The rumor is that some AT&T employees retiring after 2022 will lose all the medical coverage usually given to retirees. AT&T will no longer supplement monthly premiums for medical or dental. My first thought that this could be age discrimination, as people under 50 would not trust companies for benefits, people over 65 may be grandfathered in, but some could claim that this is worse for young employees who can not retire.

You should get estimates for the cost of at least 10 years of individual health care, under ACA or any other group that you may belong to.
I suspect that you already did that, hence you feel that you are being forced to retire early.
Don't to forget to include medical coverage for your wife, specially if the proposed retiree plan would cover her.

Or if you love your job, apply for a higher position, that would not lose the retiree benefit.
Thanks VanGar. You are correct in that if I retire by EOY, the company will pretty much pay for all of my healthcare premiums until I reach FRA at 65. Then I go on Medicare. I've tried to find out if my wife is also covered but I've talked to so many people at Benefits and no one has clearly answered that question. I know that she has her Medicare (A) card but doesn't use it and doesn't pay any additional Medicare premiums because she is covered under my company plan as long as I'm working. That changes when I retire. Some people said that she can get discounted coverage either through UHC or AON, and other people tell me she won't get coverage and will need to sign up for Part B, and Part D (dental etc) and pay out of pocket. I don't know who to believe and I don't trust any one person and what they tell me. I also have not gotten estimates for the 10 years of IHC so it's all still muddy and very confusing to me at this point. All levels of management will lose the retiree health subsidy benefit if they don't retire by EOY, unless you're an officer or on the Board of Directors :|
tj
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Re: Help please. Being forced to retire early..

Post by tj »

Poisns1 wrote: Sat Jul 17, 2021 4:31 pm
VanGar+Goyle wrote: Sat Jul 17, 2021 1:29 am The rumor is that some AT&T employees retiring after 2022 will lose all the medical coverage usually given to retirees. AT&T will no longer supplement monthly premiums for medical or dental. My first thought that this could be age discrimination, as people under 50 would not trust companies for benefits, people over 65 may be grandfathered in, but some could claim that this is worse for young employees who can not retire.

You should get estimates for the cost of at least 10 years of individual health care, under ACA or any other group that you may belong to.
I suspect that you already did that, hence you feel that you are being forced to retire early.
Don't to forget to include medical coverage for your wife, specially if the proposed retiree plan would cover her.

Or if you love your job, apply for a higher position, that would not lose the retiree benefit.
Thanks VanGar. You are correct in that if I retire by EOY, the company will pretty much pay for all of my healthcare premiums until I reach FRA at 65. Then I go on Medicare. I've tried to find out if my wife is also covered but I've talked to so many people at Benefits and no one has clearly answered that question. I know that she has her Medicare (A) card but doesn't use it and doesn't pay any additional Medicare premiums because she is covered under my company plan as long as I'm working. That changes when I retire. Some people said that she can get discounted coverage either through UHC or AON, and other people tell me she won't get coverage and will need to sign up for Part B, and Part D (dental etc) and pay out of pocket. I don't know who to believe and I don't trust any one person and what they tell me. I also have not gotten estimates for the 10 years of IHC so it's all still muddy and very confusing to me at this point. All levels of management will lose the retiree health subsidy benefit if they don't retire by EOY, unless you're an officer or on the Board of Directors :|
Either way, whether she goes on your retiree plan, or if she can get Medicare, it sounds like she's going to be covered pretty easily.
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

LadyGeek wrote: Sat Jul 17, 2021 12:50 pm Poisns1 - In order to give appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread.

If you have any questions, ask them here.

(Thanks to the member who reported the post and provided a link to this thread.)
Thank You LadyGeek. I'm sorry and didn't know how to go about updating my threads. Thanks for doing this! :)
Topic Author
Poisns1
Posts: 95
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

Jags4186 wrote: Sat Jul 17, 2021 8:38 am Go see a fee-only advisor (one you pay by the hour). You might have to spend $3000 or so to have a plan set up.

https://www.garrettplanningnetwork.com/

Then you’re done and you can check in once or twice a year to the tune of a few $100s instead of even the 0.3% Vanguard charges (which on $1.2mm is $3600/yr).

You are in an excellent position to retire with the income and assets you have, even if you have to take on your medical expenses.

One thing I would consider is your wife’s situation. She is on disability. Is this a disability that is going to shorten her life or simply prevents her from holding a job? You might want to consider taking the highest paying pension amount with the 50% survivor now and get a small term life plan over a 30 year period to bridge the gap if you predecease her.

Example:
50% of $3187 is $1593.
75% of $2709 is $2,032.
The gap is $439/mo.

$439 * 12 * 25 = $131,700 which is the amount of assets needed to generate $439/mo in income.

Assuming you’re in good health and insurable now, you can get a 30 year term plan for $200,000 at the age of 55 for like $1200-$2000/yr. You can have $5736 more income every year NOW (($3187*12) - ($2709*12)) , pay the insurance premium out of that additional income and still come out ahead about $4000 every year you live. If you predecease, you’re wife gets a smaller pension, but a $200k lump sum check which more than makes up the difference. And if she predecease you, you have the higher monthly payment and you drop the insurance policy.
Thanks Jags. I do like this idea. I really have to spend 3K to have an initial plan setup? Good Idea about getting a separate life insurance. I have not reached out to get any quotes as of yet. Of course if I retire (lock in my health benes, wife's covered, maybe?) and opt to invest the lump sum myself, I wouldn't need to worry about the insurance policy. So many forks in the road really when you analyze all the options, so confusing..
Gidget128
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Re: Help please. Being forced to retire early..

Post by Gidget128 »

My husband is on SSDI and was on my insurance policy at work and was not on Medicare. When I retired from my government job I was able to get him on Medicare and the premium is around $145 per month. He is on a Medicare Advantage Plan so that covers medication etc. It is an HMO and we have good doctors/hospitals near us so it works. When you retire this will be a qualifying event so get your wife on Medicare ASAP or else you will face penalties for delaying. It was easy and seamless for us.
Jags4186
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Re: Help please. Being forced to retire early..

Post by Jags4186 »

Poisns1 wrote: Sat Jul 17, 2021 5:00 pm
Jags4186 wrote: Sat Jul 17, 2021 8:38 am Go see a fee-only advisor (one you pay by the hour). You might have to spend $3000 or so to have a plan set up.

https://www.garrettplanningnetwork.com/

Then you’re done and you can check in once or twice a year to the tune of a few $100s instead of even the 0.3% Vanguard charges (which on $1.2mm is $3600/yr).

You are in an excellent position to retire with the income and assets you have, even if you have to take on your medical expenses.

One thing I would consider is your wife’s situation. She is on disability. Is this a disability that is going to shorten her life or simply prevents her from holding a job? You might want to consider taking the highest paying pension amount with the 50% survivor now and get a small term life plan over a 30 year period to bridge the gap if you predecease her.

Example:
50% of $3187 is $1593.
75% of $2709 is $2,032.
The gap is $439/mo.

$439 * 12 * 25 = $131,700 which is the amount of assets needed to generate $439/mo in income.

Assuming you’re in good health and insurable now, you can get a 30 year term plan for $200,000 at the age of 55 for like $1200-$2000/yr. You can have $5736 more income every year NOW (($3187*12) - ($2709*12)) , pay the insurance premium out of that additional income and still come out ahead about $4000 every year you live. If you predecease, you’re wife gets a smaller pension, but a $200k lump sum check which more than makes up the difference. And if she predecease you, you have the higher monthly payment and you drop the insurance policy.
Thanks Jags. I do like this idea. I really have to spend 3K to have an initial plan setup? Good Idea about getting a separate life insurance. I have not reached out to get any quotes as of yet. Of course if I retire (lock in my health benes, wife's covered, maybe?) and opt to invest the lump sum myself, I wouldn't need to worry about the insurance policy. So many forks in the road really when you analyze all the options, so confusing..
It doesn’t have to be $3000. It could be more or less. I just threw out a number thinking maybe you’d hire someone for 10 hrs at $300/hr to to set up a plan. If you have someone who charges $150/hr and they only spend 2 hrs then you’d have a $300 set up plan. Based on your postings, I have a feeling you’ll want to spend more than 2 hrs with a financial planner to come up with a lifelong plan. My point is that you only pay the fee only advisor when you use their services. Even with Vanguard PAS, you’re paying them 0.3% regardless of whether or not you spend 5 hrs a month with them or 1 hr/yr. It’s unlikely you’ll be spending hours and hours speaking with them year after year.

A fee-only advisor will help you make the decision on lump sum vs. taking the pension. After all, they’re going to get paid the same whether or not you take the lump sum so you can be confident that you’ll be getting conflict free advice.
Sam_957
Posts: 164
Joined: Tue Oct 27, 2020 7:04 pm
Location: USA

Re: Help please. Being forced to retire early..

Post by Sam_957 »

Poisns1 wrote: Wed Mar 10, 2021 6:49 pm
"They can take away medical, but not the money. I also want to point out that they can drop the medical benefit after he retires. Hopefully they will not."
Exactly! They don't have to continue offering the retiree health subsidy. They also drastically reduced the CAM (pension and annuity retiree payout amount) starting Jan 2022 if you don't retire. See the trend here? They can take away my health benefit right after I retire. I thought about staying at the company for this reason but there is no guarantee at all in my position and I could likely be laid of shortly after Jan 2022, so thought I'd lock in the health subsidy and hope they don't cut it.
I estimated my health coverage from 55 to 65 at around $200,000 value using 2,000 per month and a 5% inflation or something similar. Consider that when opting to take the lump sum if doing so would eliminate those benefits.
My other vehicle is an index fund.
Topic Author
Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

Sam_957 wrote: Sat Jul 17, 2021 5:29 pm
Poisns1 wrote: Wed Mar 10, 2021 6:49 pm
"They can take away medical, but not the money. I also want to point out that they can drop the medical benefit after he retires. Hopefully they will not."
Exactly! They don't have to continue offering the retiree health subsidy. They also drastically reduced the CAM (pension and annuity retiree payout amount) starting Jan 2022 if you don't retire. See the trend here? They can take away my health benefit right after I retire. I thought about staying at the company for this reason but there is no guarantee at all in my position and I could likely be laid of shortly after Jan 2022, so thought I'd lock in the health subsidy and hope they don't cut it.
I estimated my health coverage from 55 to 65 at around $200,000 value using 2,000 per month and a 5% inflation or something similar. Consider that when opting to take the lump sum if doing so would eliminate those benefits.
Thanks Sam. If I retire by EOY I get the retiree health insurance subsidy no matter whether I elect Lump Sum OR the monthly pension. If go past Dec 31,2021 I lose the health subsidy entirely.
Sam_957
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Re: Help please. Being forced to retire early..

Post by Sam_957 »

Poisns1 wrote: Sat Jul 17, 2021 5:41 pm Thanks Sam. If I retire by EOY I get the retiree health insurance subsidy no matter whether I elect Lump Sum OR the monthly pension. If go past Dec 31,2021 I lose the health subsidy entirely.
I don’t think my calculation was 100% correct but still, it’s in the ballpark. A lot of people act like employer healthcare is priceless, but I like to put a dollar value on it!

Have you considered part time or contracting work if possible in your field? That is my plan around 55, currently early 40s - so we’ll see.
My other vehicle is an index fund.
Youku
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Re: Help please. Being forced to retire early..

Post by Youku »

I retired from the same company in 2012 with 31 years of service. I was forced to retire, because the unit I worked for was sold to another company. I was able to stay on with the new company and worked for them for 5 years. Hindsight, I should have just retired and enjoyed myself. But I was not sure if I had enough $ at that time, now I realized what I lack is time and not money. So, enjoy your retirement, you've earned it. It's time you let "Ma" take care of you. Enjoy!

BTW - I elected the partial lump sum and partial annuity, no regrets. I'm thankful to get the $1500 every year for my husband since he's on medicare now. Hoping I'll get the $2700 when I turn 65.
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Sandi_k
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Re: Help please. Being forced to retire early..

Post by Sandi_k »

Poisns1 wrote: Sat Jul 17, 2021 5:41 pm
Thanks Sam. If I retire by EOY I get the retiree health insurance subsidy no matter whether I elect Lump Sum OR the monthly pension. If go past Dec 31,2021 I lose the health subsidy entirely.
One way I have decided to take the annuity is to:

1) Calculate the income, using a 100% survivor benefit
2) Take that resulting annual amount, and multiply by 25x to get something of a cash value.
3) Subtract $30k per year for COBRA healthcare, since I give up retiree health care with the lump sum: from age 60-63 (both of us, he reaches Medicare when I turn 63), and $15k per year from age 63-65, until Medicare for me. That's $120k for healthcare premiums on COBRA - CA extends it 18 months beyond the Federal requirement.
4) Compare that lump sum with the income from the annuity.

For me, the annuity is worth a LOT more than the lump sum. My monthly income would be ~ 30% higher, AND I'd have retiree health care premiums covered.
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nedsaid
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Re: Help please. Being forced to retire early..

Post by nedsaid »

Outer Marker wrote: Wed Mar 10, 2021 7:44 pm
nix4me wrote: Wed Mar 10, 2021 7:39 pm If it were me, i'd keep the 400K cash, take the lump sum and put everything except the 400 cash in VTI. Then i'd retire. You only need about 2-3% to cover expenses. Sell stock when stocks are high and use cash when stocks are low for your yearly withdrawals. Id put it in Fidelity or Schwab or Vanguard.
That is really dangerous and irresponsible advice. Don't do it. You are financially well situated have no need to take on extreme risk in the stock market.
Yes, I would second that comment. Young retirees need stocks so that the portfolio can grow over time but not 100%. Stock allocation is based upon a number of factors, the biggest one is the percentage of living expenses covered by your pension. The more your expenses are covered by guaranteed income like pensions, the more aggressively you can invest. I would not go over 65% stocks for someone in this situation.
A fool and his money are good for business.
wetgear
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Re: Advice moving forward with Lump Sum

Post by wetgear »

Poisns1 wrote: Sat Jul 17, 2021 4:22 pm
wetgear wrote: Fri Jul 16, 2021 3:04 pm
Poisns1 wrote: Tue Jul 13, 2021 6:49 pm
Any luck with this?
Wetgear Thank you so much for the explanation and help regarding the numbers. I haven't made any moves yet after reviewing your calculations. I'm still in the deciding phase of what I'm going to do. Hopefully this will get clearer for me and I can march down one path before the end of the year. Still trying to sort it all out.
Glad it helped! Doing the rest of the calculations will help you know where you are at currently so you can make fully informed decisions.
island
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Re: Help please. Being forced to retire early..

Post by island »

Poisns1 wrote: Sat Jul 17, 2021 4:08 pm
island wrote: Thu Jul 15, 2021 6:07 pm Hi OP,
I just discovered this thread, hope you're still responding to it. I have family and friends that work for ATT.

Regarding the pension, my understanding is the pension multiplier of 1.6% will be reduced to 1.0% in 2022, BUT all years prior will still be calculated using the 1.6% so the pension you've already earned is not getting reduced. But obviously retiring before you want, eliminates the opportunity to add anything to it. That's self imposed.

Are you actually planning to take your pension at the end of the year when you're 55-56y/o or are you going to wait to start it at 65y/o?
Because if you take it early your pension is reduced 50%, 5% for each year below 65.
Have them run the calc based on if you took it now or postponed until 65.

Seems like if you really don't want to quit your job, just working a couple more years will give you enough income to self pay your health insurance and increase your pension.

But maybe I'm missing something else?

And I agree, no matter what you do steer clear of those self serving "advisors".
Good luck.
[ quote fixed by admin LadyGeek]

Island, you are correct. They won't change the pension/annuity that I've accrued but they decreased how much it will grow after 2022. I've ran calculations retiring end of this year and commencing my pension/annuity immediately versus deferring until I'm Full Retirement Age. They don't penalize me for taking it early ( no 5% reduction per year prior to 65) so I would be starting my pension/annuity immediately. I see that as a definite PRO but like you said I've love to work another 5+ years to pad my 401k and savings, but I may be laid off anytime after Jan 2022. It's like gambling at the Roulette Wheel!

That's good no pension reduction, maybe that has to do with minimum age and the modified rule of 75? No matter, good news!
Will share that info with those I know. so they can delve further. Said their netbenefits website is frustrating since skimpy on details and if call can get a different story depending on who answers the call.

Also stinks that they took away the retiree HRA (at 65) if didn't retire by end of 2020. That was worth $2700 annually for the employee and an additional $1500 annually for qualified dependent. That added up over the years!

Ha you're right about the layoffs. Seems like a round of those every quarter for several years, at least for some groups and no clue who was next on chopping block. Talk about anxiety-provoking.

Sadly adding perks to make retirement more appetizing are long gone, now it's just take aways.

The same could be said for myself in healthcare and I imagine many other fields or large corps.
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

[/quote]

Also stinks that they took away the retiree HRA (at 65) if didn't retire by end of 2020. That was worth $2700 annually for the employee and an additional $1500 annually for qualified dependent. That added up over the years!

Ha you're right about the layoffs. Seems like a round of those every quarter for several years, at least for some groups and no clue who was next on chopping block. Talk about anxiety-provoking.

Sadly adding perks to make retirement more appetizing are long gone, now it's just take aways.

The same could be said for myself in healthcare and I imagine many other fields or large corps.
[/quote]

Agreed on all accounts Island. I wouldn't have to be fretting about any decision if they wouldn't have made the decision to take away my accrued retiree health benefits. That was promised 30 years ago and yet they are going to take it away if I don't leave by EOY.
Youku
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Re: Help please. Being forced to retire early..

Post by Youku »

Poisns1 wrote: Mon Jul 19, 2021 10:13 pm
Also stinks that they took away the retiree HRA (at 65) if didn't retire by end of 2020. That was worth $2700 annually for the employee and an additional $1500 annually for qualified dependent. That added up over the years!


Agreed on all accounts Island. I wouldn't have to be fretting about any decision if they wouldn't have made the decision to take away my accrued retiree health benefits. That was promised 30 years ago and yet they are going to take it away if I don't leave by EOY.
[/quote]

If I recall correctly, a letter was sent out a couple years ago to retirees stating that they can only guarantee the 2700/1500 HRA thru 2034 or 2035 and will evaluate the situation again at a later date. Double check if this is a deciding factor.
single2019
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Re: Help please. Being forced to retire early..

Post by single2019 »

2700/1500 HRA is guaranteed only till 2023.

OP: the company will NOT provide preretirement benefits if you retire/forced to leave after 12/31/2021, however they DO NOT guarantee future coverage if you do retire this year. Given their history of benefit reduction, chances of you getting these benefits till 65 are slim.

The monthly pension on the other hand is guaranteed by PBGC. PBGC guarantee minimum is based on your age when the company goes bankrupt (unlikely in the short term). That annuity is better than any other available in open market.

Lack of investment expertise and behavioral aspects suggest that you are better off with pension instead of lump sum.

Company is trying to push you out with lump sum (carrot) and removal of healthcare benefits (stick). I suggest you try to hang on to your job and when forced, take the monthly pension (which is not tied to IRS minimum segment rates).
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

single2019 wrote: Tue Jul 20, 2021 7:32 am 2700/1500 HRA is guaranteed only till 2023.

OP: the company will NOT provide preretirement benefits if you retire/forced to leave after 12/31/2021, however they DO NOT guarantee future coverage if you do retire this year. Given their history of benefit reduction, chances of you getting these benefits till 65 are slim.

The monthly pension on the other hand is guaranteed by PBGC. PBGC guarantee minimum is based on your age when the company goes bankrupt (unlikely in the short term). That annuity is better than any other available in open market.

Lack of investment expertise and behavioral aspects suggest that you are better off with pension instead of lump sum.

Company is trying to push you out with lump sum (carrot) and removal of healthcare benefits (stick). I suggest you try to hang on to your job and when forced, take the monthly pension (which is not tied to IRS minimum segment rates).
Thanks Single.

You are correct. Since I missed the companies email (originally sent December 2020) about taking away the Health Reimbursement Account (this would have kicked in at Age 65 and the company would have reimbursed me $4200 each year for my spouse and my health insurance plan) I've already lost the 65+ HRA benefit. This plan is also subject to change etc. in 2023

The company is still offering me pre-65 (retirement health care benefits for myself and believe for my SSDI wife as well?) retirement health benefits which means I would stay on the company subsidized plan for the next 10 years if I retire by the EOY. I also agree that they "could" take that away but the industry advisors that I've talked to so far have said that is not likely to happen and if they do, at the least it would be very bad publicity for them. Agreed though it's entirely possible.

I am debating staying with my job but again that comes with risk as well, as we seem to be going through layoffs at least twice a year.

That's why this whole scenario is so confusing and unnerving. I've worked 30+ years to get these accrued benefits, and now depending on what I do and when, I may lose most of it. That's the disgusting part. If they didn't make these recent changes to take these accrued benefits away, I'd still be happily working toward my projected retirement date (FRA of 65 or as close as I could get).

Unfortunately, I'm more confused now than when I originally started to analyze this whole mess.. :(
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

single2019 wrote: Tue Jul 20, 2021 7:32 am 2700/1500 HRA is guaranteed only till 2023.

OP: the company will NOT provide preretirement benefits if you retire/forced to leave after 12/31/2021, however they DO NOT guarantee future coverage if you do retire this year. Given their history of benefit reduction, chances of you getting these benefits till 65 are slim.

The monthly pension on the other hand is guaranteed by PBGC. PBGC guarantee minimum is based on your age when the company goes bankrupt (unlikely in the short term). That annuity is better than any other available in open market.

Lack of investment expertise and behavioral aspects suggest that you are better off with pension instead of lump sum.

Company is trying to push you out with lump sum (carrot) and removal of healthcare benefits (stick). I suggest you try to hang on to your job and when forced, take the monthly pension (which is not tied to IRS minimum segment rates).
Thanks Single.

You are correct. Since I missed the companies email (originally sent December 2020) about taking away the Health Reimbursement Account (this would have kicked in at Age 65 and the company would have reimbursed me $4200 each year for my spouse and my health insurance plan) I've already lost the 65+ HRA benefit. This plan is also subject to change etc. in 2023

The company is still offering me pre-65 (retirement health care benefits for myself and believe for my SSDI wife as well?) retirement health benefits which means I would stay on the company subsidized plan for the next 10 years if I retire by the EOY. I also agree that they "could" take that away but the industry advisors that I've talked to so far have said that is not likely to happen and if they do, at the least it would be very bad publicity for them. Agreed though it's entirely possible.

I am debating staying with my job but again that comes with risk as well, as we seem to be going through layoffs at least twice a year.

That's why this whole scenario is so confusing and unnerving. I've worked 30+ years to get these accrued benefits, and now depending on what I do and when, I may lose most of it. That's the disgusting part. If they didn't make these recent changes to take these accrued benefits away, I'd still be happily working toward my projected retirement date (FRA of 65 or as close as I could get).

Unfortunately, I'm more confused now than when I originally started to analyze this whole mess.. :(
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Wiggums
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Re: Help please. Being forced to retire early..

Post by Wiggums »

Since I retired, our company (40,000+ employees) has cut medical and insurance coverage. My DW struggled with the decision to retire, but there are variables that are unknown and can’t be known. weigh your chances of success in retirement and you give your notice when do don’t see a big red flashing light.

Good luck to you.
"I started with nothing and I still have most of it left."
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

So I'm starting to gravitate toward leaving the company and taking the lump sum, investing on my own within my existing Fidelity account for simplicity.

I'm trying to simplify my accounts and holdings to make it easy to make annual adjustments (to stay within AA), which should also let me avoid unnecessary changes/tinkering and ultimately be successful.

My plan so far:

1) Simplify my Company 401K current funds which is currently ~ 1.2M. I was considering going with the 1 fund Target date fund like the Fidelity AA 2030 for simplicity, but I don't like that it holds almost 30% in International stocks! Instead I'm opting for the 3 fund approach. I'd take my existing company 401K holdings (Asset Allocation 2030 fund 15%, Total Return Bond 7%, Total US Stock (large cap) 12%, AT&T US Stock Fund (large cap) 10%, International Stock Index 20%, Large Cap US Stock Index 16%, SM & MD US Stock 20%) and convert to mix below for an overall 60/40 AA. Rebalance once per year to maintain AA.

50% TOTAL US STOCK INDEX (.01 ER)
10% INTERNATIONAL STOCK INDEX (.02ER)
40% AT&T TOTAL RETURN BOND (.14 ER)

2) Take my company offered lump sum of $768K and buy 3 funds below:
50% FSKAX
10% FTIHX
40% FXNAX

3) Retire at EOY as planned (56 Y.O.). Live off the DW's yearly SSDI income of $23,700 and draw my remaining living expenses (~65K -$23,700 = $41,300) of 41K from my cash savings account (currently about 450K) until DW reaches 62. I should still have about $120k left in the savings which would server as my emergency fund + a couple water toys. DW gets her company pension of $9500/yr at age 62 which would lower my remaining draw to about $31,800/yr. I'd try not to touch either the 401k and IRA during this period so hopefully the main principal would at least still be intact at around 2M after 8 years. Starting a $31,800/yr draw off the 2M would equate to about a 1.5% draw. Continue the 1.5% draw until my FRA of 67, then commence my SS benefit of $34,800/yr. At that point we'd be getting our living expenses entirely from DW pension, SSDI and my SS so the 401K and IRA would be gravy?

4) Still trying to investigate and understand ROTH (backdoor?) contributions but possibly convert some of the 401K money to ROTH during the next 8 years since we will have a very low (~24K/year) federal tax bill but not sure this is even necessary and seems to complicate things a bit?

My fellow Bogleheads, does this sound like a sensible, simplistic, low cost yet feasible approach?
Last edited by Poisns1 on Sun Aug 08, 2021 5:12 pm, edited 1 time in total.
VSNF
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Re: Help please. Being forced to retire early..

Post by VSNF »

Unless I'm doing the math wrong (it's 5 oclock somewhere), your+wife's annuity plus the disability until retirement then social security basically equals your annual expenses grossed up for taxes. Small gap you can draw down from the 401k -- easily will outlast you. You can even spend the 400k on boats and cars (personally, I lean toward owning nothing but that's me). I say relax, have a drink, and realize that you've made it. Cheers!
"What's that? Then sell sell sell! They're all selling? Then buy buy buy!" - Al Czervik
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

VSNF wrote: Sun Aug 08, 2021 5:01 pm Unless I'm doing the math wrong (it's 5 oclock somewhere), your+wife's annuity plus the disability until retirement then social security basically equals your annual expenses grossed up for taxes. Small gap you can draw down from the 401k -- easily will outlast you. You can even spend the 400k on boats and cars (personally, I lean toward owning nothing but that's me). I say relax, have a drink, and realize that you've made it. Cheers!
Forgot to add when I'd commence my SS benefit at FRA of 67. Modified post to include this. Thanks for noticing that!
island
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Re: Help please. Being forced to retire early..

Post by island »

OP did you find out what your health plan covers? Are their monthly premiums or a high deductible you have to pay before coverage kicks in? Wife covered at no additional cost? Or since has disability is she eligible for Medicare?
I think I mentioned I have friends and family that work for ATT, said there are a few healthcare plans, but the one offered is the "bronze plan" and less than the one they've chosen as an active employee so don't feel it's worth leaving for that, but I don't know the details and of course everyone is different.
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

island wrote: Sun Aug 08, 2021 5:43 pm OP did you find out what your health plan covers? Are their monthly premiums or a high deductible you have to pay before coverage kicks in? Wife covered at no additional cost? Or since has disability is she eligible for Medicare?
I think I mentioned I have friends and family that work for ATT, said there are a few healthcare plans, but the one offered is the "bronze plan" and less than the one they've chosen as an active employee so don't feel it's worth leaving for that, but I don't know the details and of course everyone is different.
Thank You and yes I checked into that. Right now I have the bronze plan and pay about $75/mo for both the wife and I as an active employee. Great deal for us currently but this may go up next year as plans/rates have widely fluctuated and if I stay past Jan 1 2022, I run the risk of getting laid off and having no health subsidy benefit at all.

So if I retire, my wife will not be eligible for a health subsidy benefit from the company since she is on SSDI and has to sign up for Medicare Part B. I've researched some of the plans and there are a few $0/month Medicare advantage plans that offer Medical, Dental, Vision and RX. So it will cost us about $148/mo ($1776/year) for her to be covered.

As a retiree and referencing the last prices, my company health subsidy will almost cover my benefits entirely (Medical, Dental, Vision and RX $92/month, $1104/year) at the bronze level. The company health subsidy savings vs. having to pay out of pocket for my own health coverage if I stay retired equates to about $8736/year (company pays for this subsidy). Of course they could try to take that away down the line, but I also take the risk of getting laid off if I try and stay working past Jan 1 2022. There's the gamble... So basically I'm retiring to take the risk of saving the $8736 yearly health subsidy benefit for myself.
island
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Re: Help please. Being forced to retire early..

Post by island »

Understood re: the monthly fees. Do you have copays for office visits or Rx? Deductables? Thanks for the details.
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Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

island wrote: Sun Aug 08, 2021 6:25 pm Understood re: the monthly fees. Do you have copays for office visits or Rx? Deductables? Thanks for the details.
The bronze plan is considered the "high" deductible plan which also allows us to get the company match on HSA contributions. Although deductible is high, monthly fee is low. Family deductible is 6K. Once we hit that they cover 70%, so 30% copay. Hope that helps
island
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Re: Help please. Being forced to retire early..

Post by island »

Poisns1 wrote: Sun Aug 08, 2021 7:32 pm
island wrote: Sun Aug 08, 2021 6:25 pm Understood re: the monthly fees. Do you have copays for office visits or Rx? Deductables? Thanks for the details.
The bronze plan is considered the "high" deductible plan which also allows us to get the company match on HSA contributions. Although deductible is high, monthly fee is low. Family deductible is 6K. Once we hit that they cover 70%, so 30% copay. Hope that helps
Thanks! That doesn't sound bad at all. Will pass it along. Seems some I know are so ticked off that their benefits are changing they're not even thinking clearly. It's unfortunate and I'd be ticked for a bit too, but none was guaranteed.
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calmaniac
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Re: Help please. Being forced to retire early..

Post by calmaniac »

Retirement is all about cash flow. A very different calculus from acquiring assets.

Given that you have 15 years until you reach 70, at which time Social Security will cover essentially all or most of your current expenses, I would opt for having a dependable monthly stream of income (pension).

Bottom line is that you and your wife will be fine either way. You've amassed enough assets relative to your expenses to retire. You won the game. Whether you take lump sum or annuity is not a live or die question for your retirement. You need to choose the options that makes the most sense to you.
"Pretired", working 20 h/wk. AA 75/25: 30% TSM, 19% value (VFVA/AVUV), 18% Int'l LC, 8% emerging, 25% GFund/VBTLX. Military pension ≈60% of expenses. Pension+SS@age 70 ≈100% of expenses.
Topic Author
Poisns1
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Re: Help please. Being forced to retire early..

Post by Poisns1 »

Seeking Boglehead advice/opinions on my plans to make changes to my 401k (AA) and Lump Sum IRA, in preparation for retirement EOY:

So I'm starting to gravitate toward leaving the company and taking the lump sum, investing on my own within my existing Fidelity account for simplicity.

I'm trying to simplify my accounts and holdings to make it easy to make annual adjustments (to stay within AA), which should also let me avoid unnecessary changes/tinkering and ultimately be successful.

My plan so far:

1) Simplify my Company 401K current funds which is currently ~ 1.2M. I was considering going with the 1 fund Target date fund like the Fidelity AA 2030 for simplicity, but I don't like that it holds almost 30% in International stocks! Instead I'm opting for the 3 fund approach. I'd take my existing company 401K holdings (Asset Allocation 2030 fund 15%, Total Return Bond 7%, Total US Stock (large cap) 12%, AT&T US Stock Fund (large cap) 10%, International Stock Index 20%, Large Cap US Stock Index 16%, SM & MD US Stock 20%) and convert to mix below for an overall 60/40 AA. Rebalance once per year to maintain AA.

50% TOTAL US STOCK INDEX (.01 ER)
10% INTERNATIONAL STOCK INDEX (.02ER)
40% AT&T TOTAL RETURN BOND (.14 ER)

2) Take my company offered lump sum of $768K and buy 3 funds below:
50% FSKAX
10% FTIHX
40% FXNAX

3) Retire at EOY as planned (56 Y.O.). Live off the DW's yearly SSDI income of $23,700 and draw my remaining living expenses (~65K -$23,700 = $41,300) of 41K from my cash savings account (currently about 450K) until DW reaches 62. I should still have about $120k left in the savings which would server as my emergency fund + a couple water toys. DW gets her company pension of $9500/yr at age 62 which would lower my remaining draw to about $31,800/yr. I'd try not to touch either the 401k and IRA during this period so hopefully the main principal would at least still be intact at around 2M after 8 years. Starting a $31,800/yr draw off the 2M would equate to about a 1.5% draw. Continue the 1.5% draw until my FRA of 67, then commence my SS benefit of $34,800/yr. At that point we'd be getting our living expenses entirely from DW pension, SSDI and my SS so the 401K and IRA would be gravy?

4) Still trying to investigate and understand ROTH (backdoor?) contributions but possibly convert some of the 401K money to ROTH during the next 8 years since we will have a very low (~24K/year) federal tax bill but not sure this is even necessary and seems to complicate things a bit?

My fellow Bogleheads, does this sound like a sensible, simplistic, low cost yet feasible approach?
Carl53
Posts: 2687
Joined: Sun Mar 07, 2010 7:26 pm

Re: Help please. Being forced to retire early..

Post by Carl53 »

Poisns1 wrote: Sun Aug 15, 2021 2:04 pm Seeking Boglehead advice/opinions on my plans to make changes to my 401k (AA) and Lump Sum IRA, in preparation for retirement EOY:

So I'm starting to gravitate toward leaving the company and taking the lump sum, investing on my own within my existing Fidelity account for simplicity.

I'm trying to simplify my accounts and holdings to make it easy to make annual adjustments (to stay within AA), which should also let me avoid unnecessary changes/tinkering and ultimately be successful.

My plan so far:

1) Simplify my Company 401K current funds which is currently ~ 1.2M. I was considering going with the 1 fund Target date fund like the Fidelity AA 2030 for simplicity, but I don't like that it holds almost 30% in International stocks! Instead I'm opting for the 3 fund approach. I'd take my existing company 401K holdings (Asset Allocation 2030 fund 15%, Total Return Bond 7%, Total US Stock (large cap) 12%, AT&T US Stock Fund (large cap) 10%, International Stock Index 20%, Large Cap US Stock Index 16%, SM & MD US Stock 20%) and convert to mix below for an overall 60/40 AA. Rebalance once per year to maintain AA.

50% TOTAL US STOCK INDEX (.01 ER)
10% INTERNATIONAL STOCK INDEX (.02ER)
40% AT&T TOTAL RETURN BOND (.14 ER)

2) Take my company offered lump sum of $768K and buy 3 funds below:
50% FSKAX
10% FTIHX
40% FXNAX

3) Retire at EOY as planned (56 Y.O.). Live off the DW's yearly SSDI income of $23,700 and draw my remaining living expenses (~65K -$23,700 = $41,300) of 41K from my cash savings account (currently about 450K) until DW reaches 62. I should still have about $120k left in the savings which would server as my emergency fund + a couple water toys. DW gets her company pension of $9500/yr at age 62 which would lower my remaining draw to about $31,800/yr. I'd try not to touch either the 401k and IRA during this period so hopefully the main principal would at least still be intact at around 2M after 8 years. Starting a $31,800/yr draw off the 2M would equate to about a 1.5% draw. Continue the 1.5% draw until my FRA of 67, then commence my SS benefit of $34,800/yr. At that point we'd be getting our living expenses entirely from DW pension, SSDI and my SS so the 401K and IRA would be gravy?

4) Still trying to investigate and understand ROTH (backdoor?) contributions but possibly convert some of the 401K money to ROTH during the next 8 years since we will have a very low (~24K/year) federal tax bill but not sure this is even necessary and seems to complicate things a bit?

My fellow Bogleheads, does this sound like a sensible, simplistic, low cost yet feasible approach?
I did not read the whole thread, but I would recommend you do Roth conversions at least to the top of the 12% and possibly to the top of the 22% brackets. Revisit this once SS commences but your RMDs are likely to cause the maximum of your SS benefits to be taxed. Numerous threads talk about different strategies and considerations. Are you likely to leave the IRA to heirs, charity, spend it or some combination there of?

You do not mention health care. If you are getting from a current or former employer, fine, but if you are planning on using the government health care subsidy, you will need to be careful to not convert too much.

One other possible alternative, but not likely as beneficial as that noted above is to take advantage of the Retirement Saver's Credit. https://www.irs.gov/retirement-plans/pl ... ers-credit

If you or your spouse could pick up a side gig generating $4k and you keep your 2022 income below whatever the MFJ limit is for a 50% credit (limit your Roth conversions to perhaps and how does SSDI interact with it). Note the credit is not refundable so it is not likely worth $2000 but something less.
User avatar
Johnsson
Posts: 516
Joined: Mon Jul 17, 2017 2:28 pm

Re: Help please. Being forced to retire early..

Post by Johnsson »

Have you played with i-orp extended... https://www.i-orp.com/Plans/extended.html? I think you need to run a wide variety of permutations to see what level of Roth conversions work for you and your situation.

It takes a little while to get used to, but you can vary many parameters (e.g. age of death, when to start SS, expected market returns,...) to see what would happen to your portfolio over your expected lifespan.

While nobody knows the future, this software helps you see the ramifications of various decisions and decide what decisions give the outcome that feels best to you.

Notes... The software works to maximize spending and balance Pre-SS Roth conversions/taxes paid with tax rates once RMDs start. A very thought provoking tool. Use the same allocation for all account types (even though reality is different) to avoid inappropriate bias towards the account with the highest percent of equities/future returns.
'In theory there is no difference between theory and practice. In practice there is.' Yogi Berra
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Help please. Being forced to retire early..

Post by Poisns1 »

Thanks Carl53; answers below:

[/quote]

I did not read the whole thread, but I would recommend you do Roth conversions at least to the top of the 12% and possibly to the top of the 22% brackets. Revisit this once SS commences but your RMDs are likely to cause the maximum of your SS benefits to be taxed. Numerous threads talk about different strategies and considerations. Are you likely to leave the IRA to heirs, charity, spend it or some combination there of?

1) I will be living off the IRA but also plan to have some left over to heir to my DS

You do not mention health care. If you are getting from a current or former employer, fine, but if you are planning on using the government health care subsidy, you will need to be careful to not convert too much.

2) If I retire by EOY, my healthcare will be covered until I reach FRA at 65. My wife will have to enroll in Medicare part B when I leave (EOY) and will select a supplemental program to cover RX, Dental and Vision.

One other possible alternative, but not likely as beneficial as that noted above is to take advantage of the Retirement Saver's Credit. https://www.irs.gov/retirement-plans/pl ... ers-credit

If you or your spouse could pick up a side gig generating $4k and you keep your 2022 income below whatever the MFJ limit is for a 50% credit (limit your Roth conversions to perhaps and how does SSDI interact with it). Note the credit is not refundable so it is not likely worth $2000 but something less.

3) Not following you on the $4k side gig. Is that per month or per year and how does that fit into my yearly expense equation?

[/quote]
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Help please. Being forced to retire early..

Post by wetgear »

Poisns1 wrote: Sun Aug 15, 2021 2:04 pm Seeking Boglehead advice/opinions on my plans to make changes to my 401k (AA) and Lump Sum IRA, in preparation for retirement EOY:

So I'm starting to gravitate toward leaving the company and taking the lump sum, investing on my own within my existing Fidelity account for simplicity.

I'm trying to simplify my accounts and holdings to make it easy to make annual adjustments (to stay within AA), which should also let me avoid unnecessary changes/tinkering and ultimately be successful.

My plan so far:

1) Simplify my Company 401K current funds which is currently ~ 1.2M. I was considering going with the 1 fund Target date fund like the Fidelity AA 2030 for simplicity, but I don't like that it holds almost 30% in International stocks! Instead I'm opting for the 3 fund approach. I'd take my existing company 401K holdings (Asset Allocation 2030 fund 15%, Total Return Bond 7%, Total US Stock (large cap) 12%, AT&T US Stock Fund (large cap) 10%, International Stock Index 20%, Large Cap US Stock Index 16%, SM & MD US Stock 20%) and convert to mix below for an overall 60/40 AA. Rebalance once per year to maintain AA.

50% TOTAL US STOCK INDEX (.01 ER)
10% INTERNATIONAL STOCK INDEX (.02ER)
40% AT&T TOTAL RETURN BOND (.14 ER)

2) Take my company offered lump sum of $768K and buy 3 funds below:
50% FSKAX
10% FTIHX
40% FXNAX

3) Retire at EOY as planned (56 Y.O.). Live off the DW's yearly SSDI income of $23,700 and draw my remaining living expenses (~65K -$23,700 = $41,300) of 41K from my cash savings account (currently about 450K) until DW reaches 62. I should still have about $120k left in the savings which would server as my emergency fund + a couple water toys. DW gets her company pension of $9500/yr at age 62 which would lower my remaining draw to about $31,800/yr. I'd try not to touch either the 401k and IRA during this period so hopefully the main principal would at least still be intact at around 2M after 8 years. Starting a $31,800/yr draw off the 2M would equate to about a 1.5% draw. Continue the 1.5% draw until my FRA of 67, then commence my SS benefit of $34,800/yr. At that point we'd be getting our living expenses entirely from DW pension, SSDI and my SS so the 401K and IRA would be gravy?

4) Still trying to investigate and understand ROTH (backdoor?) contributions but possibly convert some of the 401K money to ROTH during the next 8 years since we will have a very low (~24K/year) federal tax bill but not sure this is even necessary and seems to complicate things a bit?

My fellow Bogleheads, does this sound like a sensible, simplistic, low cost yet feasible approach?
Looking pretty good but what are you going to do with Her IRA?

4) If this is the last year you are working it's the last time you can contribute to a Roth IRA because you or your spouse need earned income to contribute to them. That being said it would probably be a good idea to make contributions for both of you this year.
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