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Thread: Turning down high paying job. Am I crazy?

  1. #91
    Member medford's Avatar
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    Re: Turning down high paying job. Am I crazy?

    I don't think the socal thing is an option at this point.

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  3. #92
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    Re: Turning down high paying job. Am I crazy?

    Quote Originally Posted by medford View Post
    thanks for the update, never saw the original post, but happy to see the outcome some 3 years later.

    If you don't mind me asking, w/ the house paid for (I assume the rental properites as well?) what are your monthly living expenses? What are the things you find yourself paying for in retirement that you didn't think about 20-30 years ago? I've often wondered myself just how much I'll need for retirement.

    I've read alot about something I think is called the theory of 20 or something along those lines, where basically you take your yearly living expenses, multiple it by 20 and that is how much you need in retirement. You take out 5% each year, and even if you started your retirement in the worst time frame for the S&P (It was the early 70s at the time I believe where it took a sharp dive over 2 years) you still ended up growing your portfolio showing that traditional returns, even if you pick the wrong year to start should get you thru assuming you can start limit your self to a 5% withdrawl each year (the historical return would outpace inflation so each year you'd take out a little more money in theory than the year before to overcome the rise in cost)

    I'm currently on "pace" to have a little over 1 mil in my 401(k) when I hit 60. I've got a small personal account outside of that that I hope to continue contributing to again some day, plus we'll have my wife's retirement from STRS (teacher's retirement plan). Throw on Social Security (if its still there) as well. The 5% would be 50k a year, plus 5% of whatever my personal accounts are at the time, plus the SS and my wife's pension plan (there are so many changes I haven't even bothered to begin worrying about what that will be yearly at this point). All told, $75 to $100k a year, I'd hope to have my house paid off at that point, perhaps even a retirement getaway somewhere. Inflation will eat into that number from today; I think that would all be enough, we live fairly simple, probably wouldn't start getting all extravagent in retirement.
    You're going to be far ahead of me if you are going to have a million. I am withdrawing from my retirement accounts, but I am not withdrawing any principal. If you recall from my retirement threads, I am a believer in Dividend Growth Investing. Not just at the end.... the whole way. So right now I am in the distribution (retirement) phase, so I am withdrawing 75% of my dividend income and reinvesting the rest. Only been in that phase for 2 months.

    I am not retired enough to have lowered spending. My wife still works full time and I'm working part time. Nothing has changed. And other than the fact that I have a very big car payment that will someday end, I'm not sure I expect a big reduction.

  4. #93
    Member medford's Avatar
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    Re: Turning down high paying job. Am I crazy?

    thanks, I've followed your dividend investing thing closely, you've inspired me that someday, whenever I get back to investing money in my personal accoutns again, not just my 401(k) (we get a very generous offer, 50% matching up to whatever we put in, so my savings is obviously concentrated there, and will eventually increase up to 15% of my paycheck once kids are out of day care, then I'll contribute to my personal accounts again, impossible to beat a 50% automatic retun)

    anyways, most things I've read is not to expect a drop in your spending as you retire (perhaps as you age, but the goal for most people is to retire in relative good health that they can still get out and around) with the possible expection of a mortgage, most places will tell you to aim to have that paid off by retirement. I guess what I was wondering, were there expenses you see now that you never anticipated? Perhaps medical insurance or something? You may get that thru your wife's employer. What I'll equate it to, is people talk about having a baby a few years down the road, talk about the cost of diapers, baby food, etc... but the thing that rarely gets talked about is the cost of daycare. I don't think most people realize they'll be spending 600-1200 a month on their child's day care if they continue working full time. Didn't know if there was something equivalent to that in retirement that I haven't thought about.

    Thanks for everything you share in this regard, its helpful to read about someone else's experience so that I can prepare for my own.

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    Re: Turning down high paying job. Am I crazy?

    Quote Originally Posted by medford View Post
    thanks for the update, never saw the original post, but happy to see the outcome some 3 years later.

    If you don't mind me asking, w/ the house paid for (I assume the rental properites as well?) what are your monthly living expenses? What are the things you find yourself paying for in retirement that you didn't think about 20-30 years ago? I've often wondered myself just how much I'll need for retirement.

    I've read alot about something I think is called the theory of 20 or something along those lines, where basically you take your yearly living expenses, multiple it by 20 and that is how much you need in retirement. You take out 5% each year, and even if you started your retirement in the worst time frame for the S&P (It was the early 70s at the time I believe where it took a sharp dive over 2 years) you still ended up growing your portfolio showing that traditional returns, even if you pick the wrong year to start should get you thru assuming you can start limit your self to a 5% withdrawl each year (the historical return would outpace inflation so each year you'd take out a little more money in theory than the year before to overcome the rise in cost)

    I'm currently on "pace" to have a little over 1 mil in my 401(k) when I hit 60. I've got a small personal account outside of that that I hope to continue contributing to again some day, plus we'll have my wife's retirement from STRS (teacher's retirement plan). Throw on Social Security (if its still there) as well. The 5% would be 50k a year, plus 5% of whatever my personal accounts are at the time, plus the SS and my wife's pension plan (there are so many changes I haven't even bothered to begin worrying about what that will be yearly at this point). All told, $75 to $100k a year, I'd hope to have my house paid off at that point, perhaps even a retirement getaway somewhere. Inflation will eat into that number from today; I think that would all be enough, we live fairly simple, probably wouldn't start getting all extravagent in retirement.
    I think you're on the right track. Check out FIRECalc: http://www.firecalc.com/

    I've always believed that 20 times annual expenses is a bit low though, and a 5 percent withdrawal might be a bit high. A safer number to use, assuming a retirement around your late 50s, would be 30 times annual expenses. If you want to retire early around 50, you might want to aim for 35 or 40 times annual expenses. For safe withdrawal rates, maybe think about 3 percent.

    That much said, adjust for Social Security, even if it's a conservative adjustment of receiving only 50-70 percent of your projected benefits. It'll be there in some manner, maybe not as much as we're promised now (I'm 31 years old, for example), but some of it will be around. If you project your Social Security to cover 30 percent of your living expenses, for example, then you'll only need retirement funds to cover the remaining 70 percent. Use that remaining annual number to multiply by 30 with.

    I've also used a future inflation calculator to try to adjust today's money ahead 25 years or so. A ballpark calculation I simply use is doubling today's money - in other words, if I want $1 million in today's money then I need to actually save $2 million by 2038.

    By the way, my fiance is in STRS Ohio too. Their recent changes were probably necessary to make sure the fund stays healthy, but for her age group (20 and 30-somethings) they took a haircut if they want to retire early before age 60. My response to that is I've now got her maxing out a Roth IRA in addition to STRS so 1) worst case is she has a safety valve if STRS implodes, and 2) best case is she has an early retirement option if STRS stays healthy.
    Kevin Gregg and Jason Marquis will bring back memories of the Lost Decade.

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    Re: Turning down high paying job. Am I crazy?

    Quote Originally Posted by medford View Post
    anyways, most things I've read is not to expect a drop in your spending as you retire (perhaps as you age, but the goal for most people is to retire in relative good health that they can still get out and around) with the possible expection of a mortgage, most places will tell you to aim to have that paid off by retirement. I guess what I was wondering, were there expenses you see now that you never anticipated? Perhaps medical insurance or something? You may get that thru your wife's employer. What I'll equate it to, is people talk about having a baby a few years down the road, talk about the cost of diapers, baby food, etc... but the thing that rarely gets talked about is the cost of daycare. I don't think most people realize they'll be spending 600-1200 a month on their child's day care if they continue working full time. Didn't know if there was something equivalent to that in retirement that I haven't thought about.

    Thanks for everything you share in this regard, its helpful to read about someone else's experience so that I can prepare for my own.
    Health insurance is the major wildcard. My parents have friends who just retired and did some research, and they're estimating $800 per person, per month for health insurance. That might be on the high end, but either way it's expensive. Who knows what it'll be in the future. Trying to project health insurance 20 to 30 years in the future is the most difficult thing I've run into.
    Kevin Gregg and Jason Marquis will bring back memories of the Lost Decade.

  7. #96
    Member JaxRed's Avatar
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    Re: Turning down high paying job. Am I crazy?

    At this point, nothing has changed between my semi-retirement expenses and my normal expenses. But I am constantly trying to think of ways I can lower my expenses. My phone (cell and home) are minimal ($15 a month combined), but I have not yet "cut cable" but it's crossing my mind.

    By the way, both Arizona home are mortgaged. Pay $500 a month, rent for $950. So paying them off down the road sometime will result in a nice "raise". Both mortgages are just below $70K each.

  8. #97
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    Re: Turning down high paying job. Am I crazy?

    About 20 months since my last update. Time for another...... I actually started receiving Social Security in Aug 2013. But between the 2 sites I was consulting for, I decided that I was going to be too far over the $14K earnings limit, so I stopped Social Security, paid it back and went back to a status as if I'd never received it. The most recent gig (at a Hospital) ended about a year later, but the one I'd been doing for 15 hours or so weekly since 2011 (at a Hospice) was still going strong.

    Last summer, the area of Hospice I was working in got new management, and new management was aghast. I manage a software program called Raiser's Edge. It tracks the donors to non-profit agencies, which is a very subjective tricky area. (Just ask the Clinton's who messed it up). So being an expert in Raiser's Edge was my unique skill. Anyway new management was aghast that the data guy worked part time, and worked when he felt like it, and worked from home many times. So they started the process to hire a full time RE person and get rid of me.

    This time I could tell they were serious where in the past whenever old management brought it up I knew they'd never do it. They had a sweet deal. They had the best RE guy in NE Florida and he was costing them about $25K a year with no benefits. Why hire someone with less skills, pay them $40K and benefits? But new management looked serious.

    So I started making contingencies about what I was going to do as soon as I was let go. I was going to start advertising online. I even started my web site. Because I can work remotely it didn't matter whether I was down the street or across the country. But I also did a a few things like paying all my consumer debt off (including that crazy car payment), maxing out my Roth contributions for 2015, and kind of re-allocating my assets. For example, I stopped withdrawing from my IRA about 3 months ago, and instead was paying my escrow stuff out of a "regular" account.

    Beginning of Feb they made their hire and March 31st was my last day. So April 1 was going to be the day I started advertising my wares online.

    But a funny thing happened on the way to the forum..... By paying off all the debts and stopping withdrawals from IRA's to prepare for a "worst case scenario" (not getting any more consulting), I found myself in a curious position. I realized I didn't need to work. My wife is still working, and between my military retirement, and her salary we are making ends meet and still putting a little away. She turns 62 in December and can quit and file for SS. When she does, I'll also file (unless I do it sooner). Some of you may have followed my posts about dividend growth investing in stocks. In this scenario we are earning over $1,000 a month in dividends and we are not even touching them. They are just being reinvested. So we have a big cushion.

    Once that started hitting me in late Feb and March, it was like a "release". March 31st couldn't get here fast enough. And once it did, I was DONE. No more consulting no more work. I'm done.

    My next project to is to see if we can get ourselves in a slightly better position where we can afford to let one of the Arizona houses not be rented, and we can have it as a second house where we stay 3 or 4 months a year. We're not quite there yet.

    But all in all, everything worked out very well.
    The lowest acceptable payroll amount for ownership to show they are not greedy pigs is 15 million more than they are currently paying. No matter what that currently is.

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  10. #98
    THAT'S A FACT JACK!! GAC's Avatar
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    Re: Turning down high paying job. Am I crazy?

    I'm glad things are working out for you Jax. My wife just turned 60, and I'll be 59 next month. We've done a pretty good job, and we're shooting for 62 (which ain't that far off).
    Last edited by GAC; 04-27-2015 at 05:24 AM.
    "panic" only comes from having real expectations

  11. #99
    Danger is my business! oneupper's Avatar
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    Re: Turning down high paying job. Am I crazy?

    Jax, thanks for openly sharing the details of your financial situation with the community. This thread, and those like it should be of help for anyone considering their options for retirement, regardless of the station of life they are in currently. Good job.
    "A person is smart. People are dumb, panicky, dangerous animals and you know it."

    http://dalmady.blogspot.com

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    Re: Turning down high paying job. Am I crazy?

    Quote Originally Posted by JaxRed View Post
    I manage a software program called Raiser's Edge. It tracks the donors to non-profit agencies, which is a very subjective tricky area. (Just ask the Clinton's who messed it up). So being an expert in Raiser's Edge was my unique skill.
    Ha, that's my skill too. Until recently. I've been using RE for 10 years but recently ditched it for Neon. The RE tool is pretty good but I just got tired of the lousy service and the nickling-and-diming for every little feature that should just be included in the license. End rant.
    The widow is gathering nettles for her children's dinner; a perfumed seigneur, delicately lounging in the Oeil de Boeuf, hath an alchemy whereby he will extract the third nettle and call it rent. ~ Carlyle

  13. #101
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    Re: Turning down high paying job. Am I crazy?

    I'll shoot you a PM.
    The lowest acceptable payroll amount for ownership to show they are not greedy pigs is 15 million more than they are currently paying. No matter what that currently is.

  14. #102
    Brett William Moore Will M's Avatar
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    Re: Turning down high paying job. Am I crazy?

    you should look at Monte Carlo scenarios for your retirement plan. you don't want to assume normal market conditions/returns for your investments, retire & then BOOM! its 1929 all over. Your principal takes a bit hit & you don't recover. The Monte Carlo scenarios look at what your returns would be if you retired 1/1/1910, 2/1/1910, 3/1/1910, 4/1/1910, etc (I'm note sure how far back stock market data goes). You want to have very high odds of not running out of cash when you are say 77 years old. everything was great for guys who retired in 1983, not so great for those who retired in say 1973.

    another option is to only withdraw about 2.5% of your principal at the start of your retirement as this percentage is much safer than the usual 4% recommendation.
    .

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  16. #103
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    Re: Turning down high paying job. Am I crazy?

    Quote Originally Posted by Will M View Post
    you should look at Monte Carlo scenarios for your retirement plan. you don't want to assume normal market conditions/returns for your investments, retire & then BOOM! its 1929 all over. Your principal takes a bit hit & you don't recover. The Monte Carlo scenarios look at what your returns would be if you retired 1/1/1910, 2/1/1910, 3/1/1910, 4/1/1910, etc (I'm note sure how far back stock market data goes). You want to have very high odds of not running out of cash when you are say 77 years old. everything was great for guys who retired in 1983, not so great for those who retired in say 1973.

    another option is to only withdraw about 2.5% of your principal at the start of your retirement as this percentage is much safer than the usual 4% recommendation.
    That whole Monte Carlo scenario is built upon withdrawing a portion of your investments every year to live on, and having enough return on investment so that you don't run out of money before you die. I think that's an incredibly bad way to run a railroad. I have built my retirement so that I NEVER have to cannibalize my investment assets. I am one of the lucky ones who has a defined benefit retirement plan, and a super-nice government one at at that. I am retired military. Between that and Social Security for both me and my wife, we do not have to tap into our IRAs to live in retirement. And our investments are in dividend paying stocks that will pay us over $1,000 a month which will be reinvested.

    So I know you mean well, but we'll have to agree to disagree. I advise anyone that listens to me to invest in dividend paying stocks and plan on withdrawing less than 100% of what it pays while retired.
    Last edited by JaxRed; 04-28-2015 at 12:23 AM.
    The lowest acceptable payroll amount for ownership to show they are not greedy pigs is 15 million more than they are currently paying. No matter what that currently is.

  17. #104
    Brett William Moore Will M's Avatar
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    Re: Turning down high paying job. Am I crazy?

    Quote Originally Posted by JaxRed View Post
    That whole Monte Carlo scenario is built upon withdrawing a portion of your investments every year to live on, and having enough return on investment so that you don't run out of money before you die. I think that's an incredibly bad way to run a railroad. I have built my retirement so that I NEVER have to cannibalize my investment assets. I am one of the lucky ones who has a defined benefit retirement plan, and a super-nice government one at at that. I am retired military. Between that and Social Security for both me and my wife, we do not have to tap into our IRAs to live in retirement. And our investments are in dividend paying stocks that will pay us over $1,000 a month which will be reinvested.

    So I know you mean well, but we'll have to agree to disagree. I advise anyone that listens to me to invest in dividend paying stocks and plan on withdrawing less than 100% of what it pays while retired.
    I have a couple thoughts:

    1) dividends aren't always safe. for example recently a lot of energy companies have had to reduce/stop their dividends with the steep drop in oil/gas prices. debt has to be paid first before dividends can be paid out. one day you have a $100 stock paying $5 a year in dividends and a year later you have a $30 stock paying no dividends. so the idea behind the Monte Carlo scenarios is to look at the total value of your portfolio then look at how well it would have help up during really bad times.

    2) your situation sounds good. defined pension plans with your dividend stocks providing income in addition to that. for someone who doesn't have a nice pension I think its going to be hard to get enough money to simply live off the dividends. assuming your entire portfolio isn't telecoms & utilities its tough to get a diversified portfolio yielding higher than say 5%. I think its OK to plan to eat the principal of your portfolio at a certain point ( say if you live to 75 ). Long term care insurance is another thing to think about. that way you avoid the problem of living too long, running out of cash, having only medicare and social security & living in a bad nursing home. if you hold fast to a rule of only living off dividends you may end up working a lot longer than you need to. ie you need a much bigger nest egg if you plan to never eat into the principal.

    - Brett
    .

  18. #105
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    Re: Turning down high paying job. Am I crazy?

    We have long term care insurance. As for the rest, we'll agree to disagree. I can give you this much.... if a person hasn't invested enough in SOMETHING that provides them enough income to live off of, then yes, they'll have to cannibalize their assets, and then the Monte Carlo simulations can come into play.

    But for those young pups out there.........If you have 401k's where your company pays a match, do that. But in addition (or instead if you don't have a 401K with a match).... put your money in ROTH IRA's (not traditional). Forego the tax deduction. Try to max it out every year. Invest in dividend paying stocks. The big solid ones that have a long track record. Tell them to reinvest dividends, and let it roll... Never touch it, and then in retirement, try to only live on 75% of the income and re-invest the rest.
    The lowest acceptable payroll amount for ownership to show they are not greedy pigs is 15 million more than they are currently paying. No matter what that currently is.


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