Thinking about accepting new job that pays a bit less

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miamivice
Posts: 579
Joined: Tue Jun 11, 2013 11:46 am

Thinking about accepting new job that pays a bit less

Post by miamivice » Sat Sep 09, 2017 3:02 pm

I'm seriously thinking about taking on a different role at my megacorp, one that involves less business travel but also pays about $30,000 less. I would like to spend the time to focus on family and personal endeavors, as well as doing a better job of maintaining my personal health.

I am wondering if I financially am able to do this. Here's what I know:

Family Situation
Married
2 kids, ages 2 and 6
His age - 38
Her age - 38
His income - $140k
Her income - $60k

Assets
Taxable - $580k
Retirement - $600k + accruing pensions (one for him, one for her) + accruing social security
College savings - $145k
Mystery asset - $166k
Home value - $850k

Liabilities
Home loan - $415k
HELOC for mystery asset - $140k

Monthly Budget
Mortgage - $3000 (3.25% fixed for 25 more years)
HELOC payment - $1000 (4% fixed for 15 years)
Childcare - $2000 (will decline to $0 over 5 year period)
Credit card - $3500 (we put everything possible on credit card and pay off in full each month)
Non-credit card monthly expenses, not otherwise accounted above - $500

Monthly savings
His retirement - $1500/month plus company match of $600
Her retirement - $$833/month plus company match of $200
College savings - $0 (believe to be fully funded)
Non-retirement - not sure, but seems to be pretty small overall

Future retirement scenario
We don't really have a good idea on how much we will spend in retirement, as it's 17 to 25 years away for us. However, my best projection is that we'll probably cover the vast majority of our monthly expenses with social security and pension. Financial Engines estimates we'll have $245,000 a year in retirement spending money, and I cannot fathom how we could possible spend that much. Maybe $100,000 a year but not much more than that.

Basically, we spend today about $120,000 a year after tax, and save $28,000 toward retirement each year. Our companies throw in another $11,000 in matching money so we save about $40,000 a year toward retirement each year. After paying taxes and our monthly expenses, we don't have much left over. What we do save extra in taxable savings seems to get spent on big expenses like car replacement, surprise homeowner expenses, etc. Reviewing our monthly expenses, we don't have much fat to cut. We're pretty lean. Maybe we could cut out $500 a month but not $2000 a month or anything.

Would appreciate your comments on whether I can accept this new position that pays about $30,000 less per year, and focus more on the family and less on work.
Last edited by miamivice on Sat Sep 09, 2017 4:53 pm, edited 1 time in total.

JBTX
Posts: 1522
Joined: Wed Jul 26, 2017 12:46 pm

Re: Thinking about accepting new job that pays a bit less

Post by JBTX » Sat Sep 09, 2017 4:27 pm

miamivice wrote:
Sat Sep 09, 2017 3:02 pm
I'm seriously thinking about taking on a different role at my megacorp, one that involves less business travel but also pays about $30,000 less. I would like to spend the time to focus on family and personal endeavors, as well as doing a better job of maintaining my personal health.

I am wondering if I financially am able to do this. Here's what I know:

Family Situation
Married
2 kids, ages 2 and 6
His age - 38
Her age - 38
His income - $140k
Her income - $60k

Assets
Taxable - $580k
Retirement - $600k + accruing pensions (one for him, one for her) + accruing social security
College savings - $145k
Mystery asset - $166k
Home value - $850k

Liabilities
Home loan - $415k
HELOC for mystery asset - $140k

Monthly Budget
Mortgage - $3000
HELOC payment - $1000
Childcare - $2000 (will decline to $0 over 5 year period)
Credit card - $3500 (we put everything possible on credit card and pay off in full each month)
Non-credit card monthly expenses, not otherwise accounted above - $500

Monthly savings
His retirement - $1500/month plus company match of $600
Her retirement - $$833/month plus company match of $200
College savings - $0 (believe to be fully funded)
Non-retirement - not sure, but seems to be pretty small overall

Future retirement scenario
We don't really have a good idea on how much we will spend in retirement, as it's 17 to 25 years away for us. However, my best projection is that we'll probably cover the vast majority of our monthly expenses with social security and pension. Financial Engines estimates we'll have $245,000 a year in retirement spending money, and I cannot fathom how we could possible spend that much. Maybe $100,000 a year but not much more than that.

Basically, we spend today about $120,000 a year after tax, and save $28,000 toward retirement each year. Our companies throw in another $11,000 in matching money so we save about $40,000 a year toward retirement each year. After paying taxes and our monthly expenses, we don't have much left over. What we do save extra in taxable savings seems to get spent on big expenses like car replacement, surprise homeowner expenses, etc. Reviewing our monthly expenses, we don't have much fat to cut. We're pretty lean. Maybe we could cut out $500 a month but not $2000 a month or anything.

Would appreciate your comments on whether I can accept this new position that pays about $30,000 less per year, and focus more on the family and less on work.
So you will make $30K less (assume that is gross, which I am guessing is around $20K less net) and currently you save about $30K a year, mostly in retirement. If you do not change any spending, then you will have to cut way back on your retirement saving, correct?

You have a healthy amount saved for your age, so it is possible that you don't have to save anymore for retirement. $1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate). That plus social security plus pensions will easily get you over your current spending level.

So the big question is when do you want to retire? If you wait until SS retirement age you are probably set. If you want to retire much earlier then the question gets less clear.

Bottom line, if you take the job cut, do you have to continue spending $120K per year, or can you cut that back some to continue your saving? Your spending level is close to ours, and we are trying to pare that back some.

I think you can certainly afford to take the cut, especially if it increases your quality of life and health. The question is are you willing to cut back spending, even modestly, to give you more headroom if you choose to retire early?

I don't know the terms of your mortgage or HELOC and whether refinancing would save you any money.

miamivice
Posts: 579
Joined: Tue Jun 11, 2013 11:46 am

Re: Thinking about accepting new job that pays a bit less

Post by miamivice » Sat Sep 09, 2017 4:52 pm

Thanks for your response.

As to retirement age, I'll retire when I have enough money to retire. I don't think it's purposely now to try to plan on a specific age when we don't know what the stock market will do, or how much I will spend in retirement, etc. I think that I'll probably end up being able to retire between 55 and 60, but I'm not fretting that right now.

I think your calculations are a bit more conservative than mine. I think a 4% SWR is fine in my case, especially since I'll have about $72,000 a year in pensions/social security that will cover the baseline. And I invest rather aggressively so I figure a 8% roi (excluding inflation) rather than a more conservative 5% or so.

I think the big realization that I have come to is that I might not need to worry about retirement, if I don't start taking care of my health today. Perhaps I'm stating that too strongly, but I do need to take care of myself today in order to focus on the future, and I haven't been able to do that with the stress and stuff with my current position. I do need to focus more on today and less on the future.

Regarding cutting spending, as I stated in my original post, there isn't much fat to cut. 40% of our spending is in mortgages/helocs, which I can reduce by paying them off today, but that doesn't make good financial sense. Our credit card spending covers utilities, food, clothes, gasoline, and a few nice things but there isn't much fat to be cut. Nothing can be done about daycare costs right now.

I updated the post with the terms of the mortgage/HELOC. Refinancing is not an option to reduce costs.

miamivice
Posts: 579
Joined: Tue Jun 11, 2013 11:46 am

Re: Thinking about accepting new job that pays a bit less

Post by miamivice » Sat Sep 09, 2017 4:56 pm

JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.

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grap0013
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Re: Thinking about accepting new job that pays a bit less

Post by grap0013 » Sat Sep 09, 2017 5:09 pm

OP, you are in great financial shape. Slam dunk. Go for it if it improves your family life. You might find yourself even happier at work and your output will reflect that and you end up making more at some point.
There are no guarantees, only probabilities.

cherijoh
Posts: 4055
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Thinking about accepting new job that pays a bit less

Post by cherijoh » Sat Sep 09, 2017 5:48 pm

miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
You need to read up on safe withdrawal rates. $266K/year on $3M nest egg is total unsustainable if you hit any kind of a bad sequence of returns in early retirement. Double digit negative returns for a couple of years early on in retirement would torpedo your retirement nest egg with withdrawals anywhere close to that percentage. It also doesn't account for a more conservative AA as you go into retirement.

IMO it is way too soon for you to take your foot off the gas when it comes to accumulating funds towards retirement. Especially if you reduce $28K by $20K/year back to $8K/year. If your companies are actually matching your contributions (as opposed to making a discretionary employer contribution) then that would probably be reduced as well. Your plan leaves no room for even a temporary job loss or an extended illness.

miamivice
Posts: 579
Joined: Tue Jun 11, 2013 11:46 am

Re: Thinking about accepting new job that pays a bit less

Post by miamivice » Sat Sep 09, 2017 5:58 pm

cherijoh wrote:
Sat Sep 09, 2017 5:48 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
You need to read up on safe withdrawal rates. $266K/year on $3M nest egg is total unsustainable if you hit any kind of a bad sequence of returns in early retirement. Double digit negative returns for a couple of years early on in retirement would torpedo your retirement nest egg with withdrawals anywhere close to that percentage. It also doesn't account for a more conservative AA as you go into retirement.

IMO it is way too soon for you to take your foot off the gas when it comes to accumulating funds towards retirement. Especially if you reduce $28K by $20K/year back to $8K/year. If your companies are actually matching your contributions (as opposed to making a discretionary employer contribution) then that would probably be reduced as well. Your plan leaves no room for even a temporary job loss or an extended illness.
Honestly, at age 38 I'm not really concerned with the details on safe withdrawal rates, and it's a bit immaterial anyways. I don't plan on spending $266,000 a year in retirement (as I have stated before), and honestly I don't know how one would spend that much unless they are paying off their kids student loans, own a yacht, or maybe a number of vacation homes, none of which I am planning on doing. And like I said, about 75% to 90% of my retirement spending will come from guaranteed sources (social security, pensions), so I don't plan on using much from my individual retirement except for discretionary purchases like vacations.

I'll continue to save enough that both my wife and I will receive full company matches.

michaeljc70
Posts: 1955
Joined: Thu Oct 15, 2015 3:53 pm

Re: Thinking about accepting new job that pays a bit less

Post by michaeljc70 » Sat Sep 09, 2017 6:04 pm

It is around a 20% gross pay cut, which would be probably not that noticeable net taking both your incomes into account. I say yes, but I would make sure it just isn't the travel that is cut back. If you have to work more hours, obviously that would be a factor. If you would enjoy the new job less, that would be a factor.

I can't imagine many telling you to focus more on work than family, assuming you can pay for the basics and fund your retirement.

michaeljc70
Posts: 1955
Joined: Thu Oct 15, 2015 3:53 pm

Re: Thinking about accepting new job that pays a bit less

Post by michaeljc70 » Sat Sep 09, 2017 6:06 pm

miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
That is almost a 9% withdrawal rate! What if in your last 10 years of life the market crashes? What if you live longer than 30 years?

miamivice
Posts: 579
Joined: Tue Jun 11, 2013 11:46 am

Re: Thinking about accepting new job that pays a bit less

Post by miamivice » Sat Sep 09, 2017 6:09 pm

michaeljc70 wrote:
Sat Sep 09, 2017 6:06 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
That is almost a 9% withdrawal rate! What if in your last 10 years of life the market crashes? What if you live longer than 30 years?
I don't wish to argue safe withdrawal rates here. That's not the purpose of this thread.

As I've said, I don't really have any idea how much we'll spend in retirement (it's too far off and there are too many uncertainties). I do think our baseline expenses (food, home maintenance, cars, etc) will be not more than $50,000 a year, and I think we're well on track to have those expenses covered. Anything above and beyond is bonus.
Last edited by miamivice on Sat Sep 09, 2017 6:15 pm, edited 1 time in total.

michaeljc70
Posts: 1955
Joined: Thu Oct 15, 2015 3:53 pm

Re: Thinking about accepting new job that pays a bit less

Post by michaeljc70 » Sat Sep 09, 2017 6:15 pm

miamivice wrote:
Sat Sep 09, 2017 6:09 pm
michaeljc70 wrote:
Sat Sep 09, 2017 6:06 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
That is almost a 9% withdrawal rate! What if in your last 10 years of life the market crashes? What if you live longer than 30 years?
I don't wish to argue safe withdrawal rates here. That's not the purpose of this thread.
You already did! "I think a 3% SWR is way too conservative." I am not sure why you would post something if you don't want anyone to comment on it. This is a discussion board.

miamivice
Posts: 579
Joined: Tue Jun 11, 2013 11:46 am

Re: Thinking about accepting new job that pays a bit less

Post by miamivice » Sat Sep 09, 2017 6:17 pm

michaeljc70 wrote:
Sat Sep 09, 2017 6:15 pm
miamivice wrote:
Sat Sep 09, 2017 6:09 pm
michaeljc70 wrote:
Sat Sep 09, 2017 6:06 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
That is almost a 9% withdrawal rate! What if in your last 10 years of life the market crashes? What if you live longer than 30 years?
I don't wish to argue safe withdrawal rates here. That's not the purpose of this thread.
You already did! "I think a 3% SWR is way too conservative." I am not sure why you would post something if you don't want anyone to comment on it.
Well, let's move on and refocus on my question. Am I financially able to take a $30,000 reduction in pay to focus on my health and my family? If not, what changes can I make that will allow me to make it happen? At this point, I don't think neglecting my health and my family to have a fatter retirement is a good idea.

Muri
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Re: Thinking about accepting new job that pays a bit less

Post by Muri » Sat Sep 09, 2017 6:28 pm

It sounds like you have already decided that you can live on $30K less, so go ahead.
You must be very certain that your employment is secure to be taking this step.

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Mlm
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Re: Thinking about accepting new job that pays a bit less

Post by Mlm » Sat Sep 09, 2017 6:31 pm

Sure you can do it. It's just a matter of cash flow. You have a lot saved at the age of 38 so I would cut back on the retirement savings for 0-5 years until the child care expenses are gone and reevaluate again at that point. Your health, both physical and mental is much more valuable to your family than an extra vacation in retirement is.
Reality has a way of catching up with you

cherijoh
Posts: 4055
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Thinking about accepting new job that pays a bit less

Post by cherijoh » Sat Sep 09, 2017 8:42 pm

miamivice wrote:
Sat Sep 09, 2017 5:58 pm
cherijoh wrote:
Sat Sep 09, 2017 5:48 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
You need to read up on safe withdrawal rates. $266K/year on $3M nest egg is total unsustainable if you hit any kind of a bad sequence of returns in early retirement. Double digit negative returns for a couple of years early on in retirement would torpedo your retirement nest egg with withdrawals anywhere close to that percentage. It also doesn't account for a more conservative AA as you go into retirement.

IMO it is way too soon for you to take your foot off the gas when it comes to accumulating funds towards retirement. Especially if you reduce $28K by $20K/year back to $8K/year. If your companies are actually matching your contributions (as opposed to making a discretionary employer contribution) then that would probably be reduced as well. Your plan leaves no room for even a temporary job loss or an extended illness.
Honestly, at age 38 I'm not really concerned with the details on safe withdrawal rates, and it's a bit immaterial anyways. I don't plan on spending $266,000 a year in retirement (as I have stated before), and honestly I don't know how one would spend that much unless they are paying off their kids student loans, own a yacht, or maybe a number of vacation homes, none of which I am planning on doing. And like I said, about 75% to 90% of my retirement spending will come from guaranteed sources (social security, pensions), so I don't plan on using much from my individual retirement except for discretionary purchases like vacations.

I'll continue to save enough that both my wife and I will receive full company matches.
You are the one who posted about being able to spend $266K/year off a $3MM nest egg. I was merely commenting that "your calculations" are not realistic.

When you are counting your pensions are you including what has already been accrued to date or is it based on your proposed retirement date? As many people have discovered (much to their dismay), future pension benefits are not guaranteed. Pensions can be frozen at any time, companies (and municipalities) go bankrupt, and of course your continued employment and ability to work to your desired retirement date is also not guaranteed.

I was about 10 years short of retirement from a job with a very nice pension, but my job was relocated out of state and so i separated from the company. I still have the pension I accrued, but between 10 additional years of service, 10 years of raises and a favorable early retirement formula, I figured my pension was ~50% lower than it would have been had I stayed and retired from the firm - assuming that the pension was still active. (They froze the pension several years ago so my shortfall wasn't quite as big as I anticipated when I left the company).

miamivice
Posts: 579
Joined: Tue Jun 11, 2013 11:46 am

Re: Thinking about accepting new job that pays a bit less

Post by miamivice » Sat Sep 09, 2017 9:29 pm

cherijoh wrote:
Sat Sep 09, 2017 8:42 pm
miamivice wrote:
Sat Sep 09, 2017 5:58 pm
cherijoh wrote:
Sat Sep 09, 2017 5:48 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm
JBTX wrote:
Sat Sep 09, 2017 4:27 pm
$1.2 million, projected in real inflation adjusted terms, in 30 years will likely get you somewhere between $3.0 million (approx 3% real return) to $4.8 million (5.0% real), at which point you can easily/conservatively spin off a minimum of $90K per year (3 million @ 3% withdrawal rate).
My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
You need to read up on safe withdrawal rates. $266K/year on $3M nest egg is total unsustainable if you hit any kind of a bad sequence of returns in early retirement. Double digit negative returns for a couple of years early on in retirement would torpedo your retirement nest egg with withdrawals anywhere close to that percentage. It also doesn't account for a more conservative AA as you go into retirement.

IMO it is way too soon for you to take your foot off the gas when it comes to accumulating funds towards retirement. Especially if you reduce $28K by $20K/year back to $8K/year. If your companies are actually matching your contributions (as opposed to making a discretionary employer contribution) then that would probably be reduced as well. Your plan leaves no room for even a temporary job loss or an extended illness.
Honestly, at age 38 I'm not really concerned with the details on safe withdrawal rates, and it's a bit immaterial anyways. I don't plan on spending $266,000 a year in retirement (as I have stated before), and honestly I don't know how one would spend that much unless they are paying off their kids student loans, own a yacht, or maybe a number of vacation homes, none of which I am planning on doing. And like I said, about 75% to 90% of my retirement spending will come from guaranteed sources (social security, pensions), so I don't plan on using much from my individual retirement except for discretionary purchases like vacations.

I'll continue to save enough that both my wife and I will receive full company matches.
You are the one who posted about being able to spend $266K/year off a $3MM nest egg. I was merely commenting that "your calculations" are not realistic.

When you are counting your pensions are you including what has already been accrued to date or is it based on your proposed retirement date? As many people have discovered (much to their dismay), future pension benefits are not guaranteed. Pensions can be frozen at any time, companies (and municipalities) go bankrupt, and of course your continued employment and ability to work to your desired retirement date is also not guaranteed.

I was about 10 years short of retirement from a job with a very nice pension, but my job was relocated out of state and so i separated from the company. I still have the pension I accrued, but between 10 additional years of service, 10 years of raises and a favorable early retirement formula, I figured my pension was ~50% lower than it would have been had I stayed and retired from the firm - assuming that the pension was still active. (They froze the pension several years ago so my shortfall wasn't quite as big as I anticipated when I left the company).
My pension calculations are based on what I have accured so far. I have no idea how long the pensions will be around for either of our employers.

JBTX
Posts: 1522
Joined: Wed Jul 26, 2017 12:46 pm

Re: Thinking about accepting new job that pays a bit less

Post by JBTX » Sat Sep 09, 2017 11:56 pm

miamivice wrote:
Sat Sep 09, 2017 6:17 pm
michaeljc70 wrote:
Sat Sep 09, 2017 6:15 pm
miamivice wrote:
Sat Sep 09, 2017 6:09 pm
michaeljc70 wrote:
Sat Sep 09, 2017 6:06 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm


My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
That is almost a 9% withdrawal rate! What if in your last 10 years of life the market crashes? What if you live longer than 30 years?
I don't wish to argue safe withdrawal rates here. That's not the purpose of this thread.
You already did! "I think a 3% SWR is way too conservative." I am not sure why you would post something if you don't want anyone to comment on it.
Well, let's move on and refocus on my question. Am I financially able to take a $30,000 reduction in pay to focus on my health and my family? If not, what changes can I make that will allow me to make it happen? At this point, I don't think neglecting my health and my family to have a fatter retirement is a good idea.
You asked for feedback. It sounds like you have made up your mind. If so, why seek validation here?

I think i said that what I posted was a conservative scenario. But that is the way I think. I plan on the most conservative scenario and everything else is gravy.

To answer your question you have to think about withdrawal rates. $266k on 3 million is absurd unless of course you plan on dying prematurely. I would say 4.0+% on 4.8 million is more the upside scenario which would be approaching $200k per year.

But if you want validation that your family can survive comfortably on a mere $170k gross income then consider this your official validation.

Cheers.

smitcat
Posts: 674
Joined: Mon Nov 07, 2016 10:51 am

Re: Thinking about accepting new job that pays a bit less

Post by smitcat » Sun Sep 10, 2017 6:40 am

miamivice wrote:
Sat Sep 09, 2017 6:17 pm
michaeljc70 wrote:
Sat Sep 09, 2017 6:15 pm
miamivice wrote:
Sat Sep 09, 2017 6:09 pm
michaeljc70 wrote:
Sat Sep 09, 2017 6:06 pm
miamivice wrote:
Sat Sep 09, 2017 4:56 pm


My calculations are dramatically different than yours. If I had $3 million at retirement, my calculations show that I could spend $266,000 a year from that balance, and have it glide path to zero dollars at the end of a 30 year period. I think a 3% SWR is way too conservative, it would result in me giving my kids a fat inheritance which I do not intend to do.
That is almost a 9% withdrawal rate! What if in your last 10 years of life the market crashes? What if you live longer than 30 years?
I don't wish to argue safe withdrawal rates here. That's not the purpose of this thread.
You already did! "I think a 3% SWR is way too conservative." I am not sure why you would post something if you don't want anyone to comment on it.
Well, let's move on and refocus on my question. Am I financially able to take a $30,000 reduction in pay to focus on my health and my family? If not, what changes can I make that will allow me to make it happen? At this point, I don't think neglecting my health and my family to have a fatter retirement is a good idea.
This question only...
"Am I financially able to take a $30,000 reduction in pay to focus on my health and my family? If not, what changes can I make that will allow me to make it"
You can easily simulate a lower income and see what that does to your taxes. Likely you can get by with a larger cut than $30,000 if you choose. You asked about potential changes - before you make the pay cut consider refinancing to cut your % rate on the prime and HELOC , additionally adding years to the mortgage can lower it as well. Focus on the credit card charges to choose to lessen you monthly food and clothing bills, consider liquidating the mystery asset, consider the real future cost of college for 2 young kids.
And then model you taxes with these new figures to see what level of earning you might require to get to the lowest income range that works with your current goals. You do not say what state you are in but watching the tax implications of less income and less pre tax savings along with some basic costs review is you best bet.
That would be my best guess at answering this one question only...

carolinaman
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Re: Thinking about accepting new job that pays a bit less

Post by carolinaman » Sun Sep 10, 2017 7:12 am

Taking the cut to improve quality of life, health, reduced travel and more family time seems like a no brainer to me. You will have to cut some things out of your spending including probably your retirement savings. However, you are in great shape for someone your age with your savings and can afford to reduce your savings some IMO. Your kids are young only one time and the opportunity to spend more time with them and your wife is priceless, you cannot measure that like some are doing by analyzing your retirement spending and SWR.

FWIW: Twice in my career I took paycuts, one 10% and another 30%, to improve quality of life. Both changes worked out very well for me and I have no regrets. People often get trapped in miserable high paying jobs because they cannot or will not adjust their standard of living.

My one caveat: will you be happy with this new job? Ideally, this would be a job you would be happy with and it would offer a reasonable career path.

Best wishes and congratulations on your success so far.

staythecourse
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Re: Thinking about accepting new job that pays a bit less

Post by staythecourse » Sun Sep 10, 2017 8:42 am

carolinaman wrote:
Sun Sep 10, 2017 7:12 am
Taking the cut to improve quality of life, health, reduced travel and more family time seems like a no brainer to me. You will have to cut some things out of your spending including probably your retirement savings. However, you are in great shape for someone your age with your savings and can afford to reduce your savings some IMO. Your kids are young only one time and the opportunity to spend more time with them and your wife is priceless, you cannot measure that like some are doing by analyzing your retirement spending and SWR.
Any answer other then that is not understanding what life is about. Who CARES about SWR. Taking time to enjoy life, taking care of yourself, and spending with family can never be wrong Good for you for understanding before it is too late. Most don't realize it until it is too late.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

Lynette
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Re: Thinking about accepting new job that pays a bit less

Post by Lynette » Sun Sep 10, 2017 8:58 am

I'd suggest that you go and re-look some some of the assumptions behind financial engines. We could use it at work but the it included pensions, pay increases and social security. I think the assumption was that you annuityized your portfolio at retirement.

multiham
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Re: Thinking about accepting new job that pays a bit less

Post by multiham » Sun Sep 10, 2017 9:02 am

Do it! I often feel the same way you do and know the stress of travel/job are impacting my health (weight, etc). My spouse works part time and makes less than $10,000 a year so I can't afford to give up any of our income. Just make sure that the new position will give you the benefits (health, time, etc) that you are looking for. Nothing would be worse than taking the pay cut and putting in as many hours and dealing with as much stress as you do today. Good luck!

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Watty
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Re: Thinking about accepting new job that pays a bit less

Post by Watty » Sun Sep 10, 2017 9:14 am

Mlm wrote:
Sat Sep 09, 2017 6:31 pm
Your health, both physical and mental is much more valuable to your family than an extra vacation in retirement is.
+1

Your kids are 2 and 6 now so you can spend a lot of time with them now. By the time they are in middle and high school they will be spending a lot more time with their activities and their friends so it is a lot different then.

Traveling a lot can be hard on a spouse too especially when the kids are young. Being there more could also improve your marriage and make it more likely to be successful.

I sometimes like to turn questions around to see them from a different perspective. If you asked, "I can get a $30K raise if I take a new position that requires a lot more travel, should I take it?" the extra $30K would look a lot less tempting.

One thing to look that as being more important than the salary is what the new position means for job security and your future career, especially if you need or want to find a job with a different company someday.

I would take a hard look at paying off the home equity loan that you used to pay for the mystery asset especially if the home equity loan is a variable rate loan. That would make your monthly cash flow a lot better and could mean that you have enought cash flow to max out your retirement savings. The mortgage and home equity loan are in many ways like a negative bond that is using leverage which make your asset allocation a lot more aggressive than you might really want.

Whatever you do you should not cut back on your deductible and Roth retirement accounts. If you don't have enough cash flow to max them out then you could do something like put $1,000 a month in your 401k from your paycheck and then withdraw $750 a month from your taxable account to live on. The difference in the amounts is assuming that you are in the 25% tax bracket.

There are lots of pros and cons but one option you could also consider would be to check with your lender to see if they will "recast your mortgage"(Google this) if you make a large prepayment. They are not required to but they usually will. If you do this and pay off 50% (or whatever works for you) of your mortgage balance then your required mortgage payment would be reduced by the same percentage. Then length of the loan and the interest rate would stay the same. That could really improve your cash flow and allow you to do things like travel more with your kids when they are young.
miamivice wrote:
Sat Sep 09, 2017 3:02 pm
Financial Engines estimates we'll have $245,000 a year in retirement spending money, and I cannot fathom how we could possible spend that much. Maybe $100,000 a year but not much more than that.
Many estimates like this are done in inflated dollars by companies that are trying to scare you into investing a lot of money with them. I retired a few years ago and there are some new retirement expenses but without child raising and college costs, retirement savings, getting my house paid off, no more Social Security and Medicare taxes, much lower federal and state income taxes, and no work related costs like commuting, I have found my retirement expenses to be lower than while I was working.

blevine
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Re: Thinking about accepting new job that pays a bit less

Post by blevine » Sun Sep 10, 2017 9:46 am

I would also consider prospects for each job down the line.
There is nothing wrong with a small step back for 2+ steps forward in a year or two,
but if a permanent step backwards I would be cautious about doing this.
While you are doing well, not well enough to forgo saving more for the future.

If you continue with travel, make it a point to exercise in your hotels, bring your
sneakers and gym clothes and force yourself to use the equipment at each hotel.
People make excuses to NOT go to the gym, whether at home or on the road.
Don't make excuses regardless what you do, your health is important.

Without knowing more about your career can't say much, but financially this is a mistake.
As a father, your main job is to be a provider (just watch Breaking Bad for more such advice :-)

miles monroe
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Re: Thinking about accepting new job that pays a bit less

Post by miles monroe » Sun Sep 10, 2017 9:47 am

health and family is more important than money; the answer to the question imo is obvious.

John Laurens
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Re: Thinking about accepting new job that pays a bit less

Post by John Laurens » Sun Sep 10, 2017 9:56 am

To answer your question...yes. Your net worth is very good considering a 200k income at your age and your stated savings rate. Is that sum partially the result of a favorable real estate market or inheritance? If so those factors continued or lack there of, may have more bearing on your future than anything.

But if I were in your shoes, We (my wife and I) would bring her income down to zero. We would also bring the childcare cost to zero. I would continue in current role.

Regards,
John

nimo956
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Re: Thinking about accepting new job that pays a bit less

Post by nimo956 » Sun Sep 10, 2017 11:25 am

While the new job may involve less travel, how do you know it would be less stressful in terms of hours worked? What if it's okay in the beginning, but then gets more stressful/ has longer hours over time? How do you know you won't end up working just as much, with worse future prospects, for less money?

Why can't you find a different job, probably at a different company, that's higher paid with less travel?

How many years will it take you at the lower-paid job to get back to the same salary you have now?
50% VTI / 50% VXUS

Ron Ronnerson
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Re: Thinking about accepting new job that pays a bit less

Post by Ron Ronnerson » Sun Sep 10, 2017 3:40 pm

Bottom line is that you seem totally set. I would cut my hours and work-related travel as much as possible to be able to enjoy life while still being able to pay the bills and put a small amount toward retirement. Also, you can increase your retirement contributions once childcare costs go away.

When you're older, I think you're much more likely to regret having given up valuable time while your kids were young (as well as the opportunity to take better care of your health during those years) in exchange for money that didn't really improve your life all that much in the end. I doubt you'll regret being slightly less wealthy but having spent a lot of time with family and being in good health.

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