Laid Off/Termination/Downsizing survival strategies...

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CyclingDuo
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Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 1:14 pm

Looking for a little wisdom and guidance on those that have been through a job termination in their mid 50's and how it impacted decisions.

This post was not intended to be a portfolio review, but here is the latest update if you need a reference: viewtopic.php?f=1&t=207677

Emergency funds: 1.5 years of income
Debt: $127K Mortgage 5/1 ARM 4% (no other debt) on a $370K home
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal (dropping to 22% for 2018), 8.98% State
Gross Annual Household Income: $140K salary ($77K+$63K salaries) - losing the lower salary
Additional Options: +26K taxable dividends + 8K from inherited RMD's IRA's (all currently reinvested)
State of Residence: IA
Current Ages: 56 (planned to retire in 10 years) & 60 (plans to retire in 5-6 years)
Asset allocation: 70% stocks/20% bonds/10% alternatives
International allocation: 20%
Total Portfolio Size: Low 7 figures

I got the recent news my position is being eliminated. Therefore, I am dealing with the obvious emotional and financial implications of it all at age 56.

Dual income household, so feel fortunate that I will still be covered for health/dental/vision under spouse's plan for at least another 5-6 years. The plan had been to max out our retirement plans as we had the income and ability to do that due to having an empty nest. This year, the plan was to max out the two 403b plans, one 457b plan as well as the option to max out both of our Roth IRA's. My spouse also has a mandatory pension plan that she contributes to each month and receives the employer match. Last year and this year have been two years of super-saving for us based on our particular income.

Pay will continue for me to the end of August, with the chance to collect unemployment after that for up to 26 weeks or until a new position is found.

Yes, we have an emergency fund. Yes, our investments/savings to date are in good shape (at the moment have 24 x current expenses before we factor in any future pension and SS payments down the road). Spouse will work for another 5-6 years providing us with income to just about cover everything in those years, but we would have to cut way back on her savings for obvious reasons. We also have some things in our expenses we could tweak/trim/cut that are in the wants category, and not in the needs. We currently have a portion of our investment portfolio invested in such a fashion that we get about $25-26K a year in dividends (taxable account filled with investments we inherited in 2016) which currently are all set on reinvestment of dividends, but have the option to set those - or at least some of those - to utilize as income replacement if need be. The majority of the overall portfolio is based on total return, but with the dividend producing investments it is more or less a hybrid at the moment.

Scenario & Question: My final pay will be in August, so with a salary adjustment I could have HR change my pre-tax deduction so I get the full $24.5K max into my retirement plan for 2018 by the end of August. If I don't do this, my contributions will total $16,333 for 2018 as opposed to the full $24.5K. To me, it at least sounds like a worthy endeavor to stuff what I can in there before I turn in the keys, laptop and my parking pass if this turns out to be my final FT job with a decent, low cost retirement plan. Since it is the lowest cost of all of our plans (all of our work sponsored retirement plans use Vanguard Index funds, but this one is with TIAA and is the lowest cost of our plans as my spouse pays a .18% administrative fee on top of the underlying Vanguard Index funds). So - should I have HR adjust my final months deductions to max out the full $24.5K this year? If that is not advisable, I also have the option to max mine out, and cut that additional deduction amount I would need to add from my remaining salary months from going into my wife's plan so that we are least filling up the lowest cost plan first.

Scenario & Questions: Our numbers in a variety of scenarios look pretty good in i-ORP, FIRECalc based on all the playing around I have been doing (that is, provided I am doing it correctly). I have calculated everything with me not working, as well as with me continuing to work and things look favorable either way. My preference would be to get new employment so I can tuck away a little more in retirement plans, and not have to spend down any of our savings/investments (and keep those dividends working by all being reinvested). In addition, it would allow me to continue to pay into Social Security as stopping work now swings SS estimates by several hundred per month. That may not be a big deal since the odds of finding any type of employment that pays the same as I make now I realize is not in my favor, so SS is probably going to be what it is going to be - a bit less than I had originally planned. I would more or less be looking for some sort of income replacement through part-time, full-time, self-employed, or whatever the job market has in store for me out there. Original plans were for me to happily work (loved my job) into my 60's since I am 4 years younger than my spouse to cover some pre-SS gap years after she retires and have health insurance (both had planned on taking SS at age 70 before the termination news), and target one of our goals of passing on a legacy to our children. Our investment positioning was set at 70/20/10 (equities/bonds/alternatives) which may not be as ideal for one of us to retire at the moment compared to original plans of working another 10 years. So the questions are more centered around advice - What did you experience? What would you advise? How long does it take to work through all of the emotional as well as financial positioning to have the clearest picture one can have? Any glaring things that jump out I am overlooking or need to think about?

Thanks in advance. :beer

bloom2708
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by bloom2708 » Wed Apr 04, 2018 1:32 pm

Very sorry to hear about your impending layoff. Polish and buff the resume. If most of your portfolio is in pre-tax, I would not worry about maxing this year. I would pile up cash to account for an extended job search. A Dave Ramsey emergency. Pile up cash.

For all the posters who love their jobs and intend to work until 70 or after, this another good reminder that nothing is guaranteed. KlangFool 101.

Do you use LinkedIn? Do you have former co-workers you can network with? Having a personal contact will likely get you to a different job faster.

If health insurance is covered, then spend the next months searching for a replacement job. I would do the bare minimum at work, use your vacation, de-stress and have another job lined up for a couple weeks after you are done with your current job.

70/20/10 looks awful risky as you get closer to retirement. I'm not sure what alternatives means, but 60/40 would feel better to me.

Good luck in the job hunt!
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

getthatmarshmallow
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by getthatmarshmallow » Wed Apr 04, 2018 1:36 pm

No specific advice, but wanted to share my support, because ugh. You've been doing fine and living within your means. You have savings. You're talking about whether to direct more to savings! It will be OK, even if now it feels like a kick in the gut.

soccerrules
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by soccerrules » Wed Apr 04, 2018 1:40 pm

sorry to hear about the job loss. It is and can be an emotional jolt.

First - Relax and take a deep breath. The reality is that you appear to be in a really good position financially. Also why you built an EF, right ?

I am 3-4 years younger than you but in a similar spot (low 7 fig nest egg, $90K mortgage) BUT I have 1 in HS and 6 years of college to fund.

I start modeling out savings and such for the next 7-8 years to FIRE at 60. I have realized that adding savings over this time is a positive-- but not as important as:
1) my AA on my Nest Egg and NOT touching it until I am ready (LET IT GROW)
2) covering my current expenses until 60.

My point is to find different work over the next years so you can hit your goal. It would have been nice to stay where you are -- but now the route has changed. You may need to take a few weeks to let your mind calibrate to your new scenario (that is OK)

I would hope you would be able to find something you enjoy that would pay you at least 80-90% of your current income ($63K current ?)

Best of luck.
Don't let your outflow exceed your income or your upkeep will be your downfall.

birdy
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by birdy » Wed Apr 04, 2018 1:50 pm

I just wanted to also extend my sympathy to you over the loss of your job. I felt embarrassed and humiliated when I was let go. I always had felt I had done an excellent job and going through my emotions over it I still feel sadness and anger. It is one thing to choose to change jobs, but a totally different experience to find out they don't want YOU. I also suggest you use this time to come to terms with this crossroad in your life and try to look at it as a chance for a different happiness. It was scary to have to get back out in the job market and compete against the "young kids" for me. It all worked out for me----I decided to become an independent contractor and loved the chance to take jobs or not take jobs as I wished. Good luck to you and your family. Look forward and not back!

birdy

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 1:52 pm

bloom2708 wrote:
Wed Apr 04, 2018 1:32 pm
Very sorry to hear about your impending layoff. Polish and buff the resume. If most of your portfolio is in pre-tax, I would not worry about maxing this year. I would pile up cash to account for an extended job search. A Dave Ramsey emergency. Pile up cash.

For all the posters who love their jobs and intend to work until 70 or after, this another good reminder that nothing is guaranteed. KlangFool 101.
Yup. KlangFool continues to provide excellent wisdom and was the first person on the BH boards I thought of when I got called in for the news of my position being terminated. "You never know when" rings true.

Working on polishing and buffing everything resume wise.
bloom2708 wrote:
Wed Apr 04, 2018 1:32 pm
Do you use LinkedIn? Do you have former co-workers you can network with? Having a personal contact will likely get you to a different job faster.
Yes. I recently updated it. Most in my particular niche industry within higher education in the area are well aware as the news was public and on social media (not my choice) as the institution I work for cut 12 professors and upcoming staff cuts are coming as well. Declining enrollment institution wide caused it. I've been getting word out, applied for a couple of positions, and am open to other endeavors as well if and when they present themselves.
bloom2708 wrote:
Wed Apr 04, 2018 1:32 pm
If health insurance is covered, then spend the next months searching for a replacement job. I would do the bare minimum at work, use your vacation, de-stress and have another job lined up for a couple weeks after you are done with your current job.
Cannot do bare minimum as I am teaching an overload working beyond any downtime between now and May 25th. It's busy time of the Semester in academia with no time to think outside of a few hours today between things at work. I can get some downtime as Summer approaches. Pay, based on how academia pays, is until the end of August. So I really have only 8 more weeks to go work wise.
bloom2708 wrote:
Wed Apr 04, 2018 1:32 pm
70/20/10 looks awful risky as you get closer to retirement. I'm not sure what alternatives means, but 60/40 would feel better to me.
Alternatives are in real estate and K-1 (commercial real estate). Yes, the goal was to glide into 60/40 throughout the next decade. Funny how life jumps up and gives you a dose of reality that doesn't jive with best laid initial plans. The wife is at 60/40 in her 403b/457b, mine is at 70/30. The rest could be adjusted. This just happened, so I've been more or less a deer in headlights for a few weeks without making any sudden moves to do much other than process it all.
bloom2708 wrote:
Wed Apr 04, 2018 1:32 pm
Good luck in the job hunt!
:beer

quantAndHold
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by quantAndHold » Wed Apr 04, 2018 1:57 pm

You have 1.5 years of income piled up in emergency savings, and it appears that your living expenses are quite low, so your emergency savings are probably closer to 3 years of living expenses. In addition, spouse currently makes enough to pay living expenses without dipping into savings, and overall, you’re on track for retirement, as long as you can find something new that you enjoy and can do for a few more years. So, this isn’t an emergency. Basically, you’re having to pause your retirement savings for a short period, until you start making money again.

If it were me, I would go ahead and max out the 403b before you leave, continue maxing spouse’s retirement savings, and if you need extra cash, spend down taxable accounts.

Beyond that, take this as an opportunity to make some lemonade. What do you want to do? Another corporate job? Start a company? Freelance? The world is your oyster.

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jharkin
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by jharkin » Wed Apr 04, 2018 2:02 pm

Take a deep breath... I suspect you are going to be just fine.

You have 25x expenses in retirement already/ That's close to 'done' as it is, probably you could just let the principle ride now wand be set (agree with the recommendation to shift to a more conservative AA)

1.5x income in a n EF with a high savings rate probably means 2-3 years of expenses right?, and you wont have to dip into that for a year it sounds, and you still have half an income.... All adds up to you have years of breathing room to find the right new opportunity.

First order of business- switch to the spouse' employer health plan if not done already. Then start thinking of what you want to do next. I wouldn't rule out taking some time off to take training/certification classes if they will help with the search, you appear well positioned to manage that. Or just have fun for a while and then decide. :beer
Last edited by jharkin on Wed Apr 04, 2018 2:29 pm, edited 1 time in total.

KlangFool
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by KlangFool » Wed Apr 04, 2018 2:04 pm

OP,

I will refinance your ARM into 15 years or 30 years fixed rate mortgage ASAP.

KlangFool

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 2:10 pm

quantAndHold wrote:
Wed Apr 04, 2018 1:57 pm
You have 1.5 years of income piled up in emergency savings, and it appears that your living expenses are quite low, so your emergency savings are probably closer to 3 years of living expenses. In addition, spouse currently makes enough to pay living expenses without dipping into savings, and overall, you’re on track for retirement, as long as you can find something new that you enjoy and can do for a few more years. So, this isn’t an emergency. Basically, you’re having to pause your retirement savings for a short period, until you start making money again.

If it were me, I would go ahead and max out the 403b before you leave, continue maxing spouse’s retirement savings, and if you need extra cash, spend down taxable accounts.
Sounds good. Even if some of it were more or less moving things around from taxable to tax deferred. I have no idea what unemployment even pays, but at least it won't be total loss of income for a few months as I hunt and transition to something else.
quantAndHold wrote:
Wed Apr 04, 2018 1:57 pm
Beyond that, take this as an opportunity to make some lemonade. What do you want to do? Another corporate job? Start a company? Freelance? The world is your oyster.
:beer Not sure I'm the corporate type (worked in the Fine Arts for 35 years). Thought about a business, but not keen on the idea of "buying a job" - especially without small business experience seems to add a level of fear/loss. However, your point is well taken. I may find something totally unrelated to the previous 35 years that provides a new perspective. I will indeed remain open to all options and leave no stone unturned...
Last edited by CyclingDuo on Wed Apr 04, 2018 2:23 pm, edited 1 time in total.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 2:12 pm

KlangFool wrote:
Wed Apr 04, 2018 2:04 pm
OP,

I will refinance your ARM into 15 years or 30 years fixed rate mortgage ASAP.

KlangFool
As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).

Too bad I didn't find out a few months earlier when rates were even lower!

getthatmarshmallow
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by getthatmarshmallow » Wed Apr 04, 2018 2:12 pm

Administration?

delamer
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by delamer » Wed Apr 04, 2018 2:21 pm

I am sorry about your job. I have had a few friends go through the same thing at about the same age, and it is tough both financially and psychologically.

Do you have a solid handle on your expenses, going forward? I know you mentioned 1.5 years of expenses saved, but is that based on a rough guess or a really detailed analysis? In your position, I’d want details. And not just for the next couple years, but into retirement. For instance, how much time left on the mortgage?

I don’t know that it makes sense to max your retirement contributions. Cash on hand is a high priority when faced with a job loss. It may be that your tax rates won’t be any higher now than in retirement.

Good luck.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 2:22 pm

jharkin wrote:
Wed Apr 04, 2018 2:02 pm
First order of business- switch to the spouse' employer health plan if not done already. Then start thinking of what you want to do next. I wouldn't rule out taking some time off to take training/certification classes if they will help with the search, you appear well positioned to manage that.
I am trying to take a deep breath (when my gut isn't aching over it all). The immediate grief feels a bit like the loss of a loved one which I imagine is par for the course. Winter needs to be over to help remove some of the gloom in my neck of the woods.

Fortunately, I already moved to my spouse's health plan a few years ago as it was a bit better plan than the one where I have been working. So that is already taken care of and in place.

Yes, I indeed will have time for some training/certification if need be to transition to something else if that is the direction I go. I'm not the type to sit still and do nothing, so once the dust settles from it all I will be all in looking for options.

dcabler
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by dcabler » Wed Apr 04, 2018 2:24 pm

One thing you're contemplating is something I've been doing for several years now. Like you, I'm in my mid 50's (turning 57 this year). I've been front-end-loading my 401k for several years by having the maximum withholding % possible. Within a few months, I've maxed out for the year. Of course you need to make sure you have enough in your checking account to live on during that time and it does delay getting the full match for the year, but it's worth it, in my opinion. In my industry (semiconductor), layoffs tend to happen after mid year, usually at the end of the year.

And I have been through several layoffs. Last year just after I turned 56, the company where I was working closed its office where I worked at the end of June. Fortunately, I saw it coming and the stars aligned and I already had an offer-in-hand by the time the doors closed. And my 401K was fully funded. Love this job but figure that it's probably my last full-time one in this industry.

In late 2012, a company where I had worked for many years had a large layoff and my entire team was affected. Within a few weeks I was employed again, but after 8 months, they decided to close the local office at the new job. I was given an option to move to San Diego, which I declined. In that event, I was out of work for about 10 months before getting the next gig. Kept really busy and time flew! I got unemployment, which just about covered Cobra until I switched to ACA and it more than covered it and help take the sting off. Did all of the analysis you did and concluded that I could retire if I didn't get another job, but another one came along.

Before that, in my 2003 while still in my 40's, I went through a layoff. Again, saw it coming, was ready for a change anyway, and had an interview already scheduled before I got the notice. Took several weeks but I was hired.

Moral of the story: It happens. It even happens to Senior Managers and Directors like me who also have the unfortunate job of sometimes laying off other people. We did all of the right things along the way with our savings rate, investing, and emergency fund. With the time off I got a better handle on where our spending was and made some adjustments which we've kept. By the third time it happened, it was old hat and we were even better prepared financially and emotionally. And each time I took advantage of unemployment insurance even if I wasn't 100% sure I'd ever go back to work.
Last edited by dcabler on Wed Apr 04, 2018 2:46 pm, edited 2 times in total.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 2:32 pm

delamer wrote:
Wed Apr 04, 2018 2:21 pm
I am sorry about your job. I have had a few friends go through the same thing at about the same age, and it is tough both financially and psychologically.

Do you have a solid handle on your expenses, going forward? I know you mentioned 1.5 years of expenses saved, but is that based on a rough guess or a really detailed analysis? In your position, I’d want details. And not just for the next couple years, but into retirement. For instance, how much time left on the mortgage?
It's 1.5 years of our current dual salaried income in our EF, not expenses. It would be a little more than 3 x our annual expenses in the EF if we use that figure instead. Current annual expenses are based on our dual income, amount of savings, lifestyle, and including the mortgage. So the 24 x multiple we have saved is based on that figure. My wife will receive a pension, and we will both receive SS at some point in some amount. Plugging those into the equation at the proper expected times (years we begin them), and our current savings/portfolio is a higher multiple than 24 x. The mortgage is a 5/1 ARM which we have had the past 15 years and just kept rolling it over into another 5/1 ARM as rates were favorable all these years and we were never sure we would be staying this long. :mrgreen:
delamer wrote:
Wed Apr 04, 2018 2:21 pm
I don’t know that it makes sense to max your retirement contributions. Cash on hand is a high priority when faced with a job loss. It may be that your tax rates won’t be any higher now than in retirement.

Good luck.
Thanks. Yes, due to inheritance and having worked overseas for 15 years where we could not contribute to tax deferred, a little more than 50% of our total portfolio is in taxable. That's why I thought it would be worthwhile to stuff some more into the tax-deferred 403b between now and August to get the full $24.5K in there for this calendar year.

KlangFool
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by KlangFool » Wed Apr 04, 2018 2:47 pm

CyclingDuo wrote:
Wed Apr 04, 2018 2:12 pm
KlangFool wrote:
Wed Apr 04, 2018 2:04 pm
OP,

I will refinance your ARM into 15 years or 30 years fixed rate mortgage ASAP.

KlangFool
As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).

Too bad I didn't find out a few months earlier when rates were even lower!
CyclingDuo,

<<As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).>>

1) If we hit a recession and your spouse lost her job, how long can you last? This is assuming that the stock market drops 50% and the bond stays the same. And, you may need to sell at low in order to survive.

2) This is me. I would make sure that I can survive the worst case scenario first before I pay off the mortgage.

3) You can refinance the mortgage now before you are laid off. When will the ARM reset?

4) Refinancing fixed the interest rate and improve your liquidity.

KlangFool

delamer
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by delamer » Wed Apr 04, 2018 3:05 pm

CyclingDuo wrote:
Wed Apr 04, 2018 2:32 pm
delamer wrote:
Wed Apr 04, 2018 2:21 pm
I am sorry about your job. I have had a few friends go through the same thing at about the same age, and it is tough both financially and psychologically.

Do you have a solid handle on your expenses, going forward? I know you mentioned 1.5 years of expenses saved, but is that based on a rough guess or a really detailed analysis? In your position, I’d want details. And not just for the next couple years, but into retirement. For instance, how much time left on the mortgage?
It's 1.5 years of our current dual salaried income in our EF, not expenses. It would be a little more than 3 x our annual expenses in the EF if we use that figure instead. Current annual expenses are based on our dual income, amount of savings, lifestyle, and including the mortgage. So the 24 x multiple we have saved is based on that figure. My wife will receive a pension, and we will both receive SS at some point in some amount. Plugging those into the equation at the proper expected times (years we begin them), and our current savings/portfolio is a higher multiple than 24 x. The mortgage is a 5/1 ARM which we have had the past 15 years and just kept rolling it over into another 5/1 ARM as rates were favorable all these years and we were never sure we would be staying this long. :mrgreen:
delamer wrote:
Wed Apr 04, 2018 2:21 pm
I don’t know that it makes sense to max your retirement contributions. Cash on hand is a high priority when faced with a job loss. It may be that your tax rates won’t be any higher now than in retirement.

Good luck.
Thanks. Yes, due to inheritance and having worked overseas for 15 years where we could not contribute to tax deferred, a little more than 50% of our total portfolio is in taxable. That's why I thought it would be worthwhile to stuff some more into the tax-deferred 403b between now and August to get the full $24.5K in there for this calendar year.
I’d do a year-by-year expense estimate (without any further savings) and see how much you need to withdraw from savings each year until you are collecting both Social Security and your wife’s pension. If you get another job, so much the better.

Given that you have 24x expenses even without SS and the pension, you should be OK. But your planning will go better if you know how much you’ll spend down and what your nest egg will look like at “full retirement.”

It also is good to do some estimates of income and expenses for each of you as a sole survivor. Sometimes plans that look fine with both of you living aren’t as robust when one of you dies.

Good luck.

Hulu
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by Hulu » Wed Apr 04, 2018 3:07 pm

Sorry for your loss. Parting involuntarily is really hard. The emotional toll is unpredictable and heavy. I'd surrounding yourself with positive and loving people/experiences. And use the opportunity to take stock of what is important to you and the family. It's hard, painful work to separate ourselves from our jobs, relationships, body, etc.

Financially I'm not as knowledgeable so I'll let those who know more comment. Good luck!

Colorado13
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by Colorado13 » Wed Apr 04, 2018 5:56 pm

I sympathize with your situation. While I am in a slightly different (although similar) boat, I was thankful to receive amazing advice and support at viewtopic.php?f=2&t=245664. This is a challenging situation to be facing and I am sending best wishes to you. You seem to have your financial house in order, but I truly understand the emotional toll of this situation. Try to be kind to yourself during this stressful transition and keep the faith that there are brighter days ahead.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 5:57 pm

KlangFool wrote:
Wed Apr 04, 2018 2:47 pm
CyclingDuo wrote:
Wed Apr 04, 2018 2:12 pm
KlangFool wrote:
Wed Apr 04, 2018 2:04 pm
OP,

I will refinance your ARM into 15 years or 30 years fixed rate mortgage ASAP.

KlangFool
As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).

Too bad I didn't find out a few months earlier when rates were even lower!
CyclingDuo,

<<As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).>>

1) If we hit a recession and your spouse lost her job, how long can you last? This is assuming that the stock market drops 50% and the bond stays the same. And, you may need to sell at low in order to survive.

2) This is me. I would make sure that I can survive the worst case scenario first before I pay off the mortgage.

3) You can refinance the mortgage now before you are laid off. When will the ARM reset?

4) Refinancing fixed the interest rate and improve your liquidity.

KlangFool
Good points, KlangFool.

Yes, thinking of worst case scenarios indeed such as 50% drop in the market coupled with a layoff for my spouse would be difficult. Her job is mandated by the Federal Government, so the Elementary and Secondary Act ESEA (No Child Left Behind) would have to be abolished (Public Law PL 107-110, the No Child Left Behind Act of 2001) for the services she provides. However, as we all know - nothing is set in stone - and I guess it could happen. The other worst case scenario - if she was the sole breadwinner - would be if she came into some health/injury issues before I could land a new job.

Obviously, refinancing while still employed is going to be easier than after. Won't they look into the fact that I stop getting paid after August, or do I just focus on our current income while we have it? The 5/1 ARM resets next February. I think with a phone call, we could probably refinance with the same company rather quickly to a 15 or 30 fixed (heaven knows they send me snail mail bi-weekly, and emails with plenty of offers).

Even on one salary, the current mortgage (PITI) payment would only jump from 10% (based on two incomes) to 18% (based on one income) of our gross salaried income with our current payments. So I guess I wasn't as concerned about it, but you raise good points to take a look for the longer haul.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 6:14 pm

Colorado13 wrote:
Wed Apr 04, 2018 5:56 pm
I sympathize with your situation. While I am in a slightly different (although similar) boat, I was thankful to receive amazing advice and support at viewtopic.php?f=2&t=245664. This is a challenging situation to be facing and I am sending best wishes to you. You seem to have your financial house in order, but I truly understand the emotional toll of this situation. Try to be kind to yourself during this stressful transition and keep the faith that there are brighter days ahead.
Thank you for the kind thoughts. :D

I actually read that thread!

And many others similar after doing several searches for those being laid off in their 50's. I've been spending plenty of time reading all about this to know that many go through similar experiences - and life does go on. Posting is probably part therapy for me as I just felt like it was time to start getting it off my chest in a public forum. In addition, it's part asking for guidance/advice for me as I certainly haven't been able to talk to colleagues at work about the financial aspect. My closest colleagues have been very kind, the rest have no idea what to say to me and it's hard not to feel a bit like a leper when walking around campus or in the community when I see colleagues at a store or restaurant.

I have taken the advice I have read about letting everyone you know in your network you are looking for a job. I feel fortunate to say that a couple of potential opportunities may materialize from the least expected directions simply by me blabbing a little bit the past week about my situation wherever I go based on everything I have read.

I am trying to be kind to myself. Hopping on the bike as much as I can squeeze in, eating well, keeping entertained, and enjoying every day of work like it was my last.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 6:15 pm

Hulu wrote:
Wed Apr 04, 2018 3:07 pm
Sorry for your loss. Parting involuntarily is really hard. The emotional toll is unpredictable and heavy. I'd surrounding yourself with positive and loving people/experiences. And use the opportunity to take stock of what is important to you and the family. It's hard, painful work to separate ourselves from our jobs, relationships, body, etc.

Financially I'm not as knowledgeable so I'll let those who know more comment. Good luck!
Thanks, Hulu!

The bolded sentence you wrote rings a huge bell for me. I had no idea it would have moments of such heaviness....

delamer
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by delamer » Wed Apr 04, 2018 6:24 pm

CyclingDuo wrote:
Wed Apr 04, 2018 5:57 pm
KlangFool wrote:
Wed Apr 04, 2018 2:47 pm
CyclingDuo wrote:
Wed Apr 04, 2018 2:12 pm
KlangFool wrote:
Wed Apr 04, 2018 2:04 pm
OP,

I will refinance your ARM into 15 years or 30 years fixed rate mortgage ASAP.

KlangFool
As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).

Too bad I didn't find out a few months earlier when rates were even lower!
CyclingDuo,

<<As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).>>

1) If we hit a recession and your spouse lost her job, how long can you last? This is assuming that the stock market drops 50% and the bond stays the same. And, you may need to sell at low in order to survive.

2) This is me. I would make sure that I can survive the worst case scenario first before I pay off the mortgage.

3) You can refinance the mortgage now before you are laid off. When will the ARM reset?

4) Refinancing fixed the interest rate and improve your liquidity.

KlangFool
Good points, KlangFool.

Yes, thinking of worst case scenarios indeed such as 50% drop in the market coupled with a layoff for my spouse would be difficult. Her job is mandated by the Federal Government, so the Elementary and Secondary Act ESEA (No Child Left Behind) would have to be abolished (Public Law PL 107-110, the No Child Left Behind Act of 2001) for the services she provides. However, as we all know - nothing is set in stone - and I guess it could happen. The other worst case scenario - if she was the sole breadwinner - would be if she came into some health/injury issues before I could land a new job.

Obviously, refinancing while still employed is going to be easier than after. Won't they look into the fact that I stop getting paid after August, or do I just focus on our current income while we have it? The 5/1 ARM resets next February. I think with a phone call, we could probably refinance with the same company rather quickly to a 15 or 30 fixed (heaven knows they send me snail mail bi-weekly, and emails with plenty of offers).

Even on one salary, the current mortgage (PITI) payment would only jump from 10% (based on two incomes) to 18% (based on one income) of our gross salaried income with our current payments. So I guess I wasn't as concerned about it, but you raise good points to take a look for the longer haul.
Mortgage lenders always ask how long you’ve already been with your current employer. I have never known one to ask how long you intend to continue with your current employer.

You should be able to qualify based on your wife’s income alone, in any case.

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Re: Laid Off/Termination/Downsizing survival strategies...

Post by KlangFool » Wed Apr 04, 2018 6:34 pm

CyclingDuo wrote:
Wed Apr 04, 2018 5:57 pm
KlangFool wrote:
Wed Apr 04, 2018 2:47 pm
CyclingDuo wrote:
Wed Apr 04, 2018 2:12 pm
KlangFool wrote:
Wed Apr 04, 2018 2:04 pm
OP,

I will refinance your ARM into 15 years or 30 years fixed rate mortgage ASAP.

KlangFool
As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).

Too bad I didn't find out a few months earlier when rates were even lower!
CyclingDuo,

<<As opposed to just paying it off? Paying it off would only free up $702 per month (that's the amount that goes to PI of PITI).>>

1) If we hit a recession and your spouse lost her job, how long can you last? This is assuming that the stock market drops 50% and the bond stays the same. And, you may need to sell at low in order to survive.

2) This is me. I would make sure that I can survive the worst case scenario first before I pay off the mortgage.

3) You can refinance the mortgage now before you are laid off. When will the ARM reset?

4) Refinancing fixed the interest rate and improve your liquidity.

KlangFool
Good points, KlangFool.

Yes, thinking of worst case scenarios indeed such as 50% drop in the market coupled with a layoff for my spouse would be difficult. Her job is mandated by the Federal Government, so the Elementary and Secondary Act ESEA (No Child Left Behind) would have to be abolished (Public Law PL 107-110, the No Child Left Behind Act of 2001) for the services she provides. However, as we all know - nothing is set in stone - and I guess it could happen. The other worst case scenario - if she was the sole breadwinner - would be if she came into some health/injury issues before I could land a new job.

Obviously, refinancing while still employed is going to be easier than after. Won't they look into the fact that I stop getting paid after August, or do I just focus on our current income while we have it? The 5/1 ARM resets next February. I think with a phone call, we could probably refinance with the same company rather quickly to a 15 or 30 fixed (heaven knows they send me snail mail bi-weekly, and emails with plenty of offers).

Even on one salary, the current mortgage (PITI) payment would only jump from 10% (based on two incomes) to 18% (based on one income) of our gross salaried income with our current payments. So I guess I wasn't as concerned about it, but you raise good points to take a look for the longer haul.
CyclingDuo,

<<The 5/1 ARM resets next February.>>

I would refinance to 30 years and lower the monthly payment. If things go well, you could pay it off. If not, it is a small price to pay to bridge the gap until you withdraw pension/social security.

It happened to some folks in 2008/2009. Laid off plus ARM reset at the same time.

Please take my prediction with a huge amount of skepticism. Historically, there is at least one US recession every 10 years since 1836. The last recession was 2007/2009. We are long overdue for a recession. So, based on historical trend, there should be a recession coming soon between now and 2019.

KlangFool

il0kin
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by il0kin » Wed Apr 04, 2018 6:57 pm

May I ask, do you wish now that you had paid off your mortgage earlier? I am still young, 29, but am in a technical field and plan to stay in it for the long term, but I work for a very stable employer. Technical fields can definitely have age discrimination. Anyway, we have a 30-yr at 3.875 and the loan will complete at age 57. I have always considered not having a mortgage a prerequisite to retirement in order to free up monthly income.

Thanks for sharing, and I sincerely hope you are employed again shortly.

KlangFool
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by KlangFool » Wed Apr 04, 2018 7:17 pm

il0kin wrote:
Wed Apr 04, 2018 6:57 pm
May I ask, do you wish now that you had paid off your mortgage earlier? I am still young, 29, but am in a technical field and plan to stay in it for the long term, but I work for a very stable employer. Technical fields can definitely have age discrimination. Anyway, we have a 30-yr at 3.875 and the loan will complete at age 57. I have always considered not having a mortgage a prerequisite to retirement in order to free up monthly income.

Thanks for sharing, and I sincerely hope you are employed again shortly.
il0kin,

<<I have always considered not having a mortgage a prerequisite to retirement in order to free up monthly income. >>

How does this make any sense? The interest rate is going up. Let's say you have a 300K mortgage and the CD rate is 5%, do you want to take the 300K CD at 5% to pay off the 3.875% mortgage?

I have a 300K 3.49% mortgage. My taxable account is about 500K and generates about 2% to 3% dividend. Why would I pay off the mortgage?

So, the correct answer is highly dependent on the interest rate of your mortgage. At 3.875%, you got a great deal. Why would you want to pay it off?

KlangFool

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 7:30 pm

il0kin wrote:
Wed Apr 04, 2018 6:57 pm
May I ask, do you wish now that you had paid off your mortgage earlier? I am still young, 29, but am in a technical field and plan to stay in it for the long term, but I work for a very stable employer. Technical fields can definitely have age discrimination. Anyway, we have a 30-yr at 3.875 and the loan will complete at age 57. I have always considered not having a mortgage a prerequisite to retirement in order to free up monthly income.

Thanks for sharing, and I sincerely hope you are employed again shortly.
Thanks, me too!

I don't think we wish we had paid it off earlier as our payment as a portion of our income has always been low (it's 10% right now), although we have talked about it off and on over they years. As it was, we put 50% down at the time we bought the house from proceeds on the sale of some land we had in Colorado. We were raising two children, working with salaries that depict your typical educators, saving for college for two kids, and subsequently paying for two college educations (plus one graduate degree that one pursued) - so we can't say the cash flow was enough to have been adding to the principal of the mortgage each month in addition to our regular monthly retirement savings, and the college educations. The home was struck by a tornado in 2010, so to do the new roof, put in a new fence, a new shed, take care of the flooded basement, install a permanent interior drainage solution and second sump pump and backups to prevent flooding from happening again (lots of jackhammering, dry wall work, new carpet/paint, required a refinance to help cover it all as we upgraded everything at the time. I think we added to our mortgage an additional $35-40K at the time to cover all of the things beyond what insurance covered due to the upgrades. Had it not been for that stinking tornado, the mortgage would be sub 6 figures at this point. Pardon the pun, but life is indeed full of twists and turns. :mrgreen:

Also, I guess we bend or lean more towards the side of a home not being the best investment, but a place to sleep and live - so the money working for us in the markets over the past 15 years has returned more than if we had paid off the mortgage. Now with the recent termination, some of my future options may or may not include moving to a different city for work. The option to stay for at least another 5-6 years is a possible reality as well, but at this juncture - everything has to be on the table.

Might even throw in the possibility of turning one or two of our three spare bedrooms into Airbnb possibilities (could be a small new sideline for me) in the "gig" economy.

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Re: Laid Off/Termination/Downsizing survival strategies...

Post by Dottie57 » Wed Apr 04, 2018 7:41 pm

The idea behind no mortgage is to dramatically lower expenses. It makes achieving 25x easier.

I got rid of my mortgage as soon as I could. But my mortgage was at 8% when it was paid off. My initial mortgage was at 10%.

tnr
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by tnr » Wed Apr 04, 2018 7:47 pm

As a fellow academic, I greatly sympathize with your situation. I will leave the financial advice to others but on the working front, are there adjunct teaching possibilities in your area? Tutoring? Are there any computer related activities for which you could get quickly trained and for which your background would be an asset? Good luck to you.

delamer
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by delamer » Wed Apr 04, 2018 7:58 pm

il0kin wrote:
Wed Apr 04, 2018 6:57 pm
May I ask, do you wish now that you had paid off your mortgage earlier? I am still young, 29, but am in a technical field and plan to stay in it for the long term, but I work for a very stable employer. Technical fields can definitely have age discrimination. Anyway, we have a 30-yr at 3.875 and the loan will complete at age 57. I have always considered not having a mortgage a prerequisite to retirement in order to free up monthly income.

Thanks for sharing, and I sincerely hope you are employed again shortly.

All other things being equal, it is better to not have the mortgage. But sometimes people forget that even a mortgage-free home still creates expenses — property taxes, homeowner’s insurance, utilities, and maintenance/repairs. For instance, even with no mortgage, it would cost us about $16,000/year to stay in our house (and that is without any repairs in the budget).

On the other hand, you have to live somewhere.

Shikoku
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by Shikoku » Wed Apr 04, 2018 9:13 pm

CyclingDuo wrote:
Wed Apr 04, 2018 1:52 pm
Most in my particular niche industry within higher education in the area are well aware as the news was public and on social media (not my choice) as the institution I work for cut 12 professors and upcoming staff cuts are coming as well. Declining enrollment institution wide caused it. I've been getting word out, applied for a couple of positions, and am open to other endeavors as well if and when they present themselves.
I am sorry for your challenging situation and am well aware that it can be a hollow feeling. You are in good financial position as well as your spouse is working. One of the options might be to look for part-time teaching opportunities in other institutions including community colleges. You might be able to teach in some related subject areas also. I understand that the earning will not be the same as full-time employment but it will keep you occupied in doing something you probably enjoy doing. This will also give you time to look for other opportunities. Very best wishes.
"I don't worry too much about pointing fingers at the past. I operate on the theory that every saint has a past, every sinner has a future." -- Warren Buffett

dknightd
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by dknightd » Wed Apr 04, 2018 9:53 pm

Sorry they cut your job.

As others have said - buff up and mail out your resume.
When the semester is over, take a long bike ride (based on your username I'm guessing that will help you de-stress)

You said fine arts, so I'm going to assume you are an artist. Maybe now is a good time to open up your studio and pursue that?
You might also be able to use your art in a related area.

You basically have the summer to figure out what you are going to do. Then a few years of EF to do it.
I'd take a deep breath. Then another.

Unemployment will probably not be much, but it will be something.

Heck, you could probably become a financial planner if your wanted ;)

JBTX
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by JBTX » Wed Apr 04, 2018 9:59 pm

I certainly wouldn't pay down the mortgage now, when you are soon to be unemployed. Sure that gets rid of your mortgage payment, but it also drains $127K of liquidity just when you might need it. Once you get situated with a new job 6 months to a year and if you feel reasonably secure then perhaps paying it off at that point - but not now.

As to refinancing, that is certainly the conservative thing to do, lock in to a fixed rate while still employed in case you both end up unemployed. If you think you may want to keep the mortgage, it might be looking into if you can get a reasonable fixed rate. However, with only $127k left, and all of your existing liquidity, I'm not sure it is necessary in your case.

You seem well situated. Once you start drawing pension and SS it looks like combined they should cover at least 100% of your expenses. So what you have saved should fill the gap until then, and what is left over is gravy.

I think financially you will be fine. It is just getting past the bruised ego. You are lucky in that you have several months advance notice - it doesn't always play out that way. Start connecting to old work connections via linked in, doing some informal networking with any former colleagues who could be of assistance, and at least talk to some recruiters when they call. Update the resume, yada yada.

Having been through this a couple of times - there is an upside. You have a period where you will be working, but there is an end in sight, and the recurring problems and issues will no longer be yours. It can actually be invigorating. You go to work, do what you need to do, but don't worry about all the other things there long term. Obviously when you leave don't burn bridges. Those contacts and references may be valuable.

Good Luck!

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whodidntante
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by whodidntante » Wed Apr 04, 2018 10:26 pm

If you think you might need it, you could draw your home equity out using a HELOC or a HEL while still employed. It seems you don't need to do that, though.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 10:59 pm

tnr wrote:
Wed Apr 04, 2018 7:47 pm
As a fellow academic, I greatly sympathize with your situation. I will leave the financial advice to others but on the working front, are there adjunct teaching possibilities in your area? Tutoring? Are there any computer related activities for which you could get quickly trained and for which your background would be an asset? Good luck to you.
I am looking into such possibilities to potentially piece together what I can as one option. It could be taking on some private students, a day or two here or there, a class or two as an adjunct, some gig work, etc... . :beer

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 11:17 pm

dknightd wrote:
Wed Apr 04, 2018 9:53 pm
Sorry they cut your job.

As others have said - buff up and mail out your resume.
When the semester is over, take a long bike ride (based on your username I'm guessing that will help you de-stress)
Will do! Buffing it up this week. No problems hopping on the bike to de-stress. I started riding hard last week to start recovering from the news! Took my HR up as high as I could to make sure I still had a heart. :mrgreen:
dknightd wrote:
Wed Apr 04, 2018 9:53 pm
You said fine arts, so I'm going to assume you are an artist. Maybe now is a good time to open up your studio and pursue that?
You might also be able to use your art in a related area.
Music. I might paint my house this Summer though (good therapy).
dknightd wrote:
Wed Apr 04, 2018 9:53 pm
You basically have the summer to figure out what you are going to do. Then a few years of EF to do it.

I'd take a deep breath. Then another.
Will do.
dknightd wrote:
Wed Apr 04, 2018 9:53 pm
Heck, you could probably become a financial planner if your wanted ;)
Believe it or not, I actually took a bunch of the prep classes decades ago in San Francisco (for Series 7, Series 63, Series 65) as I was waiting for my music career to take off. I never took the exams to get the licenses though...

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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Wed Apr 04, 2018 11:25 pm

JBTX wrote:
Wed Apr 04, 2018 9:59 pm
I certainly wouldn't pay down the mortgage now, when you are soon to be unemployed. Sure that gets rid of your mortgage payment, but it also drains $127K of liquidity just when you might need it. Once you get situated with a new job 6 months to a year and if you feel reasonably secure then perhaps paying it off at that point - but not now.

As to refinancing, that is certainly the conservative thing to do, lock in to a fixed rate while still employed in case you both end up unemployed. If you think you may want to keep the mortgage, it might be looking into if you can get a reasonable fixed rate. However, with only $127k left, and all of your existing liquidity, I'm not sure it is necessary in your case.

You seem well situated. Once you start drawing pension and SS it looks like combined they should cover at least 100% of your expenses. So what you have saved should fill the gap until then, and what is left over is gravy.

I think financially you will be fine. It is just getting past the bruised ego. You are lucky in that you have several months advance notice - it doesn't always play out that way. Start connecting to old work connections via linked in, doing some informal networking with any former colleagues who could be of assistance, and at least talk to some recruiters when they call. Update the resume, yada yada.

Having been through this a couple of times - there is an upside. You have a period where you will be working, but there is an end in sight, and the recurring problems and issues will no longer be yours. It can actually be invigorating. You go to work, do what you need to do, but don't worry about all the other things there long term. Obviously when you leave don't burn bridges. Those contacts and references may be valuable.

Good Luck!
Great thoughts, JBTX. Thanks! I do not want to burn any bridges, that's for sure.

I'll check rates and look into a refi with a fixed rate.

CurlyDave
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CurlyDave » Thu Apr 05, 2018 12:03 am

I would not even begin to refinance the mortgage or pay it off. There are closing costs associated with every Re-Fi and you may not be there for the long term. Plus your interest rate is going to be below the long term CAGR of your portfolio for quite a while.

The balance is low enough that even if there were to be a rate increase in the future, you would be able to make the payments, and they would be on an even lower balance.

I have been laid off and it is a horrible experience. But, you are very well prepared with your nest egg, and could easily withstand never working again. I do not say fortunately because there was no luck involved -- you planned well and should consider yourself successful. How many others at your school are going to as well off as you?

For me, the hardest part of retiring was getting over the psychological barrier of actually withdrawing from our portfolio for living expenses.

billfromct
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by billfromct » Thu Apr 05, 2018 12:12 am

Back in December there were rumors in my company that there would be layoffs at the location where I work in early 2018 so I maxed out my 401k contributions starting in January; 50% of my salary for my regular 401k contribution & 25% for my catch-up 401k contribution.

I thought I would have a few months of 2018 401k contributions to put away more money for retirement.

As it turned out, I got my 2 week notice in mid-January & left the company at the end of January. The other 30-40 people in the group I work in at my location were told on February that they would be laid off in the Summer or Fall.

Check to see the maximum % you can contribute for normal & catch-up contributions & max out while you can. Having a 4 or 5 month notice will be a big help in planning your future.

I wish I had a few more months to max out my 401k as I doubt I will be able to do so in the future.

bill

tnr
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by tnr » Thu Apr 05, 2018 7:50 am

Not sure you have any interest but music data mining is an active area. Abstract recopied below. Many data mining techniques are rapidly learned and easily applied in certain software.

The five articles in this special section focus on data mining technqiues and applications in the music industry. Music has been an important application area for data mining and machine learning techniques for many years. Music data mining is an interdisciplinary area that studies computational methods for understanding and delivering music data and is a topic of growing importance with large commercial relevance and substantial potential. The research area of music datamining has gradually evolved during this time period in order to address the challenge of effectively accessing and interacting with these increasing large collections of music and associated data such as styles, artists, lyrics and music reviews. The algorithms and systems developed frequently employ sophisticated and advanced data mining and machine learning techniques in their attempt to better capture the frequently elusive relevant music information

Special Section on Music Data Mining (PDF Download Available). Available from: https://www.researchgate.net/publicatio ... ata_Mining [accessed Apr 05 2018].

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Re: Laid Off/Termination/Downsizing survival strategies...

Post by dodecahedron » Thu Apr 05, 2018 8:02 am

CyclingDuo wrote:
Wed Apr 04, 2018 2:10 pm
quantAndHold wrote:
Wed Apr 04, 2018 1:57 pm
You have 1.5 years of income piled up in emergency savings, and it appears that your living expenses are quite low, so your emergency savings are probably closer to 3 years of living expenses. In addition, spouse currently makes enough to pay living expenses without dipping into savings, and overall, you’re on track for retirement, as long as you can find something new that you enjoy and can do for a few more years. So, this isn’t an emergency. Basically, you’re having to pause your retirement savings for a short period, until you start making money again.

If it were me, I would go ahead and max out the 403b before you leave, continue maxing spouse’s retirement savings, and if you need extra cash, spend down taxable accounts.
Sounds good. Even if some of it were more or less moving things around from taxable to tax deferred.
Agree that maxing out 403b opportunistically before you leave makes total sense. Given your ages (especially your spouse's age), you are not really "locking the money up" by moving funds from taxable to tax-deferred and you may have windows when Roth conversions, etc. make sense.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Thu Apr 05, 2018 9:04 am

CurlyDave wrote:
Thu Apr 05, 2018 12:03 am
I would not even begin to refinance the mortgage or pay it off. There are closing costs associated with every Re-Fi and you may not be there for the long term. Plus your interest rate is going to be below the long term CAGR of your portfolio for quite a while.

The balance is low enough that even if there were to be a rate increase in the future, you would be able to make the payments, and they would be on an even lower balance.
Wow! Plenty of thoughts in this thread ranging from pay it off, don't pay it off, refinance, and now don't refinance.

We're already into the resetting 1 year portion of the 5/1 ARM as I was dragging my feet last Fall with contemplation of a refinance, and while I was doing that - our mortgage was suddenly sold to a new company. Our thoughts at that time were looking at a cash out refinance a la Ric Edelman to not have so much tied up in our home equity. I got plenty of feedback on that idea to the point we did nothing. Probably best it worked out that way considering current circumstances.

Regardless, over the previous 15 years using the 5/1 ARM only, we've paid from above 6% all the way down to 3% and it sits at 4% this year. I believe the thought process you raise around leaving it alone makes sense (I don't expect huge fluctuations out of the interest rate zone it has been in the past 15 years going forward). I also understand the idea of a refi to lock in a fixed rate to protect the possibility of rates moving up considering the real possibility of our household income being reset to a lower number even if I am able to find new employment.

At the prior mortgage lender, it was fairly painless to do a refi to a new no closing cost 5/1 ARM with a phone call. Doing that would set the interest rate a bit higher, but still usually turned out to be a wash in the end - if not even better as rates lowered in the 1 year reset portion as rates dropped over the years - compared to paying closing costs for a 5 year refi with closing costs.
CurlyDave wrote:
Thu Apr 05, 2018 12:03 am
I have been laid off and it is a horrible experience. But, you are very well prepared with your nest egg, and could easily withstand never working again. I do not say fortunately because there was no luck involved -- you planned well and should consider yourself successful. How many others at your school are going to as well off as you?
I concur on the horrible - or at least feeling horrible at the moment about it all. How many were cut where I work? A dozen professors (out of around 80 full time faculty). In my speciality area, two full time professors out of the three of us were cut. Staff and administration cuts campus wide are to be announced soon. College needed to save $1.9M per year to not raid the endowment. This due to it being a tuition driven model and enrollment has tailed off like it is at all small private colleges throughout the Midwest (tail end of the Millennial boom, cost of tuition, good economy for jobs tempting high school graduates to work rather than go to school, or insert your theory here:____________). My department saw little enrollment drop (down only 3 students compared to 5 years ago: dropped from 84 students majoring in our program to 81 students). But the cuts were institution wide based on which departments were the least revenue positive. I believe that is called Rank and Yank in the corporate world. The Fine Arts haven't been revenue producing models for centuries, so on a corporate level I guess I have to understand, but on an educational level it saddens me to see schools struggling to reinvent themselves by cutting some of the creative disciplines. At least the school didn't cut our new gun shooting team program and the coach. :annoyed
CurlyDave wrote:
Thu Apr 05, 2018 12:03 am
For me, the hardest part of retiring was getting over the psychological barrier of actually withdrawing from our portfolio for living expenses.
Yes, I wasn't planning on tapping that for at least another 6 - 7 years beginning with my wife's retirement, and even then it would have been delayed a few years beyond that as her pension would begin at her retirement. My hope is to get enough replacement income, and to trim our expenses as best we can to avoid having to withdraw for any living expenses. Or if we have to withdraw, to at least keep it as minimal as possible and take it from taxable. I've got a spreadsheet set up with our current budget based on our current dual income and all of our expenses, and I have a created a couple of columns next to it to run scenarios of a one income household and a column of me getting some replacement income that is lower than my current salary (say 50-70% lower). Fortunately, we did some upgrades (landscaping, interior shutters, new windows, new carpet, hardwood floor refinishing, interior painting) this past year and I bought a new vehicle last May for cash. The only thing left to do was exterior painting, and looks like I will have time to do that myself come June.

cherijoh
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by cherijoh » Thu Apr 05, 2018 10:27 am

KlangFool wrote:
Wed Apr 04, 2018 7:17 pm
il0kin wrote:
Wed Apr 04, 2018 6:57 pm
May I ask, do you wish now that you had paid off your mortgage earlier? I am still young, 29, but am in a technical field and plan to stay in it for the long term, but I work for a very stable employer. Technical fields can definitely have age discrimination. Anyway, we have a 30-yr at 3.875 and the loan will complete at age 57. I have always considered not having a mortgage a prerequisite to retirement in order to free up monthly income.

Thanks for sharing, and I sincerely hope you are employed again shortly.
il0kin,

<<I have always considered not having a mortgage a prerequisite to retirement in order to free up monthly income. >>

How does this make any sense? The interest rate is going up. Let's say you have a 300K mortgage and the CD rate is 5%, do you want to take the 300K CD at 5% to pay off the 3.875% mortgage?

I have a 300K 3.49% mortgage. My taxable account is about 500K and generates about 2% to 3% dividend. Why would I pay off the mortgage?

So, the correct answer is highly dependent on the interest rate of your mortgage. At 3.875%, you got a great deal. Why would you want to pay it off?

KlangFool
Personally, I think the advisability of carrying a mortgage into retirement depends on the size of the mortgage, the interest rate and the split between guaranteed sources of retirement income and spending down your nest egg.

Anyone who has read any of Klangfool's posts on "Can I afford this house?" threads knows that he bought less house than the bank said he could afford and that he keeps 5 years of expenses on hand. So he is safe whether he pays off the mortgage before retirement or not! :D

When it comes to situations like the OPs - unexpected laid off while still carrying a mortgage - IMO it doesn't make sense to deplete your taxable investments to pay off a mortgage that you can pay off gradually on schedule. For anyone who is still working, has an adequate emergency fund, and is fully funding their tax advantaged plans, I think it comes down to interest rate of your mortgage and whether interest rates are going up or going down. You also have to consider how much home equity you have relative to your net worth. Paying off your mortgage too aggressively can leave you with an illiquid asset and insufficient sources of cash in case of a layoff.

But it behooves someone contemplating buying a house (or especially looking to upgrade to a more expensive house during their highest earning years) to look at when they would pay off the house relative to their prospective retirement date. If you have a lot of guaranteed sources of retirement income, carrying a mortgage into retirement is less risky than if you are depending on your nest egg. Paying your mortgage is not a discretionary expense you can cut back on if the stock market tanks.

You also need to consider that you may end up retiring a lot sooner than you had planned. A whole lot of people sabotaged their comfortable retirements by going into the 2008 recession with too much mortgage debt. Many assumed that they could have their cake and eat too. A fancy house that could be sold to downsize at retirement and provide an infusion of cash to fund their retirement. Instead they ended up unemployed with a house they had no hope of unloading and rapidly shrinking home equity!

tnr
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by tnr » Thu Apr 05, 2018 11:12 am

Good advice Cherijoh.

The Stone Wall
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by The Stone Wall » Thu Apr 05, 2018 12:36 pm

Sorry to hear about the job situation. Based on your responses and that you have had 1300 posts, you know a lot about your financial well-being. You have positioned yourself well for this unfortunate episode in your life. I went through a period of searching for a job while a spouse was employed. It is not easy on either person. One thing to work on over the next few months, particularly if the job search is difficult is that relationship.

I wonder if your institution is going to transfer costs from recurring positions to non-recurring? If your program has not been eliminated, many if not all of those classes will have to remain on the books. I suspect the department will potentially hire part time instructors for those classes. This may be an opportunity for you. Benefits would not be available depending on the number of hours worked.

Good luck.

WhiteMaxima
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by WhiteMaxima » Thu Apr 05, 2018 1:16 pm

Roth Conversion.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Thu Apr 05, 2018 1:42 pm

The Stone Wall wrote:
Thu Apr 05, 2018 12:36 pm
Sorry to hear about the job situation. Based on your responses and that you have had 1300 posts, you know a lot about your financial well-being. You have positioned yourself well for this unfortunate episode in your life. I went through a period of searching for a job while a spouse was employed. It is not easy on either person. One thing to work on over the next few months, particularly if the job search is difficult is that relationship.
Good advice.
The Stone Wall wrote:
Thu Apr 05, 2018 12:36 pm
I wonder if your institution is going to transfer costs from recurring positions to non-recurring? If your program has not been eliminated, many if not all of those classes will have to remain on the books. I suspect the department will potentially hire part time instructors for those classes. This may be an opportunity for you. Benefits would not be available depending on the number of hours worked.
Always a possibility if that is the direction administration chooses to serve the students. I'm not sure they are that far along with a plan yet outside of announcing who and what is cut.

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CyclingDuo
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by CyclingDuo » Thu Apr 05, 2018 1:43 pm

WhiteMaxima wrote:
Thu Apr 05, 2018 1:16 pm
Roth Conversion.
:sharebeer

cherijoh
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Re: Laid Off/Termination/Downsizing survival strategies...

Post by cherijoh » Thu Apr 05, 2018 3:44 pm

CyclingDuo wrote:
Wed Apr 04, 2018 11:17 pm
dknightd wrote:
Wed Apr 04, 2018 9:53 pm
You said fine arts, so I'm going to assume you are an artist. Maybe now is a good time to open up your studio and pursue that?
You might also be able to use your art in a related area.
Music. I might paint my house this Summer though (good therapy).
Sorry to hear about the job loss. I was hit with a site closer at a somewhat younger age, and it was not easy to figure out how to shift course. I went back for a masters degree in a different but related STEM field and switched industries. Very different from the Fine Arts.

Are there any K-12 magnet schools in your area? We have one that focuses on the Performing Arts. Something like that might not pay as well as the university level, but it might allow you to stay in field that you enjoy.

There are also several that appear to be private academies but I think those may be primarily after-school and summer enrichment programs.

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