The axe falls and I am prepared. What's next?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

qwertyjazz wrote: Sun May 24, 2020 10:15 pm Ignore the stocks and just compare bonds to the mortgage - are you getting 3.5% return on the bond portion right now?
qwertyjazz,

Why should I? There is nothing there that makes your POV more valid than mine. I know that I am borrowing at 3.5% to invest in my 60/40 portfolio. I took a calculated risk.

KlangFool
BrownEyedGirl_27
Posts: 231
Joined: Tue Dec 17, 2019 6:37 pm

Re: The axe falls and I am prepared. What's next?

Post by BrownEyedGirl_27 »

KlangFool, I am sad to hear of your layoff. I consider you a friend here and it sounds like you take your own advice. I've always admired your preparedness.

Sounds like you and your spouse are prepared for this. I do remember you talking about having kids (if I'm wrong, correct me).

I have a friend who got laid off at around the same age as you a few years back. He was unemployed for a year but after networking with many influential connections he was able to find gainful employment in his field. He was prepared financially, like you, to weather that storm and he wasn't ready to give up his working life. He has had one additional position (by choice) since then and he is very passionate about working.

So my best advice is to network and see if you can find a job worth your time. Take unemployment and do not feel ashamed about it. Take advantage of the extra $600 a week and remember that you and your wife can get through this difficult time. Since you have kids, think of the legacy you want to leave for them, if anything, and factor that into your motivation to either find a new job or retire early. Keep us updated on your journey! We are all rooting for your success, and I know you will make the right choice. I'll pray for you.

Cheers,
BrownEyedGirl

P.S-I was on unemployment due to my furlough this March--it helped my family save some extra money and help us top off our emergency fund. So while it wasn't awesome being furloughed, it was nice to receive extra money. I don't know if you have ever had to go on unemployment but the incentive to sign up now is a lot better than in normal economic times. Just apply as soon as possible if you haven't already.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

BrownEyedGirl_27 wrote: Sun May 24, 2020 10:32 pm KlangFool, I am sad to hear of your layoff. I consider you a friend here and it sounds like you take your own advice. I've always admired your preparedness.

Sounds like you and your spouse are prepared for this. I do remember you talking about having kids (if I'm wrong, correct me).

I have a friend who got laid off at around the same age as you a few years back. He was unemployed for a year but after networking with many influential connections he was able to find gainful employment in his field. He was prepared financially, like you, to weather that storm and he wasn't ready to give up his working life. He has had one additional position (by choice) since then and he is very passionate about working.

So my best advice is to network and see if you can find a job worth your time. Take unemployment and do not feel ashamed about it. Take advantage of the extra $600 a week and remember that you and your wife can get through this difficult time. Since you have kids, think of the legacy you want to leave for them, if anything, and factor that into your motivation to either find a new job or retire early. Keep us updated on your journey! We are all rooting for your success, and I know you will make the right choice. I'll pray for you.

Cheers,
BrownEyedGirl
BrownEyedGirl_27,

Both my kids are graduated and gainfully employed.

KlangFool
BrownEyedGirl_27
Posts: 231
Joined: Tue Dec 17, 2019 6:37 pm

Re: The axe falls and I am prepared. What's next?

Post by BrownEyedGirl_27 »

KlangFool wrote: Sun May 24, 2020 10:35 pm
BrownEyedGirl_27 wrote: Sun May 24, 2020 10:32 pm KlangFool, I am sad to hear of your layoff. I consider you a friend here and it sounds like you take your own advice. I've always admired your preparedness.

Sounds like you and your spouse are prepared for this. I do remember you talking about having kids (if I'm wrong, correct me).

I have a friend who got laid off at around the same age as you a few years back. He was unemployed for a year but after networking with many influential connections he was able to find gainful employment in his field. He was prepared financially, like you, to weather that storm and he wasn't ready to give up his working life. He has had one additional position (by choice) since then and he is very passionate about working.

So my best advice is to network and see if you can find a job worth your time. Take unemployment and do not feel ashamed about it. Take advantage of the extra $600 a week and remember that you and your wife can get through this difficult time. Since you have kids, think of the legacy you want to leave for them, if anything, and factor that into your motivation to either find a new job or retire early. Keep us updated on your journey! We are all rooting for your success, and I know you will make the right choice. I'll pray for you.

Cheers,
BrownEyedGirl
BrownEyedGirl_27,

Both my kids are graduated and gainfully employed.

KlangFool
Great! I figured they were on their own but I do know a lot of Millennials are struggling /having to live with parents / having to have parental financial assistance, especially the class of 2020.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
bluesky50
Posts: 30
Joined: Tue Jan 09, 2018 11:05 pm

Re: The axe falls and I am prepared. What's next?

Post by bluesky50 »

Seems like you already made up your mind. You don't need any advice. Go for it and enjoy your retirement.
index245
Posts: 129
Joined: Wed Feb 12, 2020 9:28 pm

Re: The axe falls and I am prepared. What's next?

Post by index245 »

Very sorry to hear about your layoff, so many people struggling in our (world's) current circumstance. I wanted to let you know that I appreciate your input on this board, very thought provoking. Also, you changed one of my perspectives....I'm now saving for college via taxable account rather than 529 plan. I prefer the flexibility given there is a decent chance that I could end up unemployed soon enough.

Best wishes to you and your family, enjoy your retirement.
bog007
Posts: 156
Joined: Fri Feb 28, 2020 3:27 am

Re: The axe falls and I am prepared. What's next?

Post by bog007 »

take a year off. wait out covid. gl
Hendrik Bessembinder> the top performing 4% of listed companies explain the net gain for the entire US stock market since 1926 | The other 96% of stocks collectively did not do better than 90dayT-bills
majiaknight
Posts: 147
Joined: Tue Jan 26, 2016 2:55 pm

Re: The axe falls and I am prepared. What's next?

Post by majiaknight »

Thanks KF for sharing your story and thoughts as always. After seeing all the replies, IMHO you've put very thorough thoughts on almost everything and you also have a strong opinion on the next potential job w/ no compromise which was well understood.

As DW and I both work for big tech in the Bay area, we certainly feel the tech job market outlook won't be promising in the next a few months due to COVID-19. My company just announced worldwide hiring freeze and things could get worse. So, the only thing I want to add in your situation is this is probably the time to only focus on the things you can control to make you and your family feel better (at least less stressful) each day and forget about the next job for a while because tbh this is absolutely the worst timing to look for jobs and you don't have to with your wealth and investment wisdom. Stay healthy and good luck!
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

BrownEyedGirl_27 wrote: Sun May 24, 2020 10:42 pm
KlangFool wrote: Sun May 24, 2020 10:35 pm
BrownEyedGirl_27 wrote: Sun May 24, 2020 10:32 pm KlangFool, I am sad to hear of your layoff. I consider you a friend here and it sounds like you take your own advice. I've always admired your preparedness.

Sounds like you and your spouse are prepared for this. I do remember you talking about having kids (if I'm wrong, correct me).

I have a friend who got laid off at around the same age as you a few years back. He was unemployed for a year but after networking with many influential connections he was able to find gainful employment in his field. He was prepared financially, like you, to weather that storm and he wasn't ready to give up his working life. He has had one additional position (by choice) since then and he is very passionate about working.

So my best advice is to network and see if you can find a job worth your time. Take unemployment and do not feel ashamed about it. Take advantage of the extra $600 a week and remember that you and your wife can get through this difficult time. Since you have kids, think of the legacy you want to leave for them, if anything, and factor that into your motivation to either find a new job or retire early. Keep us updated on your journey! We are all rooting for your success, and I know you will make the right choice. I'll pray for you.

Cheers,
BrownEyedGirl
BrownEyedGirl_27,

Both my kids are graduated and gainfully employed.

KlangFool
Great! I figured they were on their own but I do know a lot of Millennials are struggling /having to live with parents / having to have parental financial assistance, especially the class of 2020.
BrownEyedGirl_27,

My daughter is in the class of 2020. We are glad that her job offer is still valid.

Thanks.

KlangFool
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

Folks,

There is one industry that is booming due to COVAD-19. It is less impacted and might be growing. It is the Telecom industry. All the WFH is generating a huge demand for the Telecom infrastructure. This is as per my contact in the industry.

KlangFool
User avatar
galeno
Posts: 2143
Joined: Fri Dec 21, 2007 12:06 pm

Re: The axe falls and I am prepared. What's next?

Post by galeno »

Get ready to enter into a new chapter in your life. It WILL be challenging. You are financially prepared. That's good.
KISS & STC.
dcabler
Posts: 1707
Joined: Wed Feb 19, 2014 11:30 am

Re: The axe falls and I am prepared. What's next?

Post by dcabler »

printer86 wrote: Sun May 24, 2020 7:49 am
KlangFool wrote: Sun May 24, 2020 7:17 am
BeneIRA wrote: Sun May 24, 2020 12:11 am
KlangFool wrote: Fri May 22, 2020 6:17 pm Folks,

So, it happened. I will be laid off by the end of June.

The basic financial stuff:

B) 1 year subsidized medical insurance.

C) 1 year COBRA
These two items are what stuck out to me. I read three or so pages of this thread and saw a couple of people mention it as well, but these things do not square.

If you are being offered a year of subsidized medical insurance, I am assuming these are at the rates you were paying as an active employee and you will be direct billed for these benefits. This sounds like your company will give you a "Leave with Pay" or "Unpaid Leave" definition in the system, then formally terminate you, then you would get 18 months of COBRA. I am unsure when the timing is for all of that. In my experience, having worked on the other side, if they would put you on "Unpaid Leave" for a year, you keep the employer subsidy for insurance, then they terminate you and you can pay for 18 months of COBRA at that time. With them laying you off, though, and you being able to collect unemployment, perhaps they are giving you a year's worth of COBRA subsidy and then it would be up to you to pay for the remaining six months on your own if you would like to. Either way, I would get more information on this because the way it is described above doesn't seem quite right to me.
It is 2 years of COBRA. They subsidized the first year.

KlangFool
as I understand it, COBRA is good for only 18 months without some form of disability.
Many states have laws on the books that allow for continuation of COBRA beyond the 18 months, for certain circumstances. They often called "mini-Cobra". TX does, for example. https://www.bcbstx.com/employer/six_mon ... uation.htm
Last edited by dcabler on Mon May 25, 2020 7:39 am, edited 1 time in total.
aerosurfer
Posts: 258
Joined: Fri Feb 02, 2018 6:10 am

Re: The axe falls and I am prepared. What's next?

Post by aerosurfer »

Taking different perspective at this time from you...

Now that you are in this position again(unemployed & potential retirement), and faced with putting your savings and investing preparations to work, looking back are you happy with the results?

Now would be a great time for hindsight on what you feel you did right, and what could have been done differently. Would you change anything? Savings and expenses rate, college spending, tax strategy? Did you hit your 25-30x annual expenses? Which i love as a goal BTW. Sure we all wish we could have more or saved more, but you have been quite vocal in how you approached it.

Like a lot of others, I always enjoyed reading your posts and very concise and consistent advice. I hope as the months (years) play out you keep posting how the results of the game of life keep playing out
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

aerosurfer wrote: Mon May 25, 2020 7:30 am Taking different perspective at this time from you...

Now that you are in this position again(unemployed & potential retirement), and faced with putting your savings and investing preparations to work, looking back are you happy with the results?

Now would be a great time for hindsight on what you feel you did right, and what could have been done differently. Would you change anything? Sure we all wish we could have more or saved more, but you have been quite vocal in how you approached it.

Like a lot of others, I always enjoyed reading your posts and very concise and consistent advice. I hope as the months (years) play out you keep posting how the results of the game of life keep playing out
aerosurfer,

<<Sure we all wish we could have more or saved more, >>

1) Not me. After saving 1 year of expense every year, there is minimal benefit to save more. I believe in a balanced approach.

2) I made one big mistake. I was 100/0 and gambled on Telecom stock. That wiped out 50% of my portfolio 10+ years ago. I assumed that I had job security in the Telecom industry. That mistake costs me about 5 to 7 years. I could have early retired 5 to 7 years ago. I am very vocal about this. I hoped that I save some people from repeating my mistake.

3) At a high saving rate, I can afford one big mistake. That is my ultimate safety margin.

<<Did you hit your 25-30x annual expenses? Which i love as a goal BTW.>>

4) My current annual expense is about 50K to 60K. My portfolio excluding the emergency fund is about 1.3 to 1.4 million.

5) Our joint social benefit at 62 years old is about 3K per month. At 67 years old (FRA), it is about 4.5K per month.

KlangFool
Last edited by KlangFool on Mon May 25, 2020 7:41 am, edited 1 time in total.
austin757
Posts: 198
Joined: Wed Jun 06, 2018 11:48 am

Re: The axe falls and I am prepared. What's next?

Post by austin757 »

KlangFool,

I, like many others, have enjoyed reading your posts over the years. So thank you for that and I hope to continue reading them. It sounds like you're prepared for this. Whatever you decide, I am sure you will be in good position. Best of luck to you and sorry to hear of this layoff.
Soon2BXProgrammer
Posts: 1624
Joined: Mon Nov 24, 2014 11:30 pm

Re: The axe falls and I am prepared. What's next?

Post by Soon2BXProgrammer »

KlangFool wrote: Fri May 22, 2020 6:17 pm Folks,

So, it happened. I will be laid off by the end of June.

The basic financial stuff:

A) 3 months severance pay

B) 1 year subsidized medical insurance.

C) 1 year COBRA

D) 110K to 120K of the Emergency Fund

E) 1.35 to 1.4 million 60/40 portfolio

F) Late 50+ years old.

G) Annual expense of about 50K to 60K per year. (Total before wife's income)

H) My wife will continue working at 15K per year with good medical and dental insurance.

I) I had crossed the second bend points for Social Security. So, social security income for me and my wife combined is about 3K to 4K per month.

My question is

1) Is it really worthwhile for me to continue working? I worked in the IT area. If I want to stay in this area, I have to study 10 to 20 hours per week just to keep up with the latest technology.

2) If I do contract work, how much should I get paid before it is worthwhile for me to work?

A) I only plan to work 20 hours per week. Between unemployment and the $600 per week, I will get about $900 per week. Unless I am paid at $90 per hour or higher, it may not be worthwhile for me to work

3) Any other comment/feedback as to how do you decide whether you should continue working or just retire.

KlangFool
As another software engineer that is going to receive a layoff package.

2) I understand your point while there is a 600 weekly kicker, it is hard to get a part time job to pay more then unemployment. This is currently scheduled to end at the end of July

https://www.congress.gov/116/bills/hr74 ... 748enr.pdf
(e) APPLICABILITY.—An agreement entered into under this sec-tion shall apply to weeks of unemployment— (1) beginning after the date on which such agreement is entered into; and (2) ending on or before July 31, 2020

after that, unemployment is "scheduled" to shrink back to the normal state unless there is other legislation.

Of course things are changing rapidly, but 80-100 is common for the pay for senior contractors. (because we have employees that make 80/hr)

3) Consider decompressing, but consider keeping your head in the game, but don't stress about finding a job while COVID-19 is occurring, but i'd still keep my ears/eyes open to just watch in case something that lights your fire comes around.

Over the next 6 months, we will find out a lot about how COVID-19 and therefore corporate profits are going to be. This means you will have more data to make a decision.

Depending on how long your Wife is going to work, if you can find something to accidentally make money it might give you a lot of options without impacting your life much. A simple example is.. I know a ton of break away independent financial planners, that are looking for website/email/hosting/domain/work and zapier/integration work. This isn't core software engineering and the technology is changing more slowly. They can't afford full time staff but want a "tech expert" to call, and get some help. (i'm not trying to make it sound easy, it would still be hard/slow to build a portfolio of clients, but it would be possible).
Last edited by Soon2BXProgrammer on Mon May 25, 2020 8:21 am, edited 1 time in total.
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

Soon2BXProgrammer wrote: Mon May 25, 2020 7:58 am
3) Consider decompressing, but consider keeping your head in the game, but don't stress about finding a job while COVID-19 is occurring, but i'd still keep my ears/eyes open to just watch in case something that lights your fire comes around.

Over the next 6 months, we will find out a lot about how COVID-19 and therefore corporate profits are going to be. This means you will have more data to make a decision.

Depending on how long your Wife is going to work, if you can find something to accidentally make money it might give you a lot of options without impacting your life much.
Soon2BXProgrammer,

Thanks. This is probably what I will do.

KlangFool
User avatar
cashboy
Posts: 589
Joined: Tue Sep 11, 2018 5:03 pm
Location: USA

Re: The axe falls and I am prepared. What's next?

Post by cashboy »

KlangFool,

I was also in IT. my megacorp job was eliminated a couple years back. I worked my way up through IT to senior technical and hands on management positions.

when my job was eliminated i also considered what i would do:

should i just retire (my financial situation allowed for it, though i did want to work a couple of more years),
or should i look for another IT job (but only a job that i wanted to do and paid what i wanted it to for that type of job).

after thinking about it i decided that, for me, it was not a binary either/or decision; i would do both. I would settle in for retirement, but also look for another job for a period of time (I picked 6 months).

If i found a job i liked i would take it. if i did not find a job i would just continue in retirement. done this way, i would not have any regrets later in life as to 'why didn't i look for another job'?

as it turned out, I found jobs i 'could' do, but not to my liking at that point in my life so i just stayed retired. no regrets.

best wishes and good luck to you!

:sharebeer
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CDs - CASH - Canned Beans - Rice - Bottled Water)
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

cashboy wrote: Mon May 25, 2020 10:19 am KlangFool,

I was also in IT. my megacorp job was eliminated a couple years back. I worked my way up through IT to senior technical and hands on management positions.

when my job was eliminated i also considered what i would do:

should i just retire (my financial situation allowed for it, though i did want to work a couple of more years),
or should i look for another IT job (but only a job that i wanted to do and paid what i wanted it to for that type of job).

after thinking about it i decided that, for me, it was not a binary either/or decision; i would do both. I would settle in for retirement, but also look for another job for a period of time (I picked 6 months).

If i found a job i liked i would take it. if i did not find a job i would just continue in retirement. done this way, i would not have any regrets later in life as to 'why didn't i look for another job'?

as it turned out, I found jobs i 'could' do, but not to my liking at that point in my life so i just stayed retired. no regrets.

best wishes and good luck to you!

:sharebeer
Thank you for your post.

KlangFool
MP173
Posts: 2174
Joined: Fri Dec 07, 2007 6:03 pm

Re: The axe falls and I am prepared. What's next?

Post by MP173 »

What an interesting thread. KF...you are obviously well respected here and you have offered excellent advise over the years.

Do you what you want but:

1. It might take awhile for you to figure that out. You stated that you are burned out. Great time to cool off. I am nearly 65 and full time employed. The past couple of months have made me realize that I am not ready for retirement. That is my personal assessment. Why? I enjoy the social aspect of the job, am compensated very fairly, and have worked from home for over 25 years. To suddenly be at home and NOT working could possibly create tension in the marriage. Just my thoughts.

2. Have a plan, but write it in pencil. That is one of my rules of life. Situations change. I am not sure of your investments (AA) but what if the financial markets suddenly hit a downdraft and your net worth suddenly became .75x? This can and has occurred frequently during your career.

It sounds like you have prepared for this moment. If it were me, I would have more difficulty with the "time" factor rather than "money"...and I have 6-8 hobbies and interests.

Best of health and fortune,

Ed
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

MP173 wrote: Mon May 25, 2020 1:35 pm What an interesting thread. KF...you are obviously well respected here and you have offered excellent advise over the years.

Do you what you want but:

1. It might take awhile for you to figure that out. You stated that you are burned out. Great time to cool off. I am nearly 65 and full time employed. The past couple of months have made me realize that I am not ready for retirement. That is my personal assessment. Why? I enjoy the social aspect of the job, am compensated very fairly, and have worked from home for over 25 years. To suddenly be at home and NOT working could possibly create tension in the marriage. Just my thoughts.

2. Have a plan, but write it in pencil. That is one of my rules of life. Situations change. I am not sure of your investments (AA) but what if the financial markets suddenly hit a downdraft and your net worth suddenly became .75x? This can and has occurred frequently during your career.

It sounds like you have prepared for this moment. If it were me, I would have more difficulty with the "time" factor rather than "money"...and I have 6-8 hobbies and interests.

Best of health and fortune,

Ed
MP173,

1) I do not enjoy the social part of working. I worked from home about 90+% of the time for the last 10+ years.

2) I can move and retire oversea with 1/2 or 1/4 of my portfolio. I had planned for that too.

3) The good thing about being unemployed for more than 1 year a few times is that you realized that you have a life beyond working. You do not need a job to do what you like to do. I had plenty of practice of how to live unemployed (retired).

KlangFool
MP173
Posts: 2174
Joined: Fri Dec 07, 2007 6:03 pm

Re: The axe falls and I am prepared. What's next?

Post by MP173 »

There you go...you have it planned!

You are ready!

Ed
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

MP173 wrote: Mon May 25, 2020 3:00 pm There you go...you have it planned!

You are ready!

Ed
Thanks.

KlangFool
qwertyjazz
Posts: 1439
Joined: Tue Feb 23, 2016 4:24 am

Re: The axe falls and I am prepared. What's next?

Post by qwertyjazz »

KlangFool wrote: Sun May 24, 2020 10:23 pm
qwertyjazz wrote: Sun May 24, 2020 10:15 pm Ignore the stocks and just compare bonds to the mortgage - are you getting 3.5% return on the bond portion right now?
qwertyjazz,

Why should I? There is nothing there that makes your POV more valid than mine. I know that I am borrowing at 3.5% to invest in my 60/40 portfolio. I took a calculated risk.

KlangFool
KF
You have been very helpful to me I past so I will try again. Imagine you have bonds that pay 0.5% and you have a mortgage that pays 3.5% Imagine they are both of the same duration. Imagine they are both of the same amount of money. Every day you are losing 3%
There are reasons not to do this. It is not about risk of stocks though or expected portfolio return. There could be liquidity concerns. They could be of different durations and as you have stated you are concerned about inflation. But it has nothing to do with borrowing to increase return of portfolio. The AA model has done weird attributes like lumping these things together. You may have the opportunity of increasing returns with no change in risk by comparing your bonds and mortgage. This may not be the case if you want to have different durations. It may make you some no risk returns by looking more closely at your bonds and mortgage.
At least check the durations and compare them to the mortgage. Now that you are retired and do not have liquidity concerns, you may want to reevaluate the way you are handling your mortgage and bonds.
Whether you do or do not check - best of luck on your retirement and thank you for the advice
QJ
G.E. Box "All models are wrong, but some are useful."
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

qwertyjazz wrote: Mon May 25, 2020 4:09 pm
KlangFool wrote: Sun May 24, 2020 10:23 pm
qwertyjazz wrote: Sun May 24, 2020 10:15 pm Ignore the stocks and just compare bonds to the mortgage - are you getting 3.5% return on the bond portion right now?
qwertyjazz,

Why should I? There is nothing there that makes your POV more valid than mine. I know that I am borrowing at 3.5% to invest in my 60/40 portfolio. I took a calculated risk.

KlangFool
KF
You have been very helpful to me I past so I will try again. Imagine you have bonds that pay 0.5% and you have a mortgage that pays 3.5% Imagine they are both of the same duration. Imagine they are both of the same amount of money. Every day you are losing 3% There are reasons not to do this. It is not about risk of stocks though or expected portfolio return. There could be liquidity concerns.
QJ
QJ,

<<Imagine they are both of the same amount of money. Every day you are losing 3%>>

Just imagine you take that 300K and invest in the 60/40 portfolio instead. The 60/40 portfolio could return at least 5% and make you 1.5% every year.

<<There could be liquidity concerns. >>

300K in the house by paying off the mortgage versus keeping the 300K in the 60/40 portfolio. Which one has a greater liquidity concern? The annual mortgage payment that you save is 15K per year.

A) 300K in the house. You cannot take the money except by HELOC and/or selling the house. You still have to pay 5K worth of property tax every year.

B) 300K in the 60/40 portfolio. With a 50% drop in the stock market, you still have 210K to service te annual 20K PITI payment.

Which option has a greater liquidity concern? (A) or (B)?

There is more than one way to look at this. I understand your point of view. But, it is not the only valid way to play this game.

KlangFool

P.S.: At one level, I agreed with you. If my portfolio is at 1.6 million now, I would probably just pay off the mortgage. At 1.3 million, I am not comfortable paying off the 300K mortgage.
reasonable
Posts: 9
Joined: Sun Oct 27, 2019 12:05 pm

Re: The axe falls and I am prepared. What's next?

Post by reasonable »

Klang,

There is more to life than money and since you have finances set up to the point you will never be dependent upon others for survival, It is far more important to plan a life that keeps you mentally and emotionally fulfilled. If you enjoy IT work , do it to your contentment. If you have other things you have always wanted to do, plan and try it out. Experiment to see what might bring more satisfaction to life.

Phil
pwill112
Posts: 46
Joined: Thu Sep 21, 2017 10:38 am

Re: The axe falls and I am prepared. What's next?

Post by pwill112 »

1. Don't underestimate the ACA subsidies at the appropriate time if you can keep your taxable income low. I am doing that and it's working quite well so far. All the more reason to not payoff a mortgage if your taxable account would be depleted too low.

2. When you estimated Social Security how did you account for potentially zero earnings for you from now until drawing down SS? Won't that lower your payouts? Is there a calculator or website for such?
Last edited by pwill112 on Mon May 25, 2020 6:34 pm, edited 1 time in total.
User avatar
2pedals
Posts: 1293
Joined: Wed Dec 31, 2014 12:31 pm

Re: The axe falls and I am prepared. What's next?

Post by 2pedals »

pwill112 wrote: Mon May 25, 2020 6:23 pm 2. When you estimated Social Security how did you account for potentially zero earnings for you from now until drawing down SS? Won't that lower your payouts? Is there a calculator or website for such?
https://ssa.tools/calculator.html
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

pwill112 wrote: Mon May 25, 2020 6:23 pm 1. Don't discount the ACA subsidies at the appropriate time if you can keep your taxable income low. I am doing that and it's working quite well so far. All the more reason to not payoff a mortgage if your taxable account would be depleted too low.

2. When you estimated Social Security how did you account for potentially zero earnings for you from now until drawing down SS? Won't that lower your payouts? Is there a calculator or website for such?
pwill112,

1) Yes, that too.

2) I had crossed the second bend point. It won't matter that much anymore. I make a calculator for that too.

KlangFool
Broken Man 1999
Posts: 5611
Joined: Wed Apr 08, 2015 11:31 am
Location: West coast of Florida, inland on high ground!

Re: The axe falls and I am prepared. What's next?

Post by Broken Man 1999 »

KlangFool, if anyone is prepared for a layoff, it would be you.

Unless you really want to work, retiring should be a well-supported new phase of your life.

Best wishes for you and your family. Your children are educated, and I'm sure they are prepared for life as well as you and your spouse could manage. Your heavy lifting is over.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

Broken Man 1999 wrote: Mon May 25, 2020 6:36 pm KlangFool, if anyone is prepared for a layoff, it would be you.

Unless you really want to work, retiring should be a well-supported new phase of your life.

Best wishes for you and your family. Your children are educated, and I'm sure they are prepared for life as well as you and your spouse could manage. Your heavy lifting is over.

Broken Man 1999
Thanks. For better or worse, I do not have the "One More Year" (OMY) problem. I do not think I will get to choose.

KlangFool
tnr
Posts: 106
Joined: Tue Jan 26, 2016 12:36 pm

Re: The axe falls and I am prepared. What's next?

Post by tnr »

I am sorry to hear about this news but as has already been said, you have prepared well financially and so you don't have to work if the work is unappealing.

You asked under what non-financial conditions would others continue to work. Fortunately, I am in that position. For me, I continue to work because I think what I do is valuable and helpful to others. Since it is in health research, I also think it makes a contribution to society. Finally, I enjoy the social aspect of my job. The minute I don't think I am being helpful or that the research becomes junk science, I will retire.

One other area I would work for non-financial reasons would be to help out my daughters. If they were starting out a company and needed someone they could trust to help them, I would try and pitch in no matter what it was. I think this is unlikely but you never know.

Good luck to you in this new chapter of your life. I hope you will continue to join discussions on bogleheads as I enjoy your posts.
DesertDiva
Posts: 1004
Joined: Thu Mar 01, 2018 12:49 pm
Location: In the desert

Re: The axe falls and I am prepared. What's next?

Post by DesertDiva »

At the risk of sounding like everyone else here:
  • There’s really not anything I can add to what has already been posted.
  • Thank you for reminding us all of the need to be prepared
Perhaps a stint as a Bogleheads moderator is in your future? :D

All the best,
DesertDiva
Barkingsparrow
Posts: 334
Joined: Tue Jun 13, 2017 6:09 pm

Re: The axe falls and I am prepared. What's next?

Post by Barkingsparrow »

This is a timely thread. I have been following Klangfool's posts over time in particular because his situation - career, age, and portfolio size comes so close to mirroring my situation. I have nothing to add in terms of his situation - except maybe, the ax hitting when it did may prove a blessing in disguise if he is suffering from burnout. Sometimes you need a major event to happen to prompt you to step back and see the situation more clearly.

The social distancing, having now WFH for 3 months, has opened my eyes. It made me realize just how much I disliked the old routine - the commute, having to be in an office all day, etc. Since the WFH started, I've also lost 3 relatives, and a 4th just diagnosed with a serious cancer. You start to feel the routine of work is rather pointless given the bigger picture. I am half-hoping that our company (which has been hit hard and has had major lay-offs) will eventually resort to some voluntary retirement option. Almost, from a selfish POV, I envy Klangfool, in that maybe the decision was made for him.
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

Barkingsparrow wrote: Mon May 25, 2020 7:42 pm This is a timely thread. I have been following Klangfool's posts over time in particular because his situation - career, age, and portfolio size comes so close to mirroring my situation. I have nothing to add in terms of his situation - except maybe, the ax hitting when it did may prove a blessing in disguise if he is suffering from burnout. Sometimes you need a major event to happen to prompt you to step back and see the situation more clearly.

The social distancing, having now WFH for 3 months, has opened my eyes. It made me realize just how much I disliked the old routine - the commute, having to be in an office all day, etc. Since the WFH started, I've also lost 3 relatives, and a 4th just diagnosed with a serious cancer. You start to feel the routine of work is rather pointless given the bigger picture. I am half-hoping that our company (which has been hit hard and has had major lay-offs) will eventually resort to some voluntary retirement option. Almost, from a selfish POV, I envy Klangfool, in that maybe the decision was made for him.
Barkingsparrow,

If my follow-on project was not killed by the COVAD-19,

A) My job would be guaranteed for the next 3 to 4 years.

B) My portfolio would add about at least 100K per year of savings.

C) I would have full retiree health insurance benefits in 3 years.

In summary, I could retire with absolute comfort and cruise into retirement.

https://www.yiddishwit.com/gallery/laugh.html

"Man Plan and God Laughs"
- Yiddish proverb

KlangFool
User avatar
HomerJ
Posts: 15699
Joined: Fri Jun 06, 2008 12:50 pm

Re: The axe falls and I am prepared. What's next?

Post by HomerJ »

KlangFool wrote: Mon May 25, 2020 4:42 pm
qwertyjazz wrote: Mon May 25, 2020 4:09 pm
KlangFool wrote: Sun May 24, 2020 10:23 pm
qwertyjazz wrote: Sun May 24, 2020 10:15 pm Ignore the stocks and just compare bonds to the mortgage - are you getting 3.5% return on the bond portion right now?
qwertyjazz,

Why should I? There is nothing there that makes your POV more valid than mine. I know that I am borrowing at 3.5% to invest in my 60/40 portfolio. I took a calculated risk.

KlangFool
KF
You have been very helpful to me I past so I will try again. Imagine you have bonds that pay 0.5% and you have a mortgage that pays 3.5% Imagine they are both of the same duration. Imagine they are both of the same amount of money. Every day you are losing 3% There are reasons not to do this. It is not about risk of stocks though or expected portfolio return. There could be liquidity concerns.
QJ
QJ,

<<Imagine they are both of the same amount of money. Every day you are losing 3%>>

Just imagine you take that 300K and invest in the 60/40 portfolio instead. The 60/40 portfolio could return at least 5% and make you 1.5% every year.

<<There could be liquidity concerns. >>

300K in the house by paying off the mortgage versus keeping the 300K in the 60/40 portfolio. Which one has a greater liquidity concern? The annual mortgage payment that you save is 15K per year.

A) 300K in the house. You cannot take the money except by HELOC and/or selling the house. You still have to pay 5K worth of property tax every year.

B) 300K in the 60/40 portfolio. With a 50% drop in the stock market, you still have 210K to service te annual 20K PITI payment.

Which option has a greater liquidity concern? (A) or (B)?

There is more than one way to look at this. I understand your point of view. But, it is not the only valid way to play this game.

KlangFool

P.S.: At one level, I agreed with you. If my portfolio is at 1.6 million now, I would probably just pay off the mortgage. At 1.3 million, I am not comfortable paying off the 300K mortgage.
Klang, you are doing this wrong.

You need $45k a year, after the $15k your wife brings in.

$1.3 million... $45k is 3.46% withdrawal.

Pay off the mortgage, and you need $30k a year... with $1 million still in investments, that's a 3% withdrawal rate.

And taxes will be lower. And easier to qualify for ACA. $60k is close to the ACA cliff. $45k (what you need in total if you didn't have a mortgage) is well below it.

And you won't be throwing away money on paying interest to someone else.
Last edited by HomerJ on Mon May 25, 2020 8:34 pm, edited 3 times in total.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
User avatar
7th_Diagram
Posts: 52
Joined: Fri Jan 25, 2019 11:37 pm

Re: The axe falls and I am prepared. What's next?

Post by 7th_Diagram »

:sharebeer cheers Klang
"You have to understand, most people are not ready to be unplugged,and many of them are so injured, so hopelessly dependent upon the system, that they will fight to protect it." | ~Morpheus
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

HomerJ wrote: Mon May 25, 2020 8:30 pm

Klang, you are doing this wrong.

You need $45k a year, after the $15k your wife brings in.

$1.3 million... $45k is 3.46% withdrawal.

Pay off the mortgage, and you need $30k a year... with $1 million still in investments, that's a 3% withdrawal rate.

And taxes will be lower. And easier to qualify for ACA.

And you won't be throwing away money on paying interest to someone else.
HomerJ,

In summary, you do not believe a 60/40 portfolio can return more than 5% per year.

KlangFool
User avatar
HomerJ
Posts: 15699
Joined: Fri Jun 06, 2008 12:50 pm

Re: The axe falls and I am prepared. What's next?

Post by HomerJ »

KlangFool wrote: Mon May 25, 2020 8:35 pm
HomerJ wrote: Mon May 25, 2020 8:30 pm

Klang, you are doing this wrong.

You need $45k a year, after the $15k your wife brings in.

$1.3 million... $45k is 3.46% withdrawal.

Pay off the mortgage, and you need $30k a year... with $1 million still in investments, that's a 3% withdrawal rate.

And taxes will be lower. And easier to qualify for ACA.

And you won't be throwing away money on paying interest to someone else.
HomerJ,

In summary, you do not believe a 60/40 portfolio can return more than 5% per year.

KlangFool
No, that's not what I said at all. You have offered a ton of advice over the years. I don't think you've ever listened to anyone else.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
User avatar
HomerJ
Posts: 15699
Joined: Fri Jun 06, 2008 12:50 pm

Re: The axe falls and I am prepared. What's next?

Post by HomerJ »

KlangFool wrote: Mon May 25, 2020 8:35 pmIn summary, you do not believe a 60/40 portfolio can return more than 5% per year.
But, since you brought it up, I do not believe that a 60/40 is guaranteed to return more than 5% a year over the next 10 years.

Do you believe there is a guarantee that it will?

Paying off your mortgage is a guaranteed 3.5% return, and will make it easier for you to qualify for ACA subsidies when your COBRA runs out.

But do what you want.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

HomerJ wrote: Mon May 25, 2020 8:37 pm
KlangFool wrote: Mon May 25, 2020 8:35 pm
HomerJ wrote: Mon May 25, 2020 8:30 pm

Klang, you are doing this wrong.

You need $45k a year, after the $15k your wife brings in.

$1.3 million... $45k is 3.46% withdrawal.

Pay off the mortgage, and you need $30k a year... with $1 million still in investments, that's a 3% withdrawal rate.

And taxes will be lower. And easier to qualify for ACA.

And you won't be throwing away money on paying interest to someone else.
HomerJ,

In summary, you do not believe a 60/40 portfolio can return more than 5% per year.

KlangFool
No, that's not what I said at all. You have offered a ton of advice over the years. I don't think you've ever listened to anyone else.
HomerJ,

Would you borrowed 300K at 3.49% and invest in a 60/40 portfolio?

A) Yes.

B) No.

Both (A) and (B) are valid.

<<I don't think you've ever listened to anyone else.>>

In this case, I acknowledged that your point of view is valid. I had listened to you. But, you believe that my point of view is invalid.

There is more than one valid way to look at the numbers.

KlangFool
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

HomerJ wrote: Mon May 25, 2020 8:39 pm
KlangFool wrote: Mon May 25, 2020 8:35 pmIn summary, you do not believe a 60/40 portfolio can return more than 5% per year.
But, since you brought it up, I do not believe that a 60/40 is guaranteed to return more than 5% a year over the next 10 years.

Do you believe there is a guarantee that it will?

Paying off your mortgage is a guaranteed 3.5% return, and will make it easier for you to qualify for ACA subsidies when your COBRA runs out.

But do what you want.
HomerJ,

<<But, since you brought it up, I do not believe that a 60/40 is guaranteed to return more than 5% a year over the next 10 years.>>

Then, we are just making a different bet.

<<Do you believe there is a guarantee that it will?>>

Yes. For a simple reason that I believe that the inflation will be much more than 3.5% per year over the next 10 years.

<<will make it easier for you to qualify for ACA subsidies >>

I was collecting ACA subsidies while paying the mortgage while I was unemployed a few years ago.

KlangFool
Last edited by KlangFool on Mon May 25, 2020 8:50 pm, edited 1 time in total.
User avatar
tvubpwcisla
Posts: 526
Joined: Sat Nov 09, 2019 10:09 am

Re: The axe falls and I am prepared. What's next?

Post by tvubpwcisla »

Thanks for sharing Klang. Wish you all the best no matter what you decide to do. Always appreciate your contributions to the site.

:sharebeer
Stay invested my friends.
User avatar
HomerJ
Posts: 15699
Joined: Fri Jun 06, 2008 12:50 pm

Re: The axe falls and I am prepared. What's next?

Post by HomerJ »

KlangFool wrote: Mon May 25, 2020 8:45 pm
HomerJ wrote: Mon May 25, 2020 8:39 pm
KlangFool wrote: Mon May 25, 2020 8:35 pmIn summary, you do not believe a 60/40 portfolio can return more than 5% per year.
But, since you brought it up, I do not believe that a 60/40 is guaranteed to return more than 5% a year over the next 10 years.

Do you believe there is a guarantee that it will?

Paying off your mortgage is a guaranteed 3.5% return, and will make it easier for you to qualify for ACA subsidies when your COBRA runs out.

But do what you want.
HomerJ,

<<But, since you brought it up, I do not believe that a 60/40 is guaranteed to return more than 5% a year over the next 10 years.>>

Then, we are just making a different bet.
No, you are making a bet.

As I enter retirement, I will not be making a bet.

I'm not betting on the opposite position... I'm not betting that a 60/40 will return less than 5%. It may return more, it may return less. Doesn't matter to me.. I'd lock in the 3.5% and retire with no worries. You are betting that it will return more. I am not making a bet at all either way.

I always thought you were MORE conservative than me (and I'm pretty conservative), but apparently, I was wrong.

Retiring at 57 is the wrong time to be making bets.
<<Do you believe there is a guarantee that it will?>>

Yes. For a simple reason that I believe that the inflation will be much more than 3.5% per year over the next 10 years.
What you believe is not a guarantee. You know better than that.
Last edited by HomerJ on Mon May 25, 2020 8:54 pm, edited 1 time in total.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

HomerJ wrote: Mon May 25, 2020 8:50 pm
What you believe is not a guarantee. You know better than that.
HomerJ,

Correct. This 300K mortgage is my inflation and hyperinflation hedge. It is part of my diversification strategy.

Question:

If we hit high inflation and/or hyperinflation, which portion of the portfolio can benefit and lessen the blow?

KlangFool
User avatar
HomerJ
Posts: 15699
Joined: Fri Jun 06, 2008 12:50 pm

Re: The axe falls and I am prepared. What's next?

Post by HomerJ »

KlangFool wrote: Mon May 25, 2020 8:52 pm
HomerJ wrote: Mon May 25, 2020 8:50 pm
What you believe is not a guarantee. You know better than that.
HomerJ,

Correct. This 300K mortgage is my inflation and hyperinflation hedge. It is part of my diversification strategy.

KlangFool
That's a better answer...

But how does that work if you aren't making a salary any more? All your money will be equally affected by inflation. If your salary was increasing by inflation, but your mortgage was fixed, that would work, but with no salary, how does this work out for you?

Do you have substantial money in TIPs or iBonds?

I guess when you start pulling SS, and it increases by inflation, that might help. But that's 5-10 years away.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

HomerJ wrote: Mon May 25, 2020 8:58 pm
KlangFool wrote: Mon May 25, 2020 8:52 pm
HomerJ wrote: Mon May 25, 2020 8:50 pm
What you believe is not a guarantee. You know better than that.
HomerJ,

Correct. This 300K mortgage is my inflation and hyperinflation hedge. It is part of my diversification strategy.

KlangFool
That's a better answer...

But how does that work if you aren't making a salary any more? All your money will be equally affected by inflation. If your salary was increasing by inflation, but your mortgage was fixed, that would work, but with no salary, how does this work out for you?

Do you have substantial money in TIPs or iBonds?

I guess when you start pulling SS, and it increases by inflation, that might help. But that's 5-10 years away.
HomerJ,

It does not matter whether I am making a salary.

<<All your money will be equally affected by inflation. >>

Are you claiming that

A) Stock

B) Bond

C) CASH

D) Gold/Silver

E) House value

are equally affected by inflation?

The answer is obviously no. Meanwhile, the fixed nominal mortgage payment will be positively affected.

<<I guess when you start pulling SS, and it increases by inflation, that might help. But that's 5-10 years away.>>

On the other hand, it does not matter whether it is 5 to 10 years away. As long as inflation is much greater than 3.49% per year, I win by keeping the 300K mortgage.

KlangFool
User avatar
HomerJ
Posts: 15699
Joined: Fri Jun 06, 2008 12:50 pm

Re: The axe falls and I am prepared. What's next?

Post by HomerJ »

KlangFool wrote: Mon May 25, 2020 9:09 pmAs long as inflation is much greater than 3.49% per year, I win by keeping the 300K mortgage.
I suggest a plan where you win regardless if inflation is much greater than 3.49% per year or not.

Good luck to you. You're probably fine either way. But it scares me that you are making bets on predicting the future correctly.

In any case, I hope you have a lot in taxable accounts so you can stay under the ACA subsidy cliff even with the mortgage.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Topic Author
KlangFool
Posts: 19069
Joined: Sat Oct 11, 2008 12:35 pm

Re: The axe falls and I am prepared. What's next?

Post by KlangFool »

HomerJ wrote: Mon May 25, 2020 9:15 pm
KlangFool wrote: Mon May 25, 2020 9:09 pmAs long as inflation is much greater than 3.49% per year, I win by keeping the 300K mortgage.
I suggest a plan where you win regardless if inflation is much greater than 3.49% per year or not.

Good luck to you. You're probably fine either way. But it scares me that you are making bets on predicting the future correctly.

In any case, I hope you have a lot in taxable accounts so you can stay under the ACA subsidy cliff even with the mortgage.
HomerJ,

I have 100+K of CASH and 400K to 500K of stock index funds in my taxable account. I can tax manage my income to whatever number I choose.

KlangFool
User avatar
HomerJ
Posts: 15699
Joined: Fri Jun 06, 2008 12:50 pm

Re: The axe falls and I am prepared. What's next?

Post by HomerJ »

KlangFool wrote: Mon May 25, 2020 9:22 pmI have 100+K of CASH and 400K to 500K of stock index funds in my taxable account. I can tax manage my income to whatever number I choose.
Excellent. At least that's one less thing to worry about.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Post Reply