The Doctor’s Bill: My Golden Handcuffs. Can I Break Them?
Welcome to this episode of The Doctor’s Bill (Can You Afford It?).
Wonder if you should buy that big ticket item or not?
Well here’s your chance to have a wealth management expert, Johanna Fox Turner, of Fox & Company Wealth Management analyze your overall finances and make a final verdict on whether or not you can indeed swing for the fences and splurge on yourself or whether you should just walk away.
[Johanna and I have no current financial relationship]
Disclaimer: This is not meant to be a substitute for paid professional advice but only meant to serve as a suggestion/guideline.
The following are the details from our submission form:
Item/Experience Desired:
Forego golden handcuffs to retire 2 years early
Approximate Cost:
$200k after taxes
On A Happiness Scale of 1-10 (10 Being Happiest), rate what this item/experience will do for you A) Short Term and B) Long Term:
A) 7 B) 5 (it essentially buys me two years of freedom)
Age:
58
Gender:
Male
Occupation:
Health Executive
Marital Status:
Married
Any Children? (If so please provide ages)
28, 23
How Many Years Till Planned Retirement?
Two (or four if I stay for vested payout)
What is your total household income?
$400k
What is your % Annual Savings Rate? (savings/gross income)
30%
Primary Home Equity (Market Value-Debt) [For Renter =$ 0]
$525k
Additional Real Estate Holdings Equity (Market Value-Debt):
$400k
Current Liquid Asset Value (Savings, Checking, Etc.):
$75k
Retirement/HSA Combined Value:
$2.1 million
Brokerage Account (Taxable):
$900k
Miscellaneous Asset Value:
Inflation-indexed pension $50k/year, rental income $24k/year, free health care
Mortgage Balance:
$275k
Student Loan Balance:
$0
Additional Liabilities:
$27k car loan
Future College Plan Funding Needed (Today’s Dollars):
$0
Future Parental Support Funding Needed (Today’s Dollars):
$0
Additional Future Obligation Support (Today’s Dollars):
$0
Any other pertinent information not addressed?
What I am asking is if I can forego my 457f payout. If I retire at 60 I get $0, but if I retire at 62 I get $200k.
I would use it to pay off the home mortgage.
Could I also just retire at 60, pay off the mortgage out of pocket and meet my retirement income goal of $150k/yr before taxes. (I think at 3% withdrawal rate I can meet my retirement goals now)
So does this submitter get to break free from the shackles of his golden handcuffs?
If these were your financials, what would you do?
Would you still be handcuffed to your job to get the carrot?
Or do you break free from your bonds and enjoy your newly found freedom?
Click on the Doctor’s Bill Image and find out the verdict:
Open the Bill And Find Out If Can Afford It or Not
After you see the verdict please come back to this page and comment whether you agree or not with the decision (and no cheating by looking at comments first!)
If you would like to submit your own Doctor’s Bill request please fill out the submission form.
Note:
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I too agree. Your time is your most valuable resource and I’d say he has enough money to live a comfortable life especially if he can become more frugal! I plan to be financially independent long before I have a net worth of $3.7 mil.
Thanks for the comment. Here’s to reaching your FI (and mine) as soon as possible 😊
Thanks for your comment and good luck to reaching FI on your own timetable!
If leaving will make happy, do it. Honestly 200k in golden handcuffs is a lot to walk away from, but… whose to say there won’t be 200k to replace it vesting when the requester is 65? The one more year syndrome can go forever.
Instead if you have enough to retire, which there is here, and have something you’d rather do then work, go do it.
My golden handcuffs are less then 200k (though not insignificant) and 1/4 vest yearly. My work finds a way to replace that 1/4 yearly.
Wonderful insight. A lot of us have golden handcuffs which are designed by the employer to keep you possibly longer than you may want or need to. It is a personal choice and you have to prioritize what is most important. Time is a precious commodity especially as you are on the downhill side of it. It is extremely rare (if it does occur) that someone on their death bed says I wish I worked more.
Agreed. I just don’t think Mr. HE will look back in 10 years and wish he had worked that extra 2 years. But that’s a very very personal decision.
Yes, you can afford to quit. These long term incentive bonuses go on indefinitely (that is, until they decide to let you go), and you will be making a similar decision, on a rolling basis, indefinitely. (My wife has a similar arrangement.)
Thanks VagabondMD for your input. Yeah Golden Handcuffs is just another variant of the One More Year Syndrome. At one point the decision that Time is more valuable than anything else needs to be (hopefully not too late) made.
Thanks, Vagabond, glad you concur. It basically gets down to (imo) whether he likes the job enough to stay 2 more years. As I mentioned, he’s getting an extra 2 years of retirement in the best years of his life, not by living longer. That would be tough for me to pass up unless I really loved my job (which I do, fortunately 🙂 )
The car loan threw me for a loop, but it doesn’t seem like a half year’s salary is worth this man’s obviously deep desire to get out ASAP…
Yeah the car loan was a bit of an oddity. Not sure how that one came about. But 2 extra years to jump start your retirement for me trumps the handcuff especially when have the assets to more than be able to support desired spend rate
Yeah…as I just replied to Hatton1md, it’s a 0% loan and they keep their cars for a long time, so just another auto-draft on the monthly bank statement.
It worries me that he has a car loan and a mortgage at 58. I would never consider retiring with either of these. I am not sure that he has enough cushion.
Appreciate the comment Hatton1. I agree that the car loan in particular is interacting. Don’t know what the rate is or reason to finance it with the funds available. But with no worries of health care costs and at minimum a 50k floor for pension, I think worst case scenario would still be able to have basic needs met and then some
Mr. HE has confirmed that the car loan is, indeed, a 0% interest loan and they plan to keep the car 10 years, so he is simply leveraging his $$.
Given this guy’s cash flow I’m not freaked at all about the mortgage. At 3.5% his payment is probably less than what his rental generates. Leverage properly risked is a good thing. The car loan is chump change. Taxes on a 150K take home is 20K up front to uncle Sam and he likely has to pay taxes on the rental income as well so that pushes his yearly to say 180K needed to live on 150K spendable plus pay a mortgage. 3.7M does not generate 180K/yr at any reasonable interest rate so his future is leveraged. If you subtract… Read more »
Great point about how things would get completely changed with the death of one spouse in this scenario. Taxes would certainly become more problematic and take a bigger bite when the married classification becomes single in the eyes of the IRS. Thanks for giving a ton of insight for other factors that need to be considered. As always you give great viewpoints.
Thanks, Gasem – always appreciate your insight and analytical skills!
And I yours between us one is coffee and one is cream and a clearer truth emerges
This post was a good one. Wow, free healthcare for life and a floor of $50k for retirement. We should all be so lucky to start retirement that way. Congrats!
Before employers started shifting responsibility of retirement to the individual via 401ks it was a lot more common to have retirement benefits like this. I’m sure there are still some that offer it but it is quite rare.
Exactly – changes the picture a bit! See my comment for more about the source of the pension.
The subject of this week’s analysis has just given me permission to post the following. He hasn’t gotten involved in the online discussion because he is sensitive to his employer learning about this conversation and identifying him, for obvious reasons. The relatively low savings is due to the fact that our doctor had an earlier career, from which he retired after 10 years, receiving the pension and lifetime health benefits. I think you can probably guess what that career was. Imo, the pension and healthcare bene’s more than offset the “low” savings, and that is why I factored in the… Read more »