Can I retire? I'm so tired of this job/HCOL area!

[Que1999]

Hi!  Huge fan of the blog, and am very grateful for all the advice over the years that you have provided for my family & I.

I'm tired.

I've been working a high-stress, politically charged job for 16 years, and I would love some input on whether or not I can OR even should retire early.  The wife & I are both 40, and the kids are 6 & 9.  I work for a local government agency, and when I reach 20 years of service I qualify for a 50% pension for the rest of my life.  That's in 4 years....  That number can swing above 50% based on whether or not you contribute extra into the pension fund over the course of a career.  Salary for last year was around $170k, and should remain consistent throughout the next 4 years.  I have made excess contributions for most of my 16 years because it accrues at a guaranteed 8.25% interest.  If I retire right now, I have an excess of about $250k that I have (2) options with:

1) I can leave the money IN the pension fund and will begin receiving approximately $86,000 per year for the rest of my life beginning in July of 2025.

or

2) I can withdraw $55k tax-free (because these were post-tax extra contributions) & roll over around $195k to my IRA to avoid any tax.  This would reduce my pension in 2025 to around $60k per year.

Please note the pension has no COLA adjustments, so inflation would eventually chip away at it’s spending power.

The next option would be to STAY for 4 more years, reach my obligation and qualify for the full pension + a $12k bonus every year for the rest of my life.  Guesstimating the pension at that time would be difficult due to future contract negotiations/raises....  but if I had to guess I'd say.... $90K if I withdraw the excess contributions from the pension fund and rollover/withdraw the tax-free amount, or $115k or so if I leave the excess contributions in.  Just a guess, but I think these numbers should be pretty accurate.  The problem is I don't want to stay in this job anymore, and I don't want to remain where we currently live.  It is one of the highest cost of living locations in the US, and is abound with ‘issues’.  On a Cost of Living comparison website, where the median cost nationwide is 100, my current location is 178.  The area that I'm looking to relocate to is 78.  $100k where I live now = $40k where we are considering, according to the site.  We live in a 1500 sqft apartment, and the monthly maintenance/property tax = $1550 per month.  No mortgage, paid it off last year.  Also, no debt aside from credit cards that are paid off monthly for bonuses.

Our assets:

My 457:  $192k
Her 457: $179k
My 401k: $125k
My Annuity Fund: $30k (will be rolled over to IRA at retirement)
My Roth IRA: $46k
Her Roth IRA: $45k
Her T-IRA: $6k
529-1: $20k
529-2: $20k
Vanguard Brokerage Acct: $65k
100% Home Equity - If sold, we would walk away with around $450k cash
Checking Account - $50k emergency fund

All investments are index funds - 100% equities.  Mix of S&P/Total US Market funds.  No bonds for me.  I consider the pension and eventual Social Security payments as my fixed income…  I would reach the second bend point in 2025, coincidentally, when I would reach the 20-year mark.  So retiring 4 years early would be cutting down my SS payments by a bit.

As with anything in life, there’s pros and cons to each choice.  If I stay for the next 4 years, the pension would substantially increase, however, that means I have to continue paying the high taxes/cost of living for the next 4 years as well.  I can instantly cut our cost of living/expenses with an early retirement and geo-arbitrage.  A nice sized home that would meet our needs where we are considering costs between $200-$225k, and the property taxes are extremely low at around $1500 per year.  Not to mention, obviously, everything else is much cheaper as well.  The thing is we’d need to fund our living with the (2) 457’s + taxable brokerage account until the pension kicks in in 2025 (and decide which pension option I’d be going with?)...  Also, I have to mention that I would qualify for health insurance ($10 per month premium) for life at the 20-year mark, but the health insurance offered is extremely location-centric.  I would have to stay in the HCOL area to take advantage of it.  If we relocate, I would need to purchase health insurance through the marketplace, which of course would require me to stay within the income requirements to qualify for ACA subsidies.

Total in the 457’s = $371k
Taxable Brokerage Account after home sale:  $450k + $65K + $55k (if pension withdrawal) = $570k
------------
Total: $941k - $225k for new house = $716k with no mortgage......  Or should we rent?

Should we stick it out?  Should we leave?  Can we even retire yet?  I’m so conflicted…...

Thanks in advance for your help!

[gocurrycracker]

Let me poke some holes and ask some questions that don't necessarily need answers and see if it helps...?


Being tired is hard. High stress jobs pollute everything in life...

Generally speaking, every place we could live has issues. A lot of times the things we dislike in one place seem monumental and the issues in another place seem minor or quaint. "The grass is greener..." Quitting a job can reduce the issues in your current location or even make them disappear... commuting traffic, shopping hours, crowds, etc...

Financially, is the issue you can quit now and live in the LCOL area but not the HCOL area? I didn't see clearly the COL in either location. But we can throw some numbers out there...

In 4 years with your health insurance benefit, you pay $20/month. With a family of 4 on the ACA, maybe you pay $6k - $8k/year plus any care you use.

With income cut in half, taxes will be cut by 2/3. (More with no FICA taxes)

Is the HCOL area still high cost of living at that point?

What is it worth to get an extra $40k+/year every year for the rest of your life? (pension + 12k bonus)

Can you transfer to another job in the same agency?

Will a vacation help reduce short term stress to be less tired for the decision making process?

How do your wife and kids feel about the LCOL area?

[Que1999]

Let me poke some holes and ask some questions that don't necessarily need answers and see if it helps...?


Being tired is hard. High stress jobs pollute everything in life...

Generally speaking, every place we could live has issues. A lot of times the things we dislike in one place seem monumental and the issues in another place seem minor or quaint. "The grass is greener..." Quitting a job can reduce the issues in your current location or even make them disappear... commuting traffic, shopping hours, crowds, etc...

Financially, is the issue you can quit now and live in the LCOL area but not the HCOL area? I didn't see clearly the COL in either location. But we can throw some numbers out there...

In 4 years with your health insurance benefit, you pay $20/month. With a family of 4 on the ACA, maybe you pay $6k - $8k/year plus any care you use.

With income cut in half, taxes will be cut by 2/3. (More with no FICA taxes)

Is the HCOL area still high cost of living at that point?

What is it worth to get an extra $40k+/year every year for the rest of your life? (pension + 12k bonus)

Can you transfer to another job in the same agency?

Will a vacation help reduce short term stress to be less tired for the decision making process?

How do your wife and kids feel about the LCOL area?

Thanks for the quick reply, Jeremy.

"Quitting a job can reduce the issues in your current location or even make them disappear... commuting traffic, shopping hours, crowds, etc..." 

You hit the nail on the head with this one.  Those are all issues I just don't want to deal with anymore.  Along with the politics & stresses of the job.  For a more clear picture, I live in one of the outlying boroughs of Manhattan.  A decent 3-bedroom house will cost approximately $900k+...

https://www.realtor.com/realestateandhomes-detail/3019-Corporal-Kennedy-St_Flushing_NY_11360_M31693-74295

Property taxes in the City, depending on the school district, are anywhere from $8k-15k per year.  If you try to escape to some of the suburban areas, the taxes get kicked up to around $15k-20k per year.  Homes are a bit cheaper at around $600k-700k, but they increase the property taxes commensurately to keep up with the higher home prices in the City.  Everything from groceries, to movie theaters, to gas is expensive as heck out here.  We are looking at the suburbs of Tennessee.  I guess my question to you would be do you think that would be a silly move?  IE- forfeiting the full pension + bonus for a partial pension, OR would this loss of pension income be offset by selling the house & investing the money + relocating to a much cheaper cost of living location in the suburbs?  I guess that is a hard prediction to make, because obviously no one knows what the market will do.

I also neglected to mention the NY State + City tax = about 10%, on top of Fed tax vs no State income tax in Tennessee.  A comparable house in the areas of Tennessee that we’re looking at are approximately $200k, with $1500 property taxes per year.  Right now in NYC, our income tax rate = 22% Fed tax + 6.5% State tax + 3.5% City tax.  Also, like you said, no more FICA taxes in Tennessee either, if I were to retire early and go there.

In regards to the retiree health insurance vs. ACA insurance, I’m not really sure.  I guess one big positive to stay in the area would be the ability to harvest capital gains up to the top of the 0% bracket and not worry about anything, unlike ACA?  I guess the health insurance is a big positive to staying in the area….

“What is it worth to get an extra $40k+/year every year for the rest of your life? (pension + 12k bonus)”

This is my million dollar question…  I’m having a hard time answering it!

There is stress, drama and politics in most places that I have heard in my agency.  Finding a place free of this will probably be pretty hard to do… 

A vacation might help.  Maybe I’m just feeling a bit burnt out and a nice vacation in a cabin in the woods with my family might get my head back in place.  I was actually looking into this earlier today with my wife.

My wife is open to leaving.  She is also tired of the fast paced life and crowding, etc.  I don’t think my 6 year old would mind too much, but the 9 year old…..  I’m not sure how she’d feel about leaving her friends at this point.

Maybe I just need a nice vacation....?

[gocurrycracker]

Vacations are nice.

Have you been to Tennessee? Might be a good vacation destination before committing.

Just using my home town as an example... cheap to live there, but if you aren't big on pheasant hunting, high school wrestling, and talking about how fast the corn is growing as entertainment options / socializing, then you might not enjoy it. Add in a bit of local stress / drama / politics for extra fun, e.g. "Why do all of these frickin New Yorkers move to my town and (insert complaint here.)"

Maybe you'll love it. I dunno. I like this post for some things to think through:
https://www.hullfinancialplanning.com/dont-move-somewhere-just-because-its-cheap/


Another thing to consider - paying less in taxes doesn't necessarily mean another place is better. For example, we plan to move to California in a few years where we will pay more in taxes than we would if we were in Nevada or New Hampshire.

Some people view paying taxes as against their religion or whatever, and will gladly pay $2 to avoid $1 in tax. Or get $1 less in local school investment.

I'll pay them happily - its just a line item on my list of expenses, and the ROI seems reasonable.

“What is it worth to get an extra $40k+/year every year for the rest of your life? (pension + 12k bonus)”

This is my million dollar question…  I’m having a hard time answering it!

I like that you referred to "the million dollar question." Using the 4% rule, $40k/year in income requires investments of... $1 million. Or about the cost of a house in Flushing.

[ychuck46]

Let me give you some perspective since we did exactly what you are contemplating, namely moving from NY to TN.  We made the move a little over ten years ago and it absolutely was the best decision we could have made.  We lived in very, very snowy Upstate NY, just to the north of Syracuse, and left all the snow blowing and snow shoveling behind us.  We wanted out of the political atmosphere in NY as well, which in our estimation has only gotten worse over the last decade.  But let me give you some points from our experience:

1. The COL is everything you think it will be.  We moved to a small town in TN so our costs are even lower then if you went to the larger cities of Memphis, Nashville, and Knoxville, which seem to attract the people from the North and West who push for more services and the like, meaning higher local taxes and higher property values.  We moved into a house twice as large as what we had prior, on 10x the size lot, and our property taxes dropped 75%.  And btw, our property taxes have NEVER gone up over the ten years (what do you think would have been the case in NY over ten years).  As you mentioned we also have no state income tax, since the Hall tax on dividends and interest went away permanently as of last year.  We do have a high state sales tax which funds everything, including our schools, but that is also reduced for things like food, and in some cases items are tax free.  I would still rather pay a higher sales tax than never ending increases in property taxes and the like, since the latter always increased year after year in NY.  Besides, there are many areas in NY, CA, IL and elsewhere that probably excess our sales tax already due to local sales tax additions, and they still have all their other taxes.

2. Do you like the outdoors?  Then you would love TN.  Abundant fishing, hunting, etc and a lot of beautiful scenery.  Looks like UNY in many ways.

3. One big point - we are a very conservative state.  The whole state is red except for pockets in the large cities.  It actually was one of the attractions for us but if you are not conservative you might struggle here.  We have had people in our development actually move back to Long Island and elsewhere because of this reason, so be honest with yourself in this regard.

4. We are also a very pro-2nd Amendment state.  In fact, the state legislature is about finished with a new bill that will allow concealed carry in TN whether you have a permit or not.  Personally I am a CC permit holder so I am tossed up on this one, but it will give you an example of how pro gun we are here.

Hopefully this helps some.  If I can help anymore with any specifics let me know and I'll do my best.

[Que1999]

Thank you Jeremy, and ychuck for the perspective from the other side.  It's greatly appreciated!  I have some thinking to do....  I suspect I will suck up the next 4 years, and in the meantime take a vacation or two to the area to check it.  Just need to put the job/location into the big picture of life I guess and realize it's not that bad...  and look forward to 2025.

Thanks!

[El Gran_Jamon]

I'll give what advice I can. I retired, walked away, whatever from a politically charged job in education.  I'm out at 52. My pension when it comes will be 30k less or more than if I stayed to 55 or longer. Also gave up lifetime location specific medical care. Don't care. When I'm done, I'm done. I am different  from others on this site tho. I believe and invested in rental real estate. I'm not a big stocks guy but recently learned a lot. Fun.To me, full cost medical is a year's rent increases.

Here's the thing, eave a bad job and free your mind. I did. I learned how to make even more money. Things I couldn't see in front of me because I had my nose to the grind stone. You sound like you're a person of some capacity if you can survive, climb to a position of some import in a rough and tumble high cost state. (Similar here, Los Angeles ) What makes you think you can't make a go of it in Podunk Tennessee if you wanted to work a bit there?  Maybe a hybrid midel, some work, some not. When you free your mind you will be amazed at what you missed before.

I would caution you tho on quality of Healthcare in Tennessee vs NYC. Do your due diligence.  As we get older, we get health problems in some cases never knew existing.  A surgeon I had for such an issue cautioned me rather stridently not to have this or any complex medical problems in a rural area. Reason? Doctors,  surgeons and specialists are competitive and flock to where they make the most money.

[gocurrycracker]

I have some thinking to do.... 

Please keep us updated! Best of luck!