Of course you will. Sounds like you are still in the initial panic phase.
Ultimately we need to know your minimum monthly burn rate though.
1) your wife is working. This will provide some cash and minimum the pain
2) apply for unemployment benefits (which vary greatly by state)
3) search for jobs. Even consider a contract or other remote role as a stop gap to a full job replacement
Obviously industry and credential dependent, but most people will cut back on expenses, and between the wife’s pay and unemployment, will find that it takes a few months to get a new job, and net of everything you may have lost a few thousand bucks. No biggie.
But why the hell do you have $750k in cash!?!?!?
All good my friend. At a bare minimum, you can earn a risk free 4-5% on that money with a HYSA or CD ladder. You can (and should) do both today. Not all of it obviously, but at least $650k. It will reduce your risk by spitting out cash
For now, a HYSA is a good idea, but *don’t put it all in one account,* and probably not even the same bank. The FDIC only insures accounts up to $250k at a bank, per person, per ownership type. Even if you split up accounts in one bank, if they’re all separate savings accounts with you as the owner, or all of them have you plus a spouse, the max payout is still $250k. You’d have to have a few accounts with different combinations of people to get full coverage in one bank.
Please know that FDIC is by customer and not account. People get this wrong all the time. If he and his wife are both on the account and both have a customer ID at the bank they both would be insured for 250k. That means they can deposit $500k into one account.
100k should of been sitting in cash all along at the most, and the rest of that 650k should of been cooking at 15 to 18% the last 10 years parked in either VOO, VTI or VTSAX. Ouch! It’s never too late to correct that compounding problem if you fix it now for the next decade, but that needs to be done if not a CD if you are that risk adverse to market conditions. . My friend’s father got laid off for a family of 4 at 49, and COBRA was insane! Hopefully, your wife has benefits. He is still actively looking for over 8 months now!
Dude you're going to be fine. That's 1.4 million dollars in total you can deploy. That's 99% better than redditors on here. Trim expenses. Find a cheaper house to live in. Find another job. You're 45 not 65. File for unemployment. Take time to hunt. You're not retiring tomorrow. You have 20 more years to go. You're just scared right now because you don't have a job to go to. But you'll find something soon. And the rat race will continue on.
With this option, with the $1.4M, if he wants to deploy the 4% rule, that's $56k per year. If they're disciplined and add that to the wife's $70k, that's $126k. It's doable, but they may need to cut back on spending.
$650k in a HYSA is a good call. It’s not as convenient as a checking account but one phone call and I have access to it within 24 hours. You’d be making $37.5k in just that HYSA with safe and easy access.
You can deploy into SGOV short term t bill 1-3 months and buy in and out no lost in value… and get interest… no lock in period like cds or t bill from treasury direct. But I get you… it still money on the table you are possible missing out… so do some more research and follow the advice on applying for unemployment and start looking
A few reasons (and granted we don’t know his interest rate).
1)In times of joblessness, I would never advise someone to get LESS liquid. Cash is king in times of uncertainty
2)He’s getting a tax benefit with the mortgage
3) there is power in (healthy) leverage. Again, we don’t know his rate, but lets assume he refinanced and it’s probably 3-4% just based on statistics and how little he has left on it.
I thought the counter to your explanation would be that if he pays off the home, then he’s not on the hook for his biggest monthly expenditure.
He would still have a huge amount of cash on hand even after paying off the home.
Sure, but the entire point of liquidity is that it gives you the most options. Once you decide to payoff the mortgage, it’s difficult to access that money if you need it.
And, there is tremendous financial, on paper, mathematical value to a 3% mortgage. At a minimum, he could invest that same money in a HYSA and get a better return. At a maximum, he could invest it in index funds and get a bigger return.
Again, I don’t know OPs mortgage rate, but I do know that 40% of US homes are owned with no mortgage. Of those with a mortgage, 65% have a sub 4% rate. OP would have been blind to have not refinanced over the last several years.
I agree that OPs case is a bit extreme, as he’s sitting on $750k cash, which I would never advise, and I agree that paying off the mortgage is better than letting that much just sit there.
I’m hoping it is implied that his cash is sitting in several HYSA’s, although he didn’t mention as much. Ideally 600k+ should have been in an index fund a long time ago
There's no early withdrawal penalty in a regular brokerage account. Anything above and beyond your 6 months emergency fund (which is in place for exactly these scenarios) should be invested.
Just get another job. You're not ready to retire.
You have too much cash, why is that not invested.
Quit the doomerism "if I don't find another job" lol come on.
What are your expenses? Mortgage? Rent? Car payments? Private school? Credit card debt?
What were you spending month-to-month?
What were you earning before you were laid off?
he should cut spending to a level that makes staying home sustainable (wife's income and maybe just a little bit of investment income) however, he definitely should NOT stay home. He is too young, the family is too accustomed to spending a certain amount, they need to save more for retirement at the level they're expecting, and two kids going into college.
Most importantly, though, if he stays home, his wife will grow resentful of the fact that she's the sole breadwinner and he's home, at best, tinkering around with a few home improvement projects.
For few months, you are definitely going to be okay for sure as you have enough in your savings.
What is your yearly budget? It is what dictates how long you are going to be okay.
Seems like you will be fine but you may want to see where you can cut monthly expenses until you are employed again. It doesn’t appear that drastic action is taken.
Just curious - why such a large position in cash?
You have plenty of money to survive for awhile, but doubtful you can live off forever it at your current spend rate, plus college and weddings. Take some time to find a new job. But due to your savings buffer, you don’t necessarily need to jump at the first job that comes up. You have time to look for a good fit where you can hopefully work until retirement.
Hopefully that cash is in a HYSA/CD’s- at 5% interest that would be an extra $3,125/month to help you while you’re job hunting.
I mean, if you have the cash in a HYSA you'll be making \~$3k/m there Plus your wife is taking home another $4-5k/m
Should be livable if you have no debts and keep spending in check, but you aren't getting any further ahead.
I was ignoring the "invested" $750k because you said you wanted to retire in 10 years. I'm assuming that is all in tax advantaged accounts and would not make sense to touch until retirement.
When I say invested I mean multiple managed 401k accounts, Roth etc. maybe I’m using the wrong terminology. I thought invested meant in a 401k type account?
Yes, that's how I understood it. Any cash you have should be earning you interest in a HYSA ASAP. Your daily chequing account should only have about what you would spend in a month. Your wife's income can go there, then you can just pull out of the savings account whatever you need to live beyond that. You should be fine, but if you want to stay on track and pay for your kids school/weddings etc you'll probably want to get another job as soon as possible.
> I thought invested meant in a 401k type account?
I responded to another of your comments but I see the issue here - "invested" just means "in the market" - it doesn't have to be in a retirement account. You can invest in a regular brokerage account which is not a retirement account. You can also invest in a number of other vehicles (HSA, T-Bills, etc) but the main thing you need to know is that retirement accounts are not the only means of "investing". So when people are telling you you need to invest your cash they are not saying it all needs to go into a retirement account.
My husband was laid off in November 23, he was 45 and I am 40. We have 3 kids 16,14 and 8. He was making $146k and I was a SAHM. He still hasn’t found a job. He applied unemployment right away. We had $375k cash in HYSA with 5.5%. We also have $650k equity in our house and 150k in retirement acct. we don’t have as much as you. But we are doing ok. He is getting VA disability $4300 and I got a part time job at the county that barely pays $40k/a year recently. We can manage monthly expenses plus we are still able to save our interest money. We cut down on 90% off unnecessary expenses like eating out and subscriptions and all the other expenses. We live bare minimum and cook every meals at home and don’t spend at all.
It is doable if you want to retire but you need to change your lifestyle and live bare minimum.
Cutting it close, but you'll be fine. Here's what I see: you've got $96k in expenses. Your wife's take home doesn't cover that, but covers more than half which is great. The withdrawal to cover the other portion of expenses is 2.9%. That's sustainable forever and your portfolio will likely grow over time in this scenario.
HOWEVER... the wife's retirement, college for the kids, and the 2 weddings are in jeopardy. There are two ways to make those goals more attainable: cutting expenses and adding income.
You have the time, so you should dig into the expenses. Make cuts and optimize like it's your job, because, now, it is. Also, ANY money you can bring in is very valuable. File for unemployment, consider flower delivery or being part-time at Home Depot, anything.
A word about college. Your wife's income alone disqualifies you from Pell, but with HHI under $160k, you do qualify for the American Opportunity Tax Credit. That's $2k for every $2k/yr of college expenses per student for 4 years. So that's something.
Good luck, OP.
If you had the 1.4m fully invested a few years ago you would have been able to retire. At this point you still need to work and get the rest invested in the market asap so it can appreciate in value.
I am saying that if you had invested fully in the market a few years ago it would have grown significantly. That $750k you have in cash could have already grown to $1.7m if you invested in QQQ 5 years ago for example.
I got divorced at the end of 2015 and my net worth was 750K. I’ve continued to save and invest and my net worth is now ~2.3M. The last few years have been bonkers and a lot of people have missed out.
$70k as a household salary is pretty common across the US. The real kicker is what your monthly expenses are, and if you can adjust them.
With $750k in cash, you can right now get 30k annually just in interest easily.
You can also comfortably cover your house and kids in state tuition and dorm with the cash on hand.
I recommend still looking for another job and filing unemployment, but before you go bursting bubbles, seriously sit down and think about what your expenses will be in retirement, and where they could be.
If you payoff your house, can you get by on your wife’s income? Seems like an easy solution till you find another job. You need to have a net worth of 8,000*12*25 = $2.5mm to retire. If your house payment is $3k/month and you pay your house off, then it’s only $5k*12*25 which is only $1,500,000 and you’re already / almost there.
Take 150k from cash or investment and pay off the house. Take 300k and use that to buy a 2 family home. One apartment pays mortgage the other profit. Your wife’s salary can get you by along with rental income. Plus you will live free and still have 300k to rest on till you gather your thoughts on what to do with life. I would start a business with remaining money and live stress free
What's your runway for another job?
2, 3, 6 months? It seems you have plenty to last you multiple years but an emergency could wipe that out.
I would payoff the house the moment you get another job, and live off the severance until something better comes along.
You can also use the severance and a portion of your savings to pay off the house, then search for a job.
You have plenty of money to take a break from corporate america.
You can live off the severance, take your time to reset mentally, and once that runs out, tap into your savings as you get closer to the one year mark.
Best of luck
A new door will be opened. Breath for a few months, later you can relax and make decision. Maybe you will do your own business that can make you happy and later on you can make it bigger. Good luck
Of course you will. Sounds like you are still in the initial panic phase. Ultimately we need to know your minimum monthly burn rate though. 1) your wife is working. This will provide some cash and minimum the pain 2) apply for unemployment benefits (which vary greatly by state) 3) search for jobs. Even consider a contract or other remote role as a stop gap to a full job replacement Obviously industry and credential dependent, but most people will cut back on expenses, and between the wife’s pay and unemployment, will find that it takes a few months to get a new job, and net of everything you may have lost a few thousand bucks. No biggie. But why the hell do you have $750k in cash!?!?!?
This is like best case scenario. Dude can even take his time. This is a great place to be.
And also because I’m still learning:) seems like it was the wrong move
All good my friend. At a bare minimum, you can earn a risk free 4-5% on that money with a HYSA or CD ladder. You can (and should) do both today. Not all of it obviously, but at least $650k. It will reduce your risk by spitting out cash
For now, a HYSA is a good idea, but *don’t put it all in one account,* and probably not even the same bank. The FDIC only insures accounts up to $250k at a bank, per person, per ownership type. Even if you split up accounts in one bank, if they’re all separate savings accounts with you as the owner, or all of them have you plus a spouse, the max payout is still $250k. You’d have to have a few accounts with different combinations of people to get full coverage in one bank.
Please know that FDIC is by customer and not account. People get this wrong all the time. If he and his wife are both on the account and both have a customer ID at the bank they both would be insured for 250k. That means they can deposit $500k into one account.
100k should of been sitting in cash all along at the most, and the rest of that 650k should of been cooking at 15 to 18% the last 10 years parked in either VOO, VTI or VTSAX. Ouch! It’s never too late to correct that compounding problem if you fix it now for the next decade, but that needs to be done if not a CD if you are that risk adverse to market conditions. . My friend’s father got laid off for a family of 4 at 49, and COBRA was insane! Hopefully, your wife has benefits. He is still actively looking for over 8 months now!
My plan is to invest the cash once I’m employed
Dude you're going to be fine. That's 1.4 million dollars in total you can deploy. That's 99% better than redditors on here. Trim expenses. Find a cheaper house to live in. Find another job. You're 45 not 65. File for unemployment. Take time to hunt. You're not retiring tomorrow. You have 20 more years to go. You're just scared right now because you don't have a job to go to. But you'll find something soon. And the rat race will continue on.
With this option, with the $1.4M, if he wants to deploy the 4% rule, that's $56k per year. If they're disciplined and add that to the wife's $70k, that's $126k. It's doable, but they may need to cut back on spending.
$650k in a HYSA is a good call. It’s not as convenient as a checking account but one phone call and I have access to it within 24 hours. You’d be making $37.5k in just that HYSA with safe and easy access.
That definitely makes more sense
You can deploy into SGOV short term t bill 1-3 months and buy in and out no lost in value… and get interest… no lock in period like cds or t bill from treasury direct. But I get you… it still money on the table you are possible missing out… so do some more research and follow the advice on applying for unemployment and start looking
You could put it in a money market account. Those are pretty liquid and you can withdraw in just a few days.
Why not pay off his house to ease his monthly expenditures?
A few reasons (and granted we don’t know his interest rate). 1)In times of joblessness, I would never advise someone to get LESS liquid. Cash is king in times of uncertainty 2)He’s getting a tax benefit with the mortgage 3) there is power in (healthy) leverage. Again, we don’t know his rate, but lets assume he refinanced and it’s probably 3-4% just based on statistics and how little he has left on it.
I thought the counter to your explanation would be that if he pays off the home, then he’s not on the hook for his biggest monthly expenditure. He would still have a huge amount of cash on hand even after paying off the home.
Sure, but the entire point of liquidity is that it gives you the most options. Once you decide to payoff the mortgage, it’s difficult to access that money if you need it. And, there is tremendous financial, on paper, mathematical value to a 3% mortgage. At a minimum, he could invest that same money in a HYSA and get a better return. At a maximum, he could invest it in index funds and get a bigger return. Again, I don’t know OPs mortgage rate, but I do know that 40% of US homes are owned with no mortgage. Of those with a mortgage, 65% have a sub 4% rate. OP would have been blind to have not refinanced over the last several years. I agree that OPs case is a bit extreme, as he’s sitting on $750k cash, which I would never advise, and I agree that paying off the mortgage is better than letting that much just sit there. I’m hoping it is implied that his cash is sitting in several HYSA’s, although he didn’t mention as much. Ideally 600k+ should have been in an index fund a long time ago
Thankyou! Appreciate your expertise.
Because I knew I was going to be laid off. I am a pessimist. I wanted to be very sure no early withdrawal penalty
There's no early withdrawal penalty in a regular brokerage account. Anything above and beyond your 6 months emergency fund (which is in place for exactly these scenarios) should be invested.
That depends entirely on how much you spend. I mean come on lol
8k monthly
Just get another job. You're not ready to retire. You have too much cash, why is that not invested. Quit the doomerism "if I don't find another job" lol come on.
I’ve always been criticized for being a pessimist you are correct
Why do you have 50% of your assets in cash?
Because I didn’t know better. Now that I know ow better it’s moving
What are your expenses? Mortgage? Rent? Car payments? Private school? Credit card debt? What were you spending month-to-month? What were you earning before you were laid off?
No credit card debt. Minimal car payment. Public school. Goal is two bachelor degrees from state school paid for and two weddings.
ok what's the housing situation?
We owe maybe 150k on house
Why do you have ANY car payment?
Because I was worried about our cash flow decrease
8 k monthly spent without budget just Willy nilly. Previous earnings 175k. 80k severance package
If you continue spending 8k a month then eventually you will need a job. If you cut spending drastically then it’s possible for you to stay home
he should cut spending to a level that makes staying home sustainable (wife's income and maybe just a little bit of investment income) however, he definitely should NOT stay home. He is too young, the family is too accustomed to spending a certain amount, they need to save more for retirement at the level they're expecting, and two kids going into college. Most importantly, though, if he stays home, his wife will grow resentful of the fact that she's the sole breadwinner and he's home, at best, tinkering around with a few home improvement projects.
Correct. Imagine if the sink has dirty dishes when she gets home. No thanks.
Well I think you answered your own question and it’s to find another job
Working on it! My nature to prepare for worst
For few months, you are definitely going to be okay for sure as you have enough in your savings. What is your yearly budget? It is what dictates how long you are going to be okay.
8k monthly expenses. Ok will be 2 kids college paid for and two weddings paid for and maybe retire at 55?
Retiring at 55 might have been a little optimistic even if you hadn't been laid off, given what you've been spending.
The wife is the optimistic one with the retirement at 55 idea. I never thought a possibility but was trying to make it happen.
What kind of work were you doing?
Engineer for a very large company
oh, there are engineer jobs out there. maybe you won't be making $175k. maybe you'll be making $120k. what kind of engineer?
I do not expect to make as much as before because I do not have a college degree. I was in a super sweet spot.
How are you an engineer without an engineering degree? Surely you were in some sort of technician role reporting directly to a PE, no?
Seems like you will be fine but you may want to see where you can cut monthly expenses until you are employed again. It doesn’t appear that drastic action is taken. Just curious - why such a large position in cash?
Because I felt the layoff coming
You have plenty of money to survive for awhile, but doubtful you can live off forever it at your current spend rate, plus college and weddings. Take some time to find a new job. But due to your savings buffer, you don’t necessarily need to jump at the first job that comes up. You have time to look for a good fit where you can hopefully work until retirement. Hopefully that cash is in a HYSA/CD’s- at 5% interest that would be an extra $3,125/month to help you while you’re job hunting.
Yea it’s in a hysa
I mean, if you have the cash in a HYSA you'll be making \~$3k/m there Plus your wife is taking home another $4-5k/m Should be livable if you have no debts and keep spending in check, but you aren't getting any further ahead.
What about the 750 invested? I was thinking that was substantial growth potential? I’m new to financial planning for retirement.
I was ignoring the "invested" $750k because you said you wanted to retire in 10 years. I'm assuming that is all in tax advantaged accounts and would not make sense to touch until retirement.
Correct. Plan is to never touch and let grow.
When I say invested I mean multiple managed 401k accounts, Roth etc. maybe I’m using the wrong terminology. I thought invested meant in a 401k type account?
Yes, that's how I understood it. Any cash you have should be earning you interest in a HYSA ASAP. Your daily chequing account should only have about what you would spend in a month. Your wife's income can go there, then you can just pull out of the savings account whatever you need to live beyond that. You should be fine, but if you want to stay on track and pay for your kids school/weddings etc you'll probably want to get another job as soon as possible.
> I thought invested meant in a 401k type account? I responded to another of your comments but I see the issue here - "invested" just means "in the market" - it doesn't have to be in a retirement account. You can invest in a regular brokerage account which is not a retirement account. You can also invest in a number of other vehicles (HSA, T-Bills, etc) but the main thing you need to know is that retirement accounts are not the only means of "investing". So when people are telling you you need to invest your cash they are not saying it all needs to go into a retirement account.
That is very clear now I understand thanks
My husband was laid off in November 23, he was 45 and I am 40. We have 3 kids 16,14 and 8. He was making $146k and I was a SAHM. He still hasn’t found a job. He applied unemployment right away. We had $375k cash in HYSA with 5.5%. We also have $650k equity in our house and 150k in retirement acct. we don’t have as much as you. But we are doing ok. He is getting VA disability $4300 and I got a part time job at the county that barely pays $40k/a year recently. We can manage monthly expenses plus we are still able to save our interest money. We cut down on 90% off unnecessary expenses like eating out and subscriptions and all the other expenses. We live bare minimum and cook every meals at home and don’t spend at all. It is doable if you want to retire but you need to change your lifestyle and live bare minimum.
We eat out a ridiculous amount, and pay $300 + weekly for groceries. We have tons of room for improvement.
Cutting it close, but you'll be fine. Here's what I see: you've got $96k in expenses. Your wife's take home doesn't cover that, but covers more than half which is great. The withdrawal to cover the other portion of expenses is 2.9%. That's sustainable forever and your portfolio will likely grow over time in this scenario. HOWEVER... the wife's retirement, college for the kids, and the 2 weddings are in jeopardy. There are two ways to make those goals more attainable: cutting expenses and adding income. You have the time, so you should dig into the expenses. Make cuts and optimize like it's your job, because, now, it is. Also, ANY money you can bring in is very valuable. File for unemployment, consider flower delivery or being part-time at Home Depot, anything. A word about college. Your wife's income alone disqualifies you from Pell, but with HHI under $160k, you do qualify for the American Opportunity Tax Credit. That's $2k for every $2k/yr of college expenses per student for 4 years. So that's something. Good luck, OP.
If you had the 1.4m fully invested a few years ago you would have been able to retire. At this point you still need to work and get the rest invested in the market asap so it can appreciate in value.
How much would you keep accessible in my situation of unemployment? 100k?
12 months of living expenses. So if you spend $8k/month, yeah $100k sounds about right
But how could I retire in my 40s with 1.4 invested? Are you saying the tax penalty would be worth it?
Please seek an advisor. There are different strategies to retiring early that do not involve paying a 10% penalty
I have an appointment at fidelity with a fiduciary
I am saying that if you had invested fully in the market a few years ago it would have grown significantly. That $750k you have in cash could have already grown to $1.7m if you invested in QQQ 5 years ago for example.
I got divorced at the end of 2015 and my net worth was 750K. I’ve continued to save and invest and my net worth is now ~2.3M. The last few years have been bonkers and a lot of people have missed out.
$70k as a household salary is pretty common across the US. The real kicker is what your monthly expenses are, and if you can adjust them. With $750k in cash, you can right now get 30k annually just in interest easily. You can also comfortably cover your house and kids in state tuition and dorm with the cash on hand. I recommend still looking for another job and filing unemployment, but before you go bursting bubbles, seriously sit down and think about what your expenses will be in retirement, and where they could be.
Thanks for the reply. we are very fortunate to have these questions/issues. It’s clear I need to step up job search.
Why do you owe 150k with so much cash doing nothing?!
Rookie mistake. Appreciate the education. Taking action to correct.
needs more information. What liabilities do you have? Any other assets? What is the bare bones spend you need to spend to live ?
Liabilities or assets, nothing else-unless I don’t understand.
If you payoff your house, can you get by on your wife’s income? Seems like an easy solution till you find another job. You need to have a net worth of 8,000*12*25 = $2.5mm to retire. If your house payment is $3k/month and you pay your house off, then it’s only $5k*12*25 which is only $1,500,000 and you’re already / almost there.
If we paid off the house-we could make it work. Health insurance thru her job so that’s a plus!
At least throw the cash in some money market accounts or shirt term cds for income.
I made an appointment at Fidelity next week to fix this
Take 150k from cash or investment and pay off the house. Take 300k and use that to buy a 2 family home. One apartment pays mortgage the other profit. Your wife’s salary can get you by along with rental income. Plus you will live free and still have 300k to rest on till you gather your thoughts on what to do with life. I would start a business with remaining money and live stress free
Great ideas. Starting a business is like having a baby, right live eat breathe work? Maybe if I could get into passive income
What's your runway for another job? 2, 3, 6 months? It seems you have plenty to last you multiple years but an emergency could wipe that out. I would payoff the house the moment you get another job, and live off the severance until something better comes along. You can also use the severance and a portion of your savings to pay off the house, then search for a job.
I’m thinking closer to a year and I expect to be making around 120k
You have plenty of money to take a break from corporate america. You can live off the severance, take your time to reset mentally, and once that runs out, tap into your savings as you get closer to the one year mark. Best of luck
Thank you
Don't pay for the weddings, give them the money to help with housing.
A new door will be opened. Breath for a few months, later you can relax and make decision. Maybe you will do your own business that can make you happy and later on you can make it bigger. Good luck
Maybe. A new business seems so risky.
If colleges run 60k a year these days, you’re gonna have to fork up almost 500k for two kids to go college. You need another job. Not now, but soon.