Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
This interview took place in November.
My questions are in bold italics and his responses follow in black.
Let’s get started…
OVERVIEW
How old are you and your wife and how long married?
53 / 51 years old and we have been married for 13 years.
Do you have kids / family?
Daughter who is 23 years old from a previous marriage.
What area of the country do you live in (and urban or rural)?
Major city in Midwest – urban
What is your current net worth?
$3.9M
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
- IRA’s: $2,116,000 or 54% of our net worth
- Brokerage: $974,000 or 25%
- Company Stock: $252,000 or 6%
- Cash: $162,000 or 4%
- House (paid off): $405,000 or 10%
Total Net Worth: $3,909,000
We are fortunate not to have any debt.
EARN
What is your job?
We just started our early retirement early this year.
I worked in the Medical Device industry for 30 years as an Executive for a few Fortune 500 companies running the commercial operations.
My wife enjoyed the Social Service industry for over 20 years.
What is your annual income?
Our pre-retirement income was $393,000 (mine $313K and wife $80k).
Our post-retirement income is $132,000.
Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?
I grew up in a low-income single parent household with my mom and sister in a townhouse. The first house that I lived in was the one that I bought when I was 25 years old.
I started buying my own clothes at age 14 and paid my own way through college. Never thought twice about not having money growing up as it was just a way of life. I always felt the love from family and had the basics covered like food, shelter and education.
At age 14, I started working in a restaurant for $3.35 / hour and worked my way up the ladder over 7 years as a dishwasher, busboy, bar back and waiter. During this period, I learned work ethic, teamwork and critical thinking skill sets.
My first job out of college was in the Consumer Products industry working for a Fortune 500 company. The job required working 6 days a week most weeks and 10-12 hour days. I also had to be flexible as I would travel at a moment’s notice that would be for 1-2 overnights per week. I worked there for three years and loved the job / company.
After that, I transitioned to the Medical Device industry where I worked for the next 30 years for the a few Fortune 500 companies. The passion and belief of helping patients was very meaningful to me.
My annual income started at $28,000 out of college and my high was at $597,000.
What tips do you have for others who want to grow their career-related income?
You should pick a job and career you love. My mother gave me an article my senior year of college that stated 17 out of 20 people hate their job and I thought that was sad. Remember that you spend more time at work than you do with loved ones at your home so make your career count.
Be open to relocation during your 20’s and 30’s. I moved around the Midwest to six different locations: Milwaukee, St. Louis, Denver, Chicago (twice) and Minneapolis. These relocations were for job promotions and new opportunities.
Ask yourself each year, “what value do you bring“ to your organization. If you struggle to answer that question, then perhaps you should not be paid any more than what you are now. If you are worth more, then prove it to you manager and others throughout the organization. There are a lot of opportunities waiting for people that prove their value and have the ambition to go after their dreams. Expect the best. Attitude is everything.
Volunteer for projects, at work and in your community, so you can build new skills, learn about leadership, meet more people, and create your brand as a results-oriented person.
I am inspired by one of my favorite Winston Churchill quotes “Success is not final. Failure is not fatal. It is the courage to continue that counts.”
As a leader of a large corporation, I was always amazed with how many people had low Emotional Intelligence. This is a critical skill set that you must learn and perfect if you are looking for leadership roles and upward mobility.
Consider going back to graduate school to get your Master of Business Administration while working in your late 20’s. Not only will this help you create an edge over others in the workplace, but you will truly benefit from seeing all aspects of the organization on how they work together. This advanced degree helped my career both financially and non-financially by building my skills to work cross functionally with a variety of departments.
Finally, my mother taught me that a hard work ethic would go a long way in life, and she was right. I am baffled with some people that think a job task may be under their level.
What is your work-life balance look like?
This has been a significant challenge my entire life while working. Especially, in my 20’s and 30’s as I worked 60 hours a week and really enjoyed it as I was rewarded with upward mobility.
I traveled 2-3 nights a week in my 30’s and 40’s so that was a sacrifice not being around my family.
Now as an early retiree not working, I do not have that work-life challenge. My wife and I are active in our health club working out at least 4 days or more a week, we hike in state parks or forest preservice at least once a week.
I started taking college classes to learn more variety of subjects and enjoy new hobbies.
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
No, the only income came from our jobs before we retired and now through our investments in retirement.
SAVE
What is your annual spending?
Our annual spending is $132,000 / year.
What are the main categories (expenses) this spending breaks into?
Here are our main annual expenses:
- $60,000 – Groceries, dining out, clothes, cell phone, health club, internet & cash
- $31,000 – Insurance: health, vision, dental, auto, home, umbrella, etc.
- $24,000 – Travel both international and domestic
- $12,000 – Home maintenance, property taxes & HOA fee’s
- $2,400 – Utilities
Do you have a budget? If so, how do you implement it?
Yes, we have budget and have tracked it the last 25 years. It has evolved over this period and now we are tracking the above categories.
I manage it through a simple spreadsheet and update it each month. Every year, I add a new tab to the spreadsheet. I must admit, it has been fun to look back over the last 25 years to see what our expenses & income have been and how they have changed over time.
This approach also helped us when we started doing our annual comprehensive financial plan with our financial planner starting 10 years ago. It was very easy to pull our expense data from our budget and forecast what it would be when we are retired. Doing both exercises, gave us more confidence that we could truly retire at age 53 years old.
What percentage of your gross income do you save and how has that changed over time?
In pre-retirement we were saving 24% of our gross income through our 401k’s, Employee Stock Purchase Plan (ESPP), non-deductible IRA’s and general savings account.
What is your best tip for saving money?
Live a lifestyle that is below your income so you can automatically save through payroll contributions and invest for your future.
Since I grew up in low income household, I was used to never having money.
My favorite Warren Buffett quote is “Investing is simple, but not easy.” This is so true!
What is your favorite thing to spend money on/your secret splurge?
Dining out and international travel are the top two ways we like to enjoy life.
Living in a large metropolitan and urban area, we have a lot of fantastic restaurants, so we take advantage of them.
We have been blessed to spend a lot of time overseas taking in new experiences, different cultures and meeting people all over the world. This makes for a great learning experience and fun way to live life.
INVEST
What is your investment philosophy/plan?
Maximize all resources: 401k, ESPP, government programs like non-deductible IRA’s, 529 Plans and side savings.
Time value of money is a wonderful concept that taught me the earlier you start saving for your future, the better off your investments will be.
Dollar cost average investing so you save the same amount every two weeks no matter if the market is up, down, or flat.
Appropriate Asset Allocation for where you are at in life. We are in a growth portfolio model to enjoy higher rates of return. Our current asset allocation model is structured at US Equity 61%, International Equity 13%, Fixed Income / Bonds 22% and Cash 5%. We believe that the reward / risk is worth it since we have 40 plus years living in retirement. Sit back and watch your investments grow!
What has been your best investment?
My wife without a doubt has been my best investment. I am blessed to have met her and married her. She keeps me grounded. My daughter turned out to be amazing and started her career in Texas. I am very proud and lucky to have this family.
My education from undergraduate and graduate school paid dividends for me along with my early work experiences in high school and college. During my career, I was fortunate to be paid a lucrative total compensation package that grew each time I took on more responsibility.
Financially speaking, participating in my Employee Stock Purchase Plan (ESPP) because you buy in at 15% discount regardless if it is trending up, down or even. Where else can you be guaranteed return on investments of 15 percent!
Getting to a level of the organization where they supplement your compensation with incentive stock options in addition to your salary and bonuses. It is amazing how these can help you pay off your house mortgage and be another source to save for retirement.
What has been your worst investment?
In my 20’s, I tried “playing the market” with stock call and put options and lost over $30,000 in the market.
I remember going to a Stock Options Educational Forum and the first slide stated “80% of investors lose money” as their disclaimer. I remember reading that and saying I am a winner and not a loser so nothing to worry about….oh boy was I wrong, it was a great learning moment for me in life.
What has been your overall return?
We have averaged 7% return on investment.
How often do you monitor/review your portfolio?
We track each of our investments every month.
We monitor our expenses monthly.
We have a quarterly meeting with our Certified Financial Planner to review our portfolio to determine any course corrections in our asset allocation model and / or re-balance the portfolio.
We complete a compressive financial plan each year to make sure we are on course.
NET WORTH
How did you accumulate your net worth?
I started in my 20’s and continued to increase the dollars each year in our investments.
I read constantly on how to grow my career with earnings, learn new ways to save and be aggressive with our investments.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save, or Invest) and why would you say it is tops?
We are blessed to have great high paying jobs and good mentors to save.
Investing in a diversified growth portfolio is my strength.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
I bought a luxury BMW car thinking I needed it for my social status in my life and it would make we feel great. Wrong, I just was spending money on an expensive depreciated asset.
We drive Honda and Mazda cars and are happy.
Do not feel you need to buy a new car every 4 years, instead we keep our cars until you need a new one, which could be 10 – 15 years.
Do not drink the Kool-Aid of get rich quick with buying calls and put stock options. That was a very valuable lesson I learned when I lost $30,000 in my 20’s.
What are you currently doing to maintain/grow your net worth?
I read daily on the economy, companies, international news, and all types of personal financial planning topics.
We regularly monitor our investments and expenses.
We make minor changes as needed to our portfolio through asset allocation modeling and rebalance.
Do you have a target net worth you are trying to attain?
No. We anticipate 40 years of living in retirements, so we have a “growth” asset allocation model.
Using the Monte Carlo simulation for our personal finance plan model, our CFP’s say we are good shape based on the outcome data using the portfolio models we use.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I was 35 years old when I had my first million.
No, we have not had any significant behavior shifts since then. We have stayed the course for saving and investing the last 20 years.
What money mistakes have you made along the way that others can learn from?
When I was 30, I used a “stockbroker” instead of a Certified Financial Planner (CFP) to manage our money. He charged a ridiculous high fee of 1.5% for assets under management compared to the 0.4% we pay now.
All those annual costs we paid for the 5 years we were with him, were costly.
What advice do you have for ESI Money readers on how to become wealthy?
Be sure to read the book The Millionaire Next Door
.
Live life to be enjoyable to yourself, your family, and friends.
Pick a job and industry that you love, not just like.
Excel at your job so the promotions and money will follow you. If you pursue money first, you will never be happy.
Find 1-2 successful family member or friends, preferably the ones that started an earlier retirement, that can mentor you on personal financial planning.
We use two different levels of service in a large financial investment company. First, we use “robo advisor” accounts for 2/3 of our money that charges us 0.3% and secondly, we use “private client relationship” accounts for 1/3 of our remaining money that charges us 0.5%. This hybrid approach has worked well for us the last five years with a blended expense of 0.4% between the two types of service we use. This helps us manage our expenses better without hindering our growth in our portfolio.
Take advantage of the 529 Plans for your children’s college education. The day my daughter was born, I opened a 529 account and put in $5,000 plus started making $400 monthly contributions to it. The plan was to continue until she started college, however the growth was so good that we stopped funding it when she was a sophomore in high school.
We paid 80% of her college and she paid 20% through scholarships and loans. The thought process was, if she has skin in the game, then she will get up for those 8:00 AM college classes instead of sleeping in and be motivated to graduate college.
Read lots of books and web sites on Personal Financial Planning.
Use a reputable Certified Financial Planner (CFP), not a financial consultant or advisor that anyone can call themselves. A CFP is a boarded role and has fiduciary responsibility to you as client. This reduces or eliminates any conflict of interest.
We prefer using a large public national financial service investment company that has different levels of service during our journey that could match our needs instead of working with a small private wealth management firm to help us with financial planning.
FUTURE
What are your plans regarding lifestyle?
We downsized our $600,000 house to a smaller $400,000 house a year before our early retirement.
We remain active by working out at our health club regularly and continue to educate ourselves on a wide variety of subjects through college courses.
What are your retirement plans?
We plan on doing a lot of international travel in retirement.
We started doing international travel when we were in our 40’s and have never looked back. We have been to many places around the globe including: Costa Rica, St. Kitts, Ecuador, Galapagos Island, Philippines, Montreal, Vancouver, Dubai, Abu Dhabi, Oman, Netherland, Thailand, London, Mexico City, Vietnam, Cambodia, and Singapore.
Our next adventure is Panama and many others in our bucket list for years to come.
Take college courses to continue learning variety of subjects.
Working out at our health club and hiking new places throughout our city and state.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
We have no major concerns about early retirement.
Health Care insurance is a minor worry. We budgeted $2,000 / month and that seems more than enough for our needs.
On the non-financial side, people asked me the first six months of early retirement if I was bored and was ready to go back to work. I always laughed when someone would say that to me. The reality of it is we are both busy doing the things that make us happy, active, and productive. We are blessed with our lives and have no plans to going back to work.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
I was fortunate to have learned at a young age of 25 from a family friend and my father in law.
These two individuals taught me the fundamental basics of saving and investing that included all types of equity, fixed income, importance of asset allocation and the dollar cost average.
Also, I really enjoy reading from many different sources on personal financial planning and the importance of it. I still consider myself a lifelong student of finance.
Who inspired you to excel in life? Who are your heroes?
My wife is amazing and a great life partner. She encourages me to be the best I could be and never settle. She has also been great at work / life balance as I struggled with this concept through my professional career. She always had a great perspective on life like enjoy new experiences, trying new food, different cultures and having strong family values. Again, I was lucky to meet her and marry her.
I was fortunate to have a Big Brother (from Big Brothers Big Sisters) as a child and maintained my friendship into adulthood for life in general.
Mentors were critical to my professional career. I was lucky to have met and worked with several influential people during different periods of my life that helped me grow my successful career. They never dodged my many, many questions on advice and getting their opinions.
For financial matters, my father in law who spent many Saturday mornings walking me through the basics of personal finance, stock, bonds, investing, etc.
Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?
The Millionaire Next Door – This is the best book ever on personal financial planning and how to live your life. This is one of the most influential books of my life.
Charles Schwab’s Guide to Financial Independence
– This teaches how to use and leverage all company and government resources available for saving for your retirement.
Work Optional – This book helps you retire early in a non-penny pinching way and keep your head level in life.
Keys to a Successful Retirement
– Focuses on the non-financial goals like staying happy, active, and productive in your retired years.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Here are our annual donations that are 5% of our gross income:
- $2,000 – We tithe to our church.
- $3,000 – We donate to a non-profit professional mentoring national organization.
- $1,000 – Instead of exchanging Christmas gifts each year for my wife and I, we research a different non-profit organization every year that speaks to us on their needs and how we can support their mission by donating to it for that particular year. We started this 10 years ago and is one of the best things we have done as a married couple. Feels terrific.
Regarding our time, I am mentoring a 15-year boy now and find it very meaningful.
I also serve as an executive board member (not paid) to a large national non-profit children’s organization that is very rewarding.
I am an alumni of a national college fraternity and just joined a chapter advisor role of a college near us. I am looking forward to mentor some young men.
Finally, we have a donor advisor fund that we started through our financial service investment company that we use to help us make our donations. This has helped us reduce our taxes and donate more resources to the non-profit organizations. This is a win / win situation for all parties.
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
We completed our estate planning that includes our will and other important documents.
Yes, we plan to distribute any leftover resources when we are both gone equally to family members and non-profit organizations.
My final thoughts to the ESI Millionaire readers are to believe in yourself, push your limits, experience life, conquer your goals and be happy. People think early retirement can happen based on the financial success only and I strongly disagree with that premise. An author once said, while your financial wealth is an important aspect in life, lets also remember that your time / freedom and physician health is even more important to have a happy, active and productive retirement.
Best of luck and enjoy your life journey!
Very nice summary and congratulations on your success. Its clear that you are very deliberate and a planner — right down to the spreadsheet with 25 years of expenses. You look very well setup for many years of travel. I also appreciate your giveback of time to mentor others and your charitable giving and DAF.
My (somewhat personal) question relates to how your daughter/previous relationship affected your career path, ability to take new positions, and financial growth. How did you navigate this, and what advice might you give?
Nicely done!
Thanks for your kind words. Blended families are always a little more challenging. I had a good working relationship with my daughters mother and was able to allow the career moves. Most of the relocation came before my daughter was born and would coach others to not be geography limited during your 20’s and early 30’s.
MI235 – Thank you very much for this interview. The parallels to my wife’s and my situation are incredible and you’ve added fuel to our eternal questions of 1) when to retire and 2) how much is enough?
Our finances are nearly identical:
– IRA’s: Yours $2,116K Ours $1,899K
– Brokerage: Yours $974K, Ours $1,068K
– Company Stock: Your $252K, Ours $0
– Cash: Yours $162K, Ours $47K
– House (paid off): Yours $405K, Ours $780K
– Total: Yours $3,909K, Ours $3,794K
(I’m also in line for an inheritance of >$600K, but I don’t count that.)
We also share many of the same passions: travel (44 states and 38 countries so far), hiking, staying healthy, and continuing to learn.
And yet, I’m 58 and still grinding away, with my $400K salary + bonus the ‘golden handcuffs’ I haven’t managed to talk myself out of yet (my wife is already retired, after 35 years in print media). I guess I keep thinking, “health insurance is going to be expensive and the more money to travel the better”.
What convinced you to finally pull the plug?
Thanks Russ for your kind words. When I completed this interview it was in the middle of 2020 so the market went up even more. My current net worth is now $4.480M.
Only you know when to retire and how much is enough. If you have documented your spending plan (budget) the last few years, you will have confidence on answering those questions. If you have not tracked your spending for the last several years, I suggest you do it.
Also, as mentioned in my interview, a Certified Financial Planner (CFP) can help you with a comprehensive financial plan to figure out your portfolio vs. spending plan. The last 5 years we did this made it white / black for us.
In terms of your question “What convinced you to finally pull the plug?” My wife and I both really liked our jobs and had terrific careers. We were not leaving anything that we did not like. For us our personal goals (International travel, volunteering and helping non-profit children’s organization) were outweighing our professional goals. We have some much we want to learn, enjoy and experience in our lifetime and work was getting in our way or slowing us down.
We planned on this work exit and transition to early retirement over 4 years.
MI235, great interview. I am MI-21 and RI-23 and my story is also somewhat similar to yours. As to Russ’s question, I agree with MI235, when you have other personal goals and interests that you’d like to pursue, the point at which these pull at you harder than your career is when you pull the plug. I retired a 18 months ago at 58. At this age I really feel the clock ticking. Russ, as advised you need to track those expenses and get your AA retirement ready. Like MI235 I planned my exit for about 4 years but you don’t need to take that much time. You can easily ID your expenses by looking at your last few years tax returns or bank statements and figure it out. I do agree with MI235 that only you can know when it’s time and it was certainly a struggle for me to finally exit. But I have not regretted it for one second. Retirement is pretty sweet!
Thank you for sharing your thoughts here!
I think you made such a good point that emotional intelligence is a critical skill set to learn if you want to move up the career ladder. I wish I learned this from an earlier age – that EQ is likely more important than IQ. Better late than never.
Hiring a CFP is very important since they are fiduciaries and often provide in-depth and comprehensive financial planning services. Unfortunately, if you don’t know what you’re looking for, then it’s easy to fall into the trap of hiring a stock broker and not comparing the fees that you are charged with other options.
Thanks for sharing your journey.
Fiona
Millennial Money Woman – thanks for your kind words.
Thanks for the great interview. Great job on your planning.
Did you two utilize the substantially equal periodic payment rule to utilize your IRA accounts since you are still in your early 50s?
“ Substantially Equal Periodic Payment, or SEPP, is a method of distributing funds from an IRA or other qualified retirement plans prior to the age of 59½ that avoids incurring IRS penalties for the withdrawals.”
I’m 58 and still working, so my wife and I are not taking any distributions from our IRAs yet.
John – We are not pulling money from our IRA accounts as of yet. We are pulling from the Brokerage taxable accounts so no need for SEPP at this time. Good luck in your future!
great post, thanks for sharing your details. For once, it’s nice to see someone on here who has spending just like mine ! I also love to eat out and have a passion for travel. Inspiring to see it’s possible to continue this in retirement.
One question about your income in retirement. Is that net or gross ? How is the income generated ? You say you have a growth portfolio so i’m curious what types of investments are giving you the income to enjoy your retirement. It would be helpful as i think about making my own plan – thankyou !
Sam, thanks for the kind words. Yes, living life to the fullest with all the interests we share in common are great to participate in. The income we reported on is net income. We will pay out taxes seperately. Currntely, my asset allocation is similiar to what I had at this time of interview: 75% equity (61% US & 14% International), 20% bonds and 5% is cash. Good luck!
Congratulations on your successful transition to early retirement. I, too, was in the healthcare industry and would wholeheartedly agree that picking an industry you love is critical to a successful life both personally and professionally. Well done. Would love to connect sometime and compare notes on your retirement so far as my wife and I have very similar interests as you and yours. Feel free to email me at [email protected]. I’ve had the pleasure of connecting with others through this great blog who joined this great club of early retirement. Cheers to you and your family.
Retiree Interview #19
Early retiree # 19 – Yes, the medical device industry has been a great career for me and I have loved every minute of the technology and helping others get better. I will reach out to you later. Cheers to you and your family!
I suppose your post was written last Fall and your net worth has increased significantly since then. I’m wondering if and how that has altered your plans if any?
Hi Amanda, Yes, our net worth grew from $3.9M (early fall 2020) to $4.48M (April 2021) since this interview was written. We have not really changed anything because of this increase. Over the years, I have seen the market rise significant or drop significant and regardless of what the market does, I don’t worry about it and do not change our course of action. I have always taken a long term approach on life.
Great story congrats! I really need to move to a lower cost of living state. My property taxes are insane and looking at your numbers makes me very jealous.
I am so glad to see that Big Brothers and Big Sisters had a big influence on your life! Its a very special program.
Lastly, I love how much you love your wife! Awesome.
Hi gtmoney, thanks for your nice words. We planned for our downsizing a year before we retired by moving to a smaller home that had lower property taxes. Thanks for your comments on BBBS as I am product of this terrific organization as a Little when I was a child and felt strong to continue with our support in many different ways as an adult: Donor, Board Member, Big and have plans in our estate plan. I am blessed to have met and married my wife and feel lucky to have her as my life partner.
MI235,
Can you estimate your current annual tax expenses (income, capital gain taxes, property, etc)? That seems to be a missing major expense category.
Regarding options, I started looking into this recently and concluded that the only worthwhile use of options for me is selling covered calls when I’m pretty much ready to sell those positions anyways. I think the only clear winners in options trading are the market makers (just like the house is the only clear winner in a casio).
Phillip – You are right about calls / puts options and why it was easy for me to share that story in my 20’s as being my biggest mistake and lesson learned. In terms of taxes, yes I should have listed them out separately like you listed them. In my first year of early retirement, this has been fun to look at for tax planning. For example, we estimate very little on income tax based on where we are drawing down (cash for the first 2-3 years) and because of that we are looking to converts some IRA’s to Roth IRA’s over this period to take advantage of low tax brackets. Our long-term capital gains will be minimum for the next 3 years. The property taxes I have listed out in my expense category. Thanks for bringing up this important topic and your comments on these items. Best of luck in your future!
Thank you, M235, for such an interesting interview. I continue to be inspired by the number of millionaire interviews in which people describe coming from very humble beginnings financially speaking. To know that you and your wife had no side hustles, just your “day” jobs is always good to see as my husband and I have no side hustles either. Thank you for sharing the reality of the hard work, sacrifices, work travel, multiple relocations and long hours that went into you achieving success in retirement. And, I aspire to get to the gym as often as you and your wife do!
One question: you said that your all in health care costs are about $2000 per month. May I ask for some more details? I want to retire soon but am worried about continuing to provide solid health care for my husband and myself.
M228 – Thanks for your kind words. In regards to health care insurance costs, we researched private insurance through insurance brokers and then also looking at Affordable Care Act (Obama care) on the open market government web site. The numbers were below our $2,000 that we were budgeting for. Good luck!
All – Thank you all for your kind words and comments. I tried replying to each person individual but was unable, so I am sending this under the general comments section.
M- Yes, blended families can be more challenging when balancing a career or personal goals. I have a good working relationship with my daughters mother and we work what is best for our daughter. Most of my relocations were before my daughter was born. My coaching to people in their 20’s and early 30’s is to not be geography limited and open yourself to new opportunities with relocations. It is not easy but can be done with proper planning and execution. Best of luck!
Russ – I suggest you look back at your last 3-4 years of expenses (budget) to see what your current spending rate is and then make an appointment with a reputable Certified Financial Planner (CFP) to run a compressive finical plan. When I did this interview, it was late summer and my net worth has grown to $4.48M. No one will be able to answer you, except you when it comes to when and how to retire. Your question to me on “what convinced us to finally pull the plug” – it was easy for us. Our personal goals were outweighing our professional goals. We have some many personal goals we want to experience, learn and help others that our careers were getting in the way. We also started the exit strategy 4 years prior to announcing it to our places of employment and our families. Wish you the best in your journey!
Millennial Money Woman – thanks for your kind words.
John – We are not pulling money from our IRA accounts as of yet. We are pulling from the Brokerage taxable accounts so no need for SEPP at this time. Good luck in your future!
Early retiree # 19 – Yes, the medical device industry has been a great career for me and I have loved every minute of the technology and helping others get better. I will reach out to you later. Cheers to you and your family!
Phillip – You are right about calls / puts options and why it was easy for me to share that story in my 20’s as being my biggest mistake and lesson learned. In terms of taxes, yes I should have listed them out separately like you listed them. In my first year of early retirement, this has been fun to look at for tax planning. For example, we estimate very little on income tax based on where we are drawing down (cash for the first 2-3 years) and because of that we are looking to converts some IRA’s to Roth IRA’s over this period to take advantage of low tax brackets. Our long-term capital gains will be minimum for the next 3 years. The property taxes I have listed out in my expense category. Thanks for bringing up this important topic and your comments on these items. Best of luck in your future!
Hi MI-235 – Thanks for your reply. I’m been tracking our expenses in Quicken for nearly 20 years and have had an annually updated comprehensive financial plan via a CFP for the last several years. We’re already to the point where our savings (and eventual Social Security payments) will cover our needs (Monte Carlo analysis >90% probability of success) if we “retire in place” (same city, same or ‘downsized house’). My question was more about the 2nd part of your answer – “personal goals outweighing professional goals”. This is where we need to spend more time thinking. For us, it comes down to clarifying our dreams. We lived in Australia for 6 years and absolutely loved it. I’d like to think we still have at least one more such adventure in our future. So, the key question for us is how much do we want to have to fund our dreams, beyond just funding our needs? Time will tell. Until the world gets back to some semblance of normal post-Covid, I’ll keep working and putting more grain in the silo. (My wife retired 3 tears ago and now dedicates all of her time to charity work.) We’re currently saving ~60% of my take-home pay. Assuming ‘normal’ market performance, we should hit $5m net worth before the end of 2022. I suspect seeing that first digit might finally convince me we can fund our dreams as well as our needs.
Best of luck to you and thanks for the chat!
Russ, thanks for clarifying your challenge on when to retire. My dad used to say, these are good problems to have….ha! You have several good options it sounds like. What I am hearing from you is it sounds like the financial size of the equation with a FP showing 90+% in MC simulations, the answer is yes. It sounds more like a non-financial question you are wrestling with on the timing. One of the books that helped me with the non-financial side of retiring was Keys to a Successful Retirement by Fritz Gibert that focuses on the non-financial goals like staying happy, active, and productive in your retired years. It may help you this process on determining if the timing is right for you plus ask you more questions you can ponder yourself. Life is a great journey so best of luck as you go down different paths. Embrace and enjoy every minute of it!
Thanks for the book reco. I have no doubt I’ll be very happy, active, and productive, in retirement – IF – I’m confident in our finances. Of course, we can definitely cut back on our spending if our investments don’t perform as expected/planned. For me it’s just, to be blunt about it, having the ‘balls’ to pull the plug. I have never not worked and I have never not fretted about whether or not we’re saving enough/have enough saved.
I think crossing the line of my 60th BDay may well be the kick in the pants I need. We’ll see in 18 months!
LOL, Russ, we’re about same age bracket and I am also in the “one more year” cycle trying to figure out whether to do one more next jump in role or hang up my cape soon while I’m still relatively young and spry. There is this issue of enjoying what I do, but then what is the point of doing it over and over each day.
I’m curious as to what your retirement spending budget looks like as I think thru mine. I keep moving the NW goal post each time I hit a new mark.
MMiguel –
I enjoy what I do, too, although Coivd has put a serious dent in that enjoyment. And, I too am trying to decide if I ask my firm for “one more role” (perhaps overseas again?).
My financial modelling target is an income of $10K/month after taxes. That’s much more than what we need to live on – although an overseas move could change that – and thus includes ‘fun money’ for overseas travel. And, going back to MI235 – my wife is a major foodie, so we need some extra $ for a really nice restaurant every so often.
So long as the markets behave (not soar, just average) from here on out, I can see a pathway to $5KM net worth by my 60th BDay in Sep 2022 (including an inheritance that will be around $600K). We’ll see then where we are and how much I’m enjoying my job then.
Sounds to me like you are more than fully-funded for retirement, though I think earlier you acknowledged that its more a matter of being mentally prepared than financially prepared. I’m suffering from pretty much the same thing – I keep looking at new career opportunities and than yell at myself… “Dude you’re gonna be senior citizen soon, get a life already!” I just don’t have the kind of energy (or maybe it was panic) I used to have. I know I’m getting close to that threshold where the benefits of a real job are just so not worth it anymore. Here’s to us both reaching some positive and meaningful answers about life over the next 12 months.
MMiguel – Kindred spirits indeed! I, too, keep looking at new career opportunities – currently other ex-pat opportunities within my current firm, since my wife and I so loved our 6-year Australian adventure. I also wonder if a ‘retirement job’ could be in my future – maybe something with one of my favorite non-profits (World Vision, The Nature Conservancy, …)? One good thing about my career over the last 10 years is that it has been a great source of international adventures. I want those to continue well into retirement, perhaps through ‘work’, but definitely through leisure, and definitely not as intensely as in my current career. I, too, don’t have the same energy and financial urgency I once did.
Indeed, here’s to us both reaching some positive and meaningful answers in the months to come!
M228 – Thanks for your kind words. We have looked at both private health care and the exchange (Obama) health care plans for our research. We have seen in our area of the country $2,000 / month will be more than enough for us at this point. Best of luck to you and your husband.
Hello, maybe I missed the answer to this question but what mix are the investments as you mentioned growth? Are they 80/20, 70/30 etc
Very interesting interview.
Thanks John for your kind words. Our asset allocation is currently at 75% equity, 20% bonds and 5% cash. Best of luck to you and your life your journey.
When it comes to buying a car this is key:
“Do not feel you need to buy a new car every 4 years, instead we keep our cars until you need a new one, which could be 10 – 15 years.”
When you buy your first car, pay it off in five years but drive it for ten. On the back five when your car payment is gone, keep making the same payment to your savings account and bam – you can pay cash for a new car every ten years!
Success Triangles, good advice. Thanks for commenting.
MI-235,
Congrats on your FAT FIRE. Our pictures have a few things in common: A long-term, high-income, corporate career, and low-income beginnings. Also, our investment portfolios are similar in size and allocation.
Where we depart is that I’m not yet retired though a bit older than you. I also own a significant dollar amount of real estate (and a hefty chunk of mortgage debt to go with it). Planning to sell the extraneous r.e. when I retire, though the capital gains hit will be painful.
I sometimes wonder if I should have retired in my early 50’s like you, but no point in wondering now – I wasn’t emotionally ready. Nowadays, thinking of pulling the trigger sooner rather than later… like any day now.
One of the big challenges is simply getting comfortable with the expense side of the equation, so I really appreciate the info you provided. I’m planning to retire in a high-cost semi-rural part of the Northeast (high cost because its a popular second home area within driving distance of a very large metro area.) I also own a city home to be close to work, but would sell or lease-out that property in retirement as part of simplifying lifestyle and finances.
My retirement budget after “downsizing” to only one house is ~$200K (not including any income tax expense), which is on the higher side compared to what I mostly see on ESI. So, I’m always wondering if I’m over-estimating. Possibly one area I’m high on is housing… my property taxes are ~$10K and I have large grounds and pool that I’m not gonna maintain myself (so another $10K right there). I’m also in a part of the country that gets cold winters, so heating can be high cost… all in all I budget about $50K for housing-related, including the prop tax, insurance, utilities, internet, housekeeper, etc. Then there is cars (fully paid for)… budgeted about $10K for insurance and maintenance – seems high right?
So that leaves food and health insurance, and then discretionary stuff like travel and entertainment. It’s this latter piece that vexes me. Any further detail you can provide on food, eating out, and entertainment would be appreciated. This is obviously dependent on individual tastes/preferences – we’re not foodies but do tend to go for organic. Working from home during the pandemic I’d say we spend about $400/mo on groceries ($21K/yr). No eating out last 12 months. And beauty of working from home is not much need for new clothes or dry-cleaning, much like retirement.
What else am I missing?
Thx
Should add that I too budget about $25K for travel. Also about $25K of health insurance ($10K after reach Medicare age for medigap) for wife and I.
MMiguel – thanks for your complements and nice words. You bring up some interesting points on how people live their lives. There is no wrong answer with your situation. For us, we have always lived in a smaller and more affordable house than our budget would allow. After saving for our future, we decided that we wanted to still have money for international travel, membership at a nice health club and dining out to top rated restaurants. We live a major city in the Midwest that has some of the nicest restaurants in the US and world. I am embarrassed to tell how much we spend on fine dining. These three line items are higher than most of the ESI readers I have noticed. With that said, we have friends that decided to do the opposite of us and live in a nicer homes and / or have vacation homes, like you described you are doing. I don’t disagree with you as it is a matter of choices and personal options.
I agree with you that before you retire, you need to be confident and comfortable with your spending plan (budget). Since we tracked this over 2 decades, we knew what we could do comfortable in retirement. Also, we decided to downsize to a smaller home that was half the size of our last home and that helped lower the property taxes. Our HOA fee’s are the same at $425 / month but the building has more security and nicer amentias. You sound like you have a good handle on your personal finances. You asked about what other line items are you missing to determine your total spend. We have a line item for education and health club that you may want to consider in retirement. I am taking non-credit college courses (inexpensive) during covid to keep learning before we start to travel again. We are avid tennis players and play 12 months out of the year at our club.
It sounds like you have majority of your big expenses identified. The only suggestion I would encourage for you would be to get a true independent assessment from a Certified Financial Planer (CFP) and run a comprehensive financial plan using your spending plan & current portfolio to see what is feasible for retirement. Finally, once you are good on the financial side be sure you are also good on the non-financial side of the equation. There are some terrific books to help you through this process as sometimes this is a forgotten part of early retirement. I am sure you will make the right decision. Good luck!
Good job building a healthy nest egg.
Medical devices. Knees, pacemakers, stents? Probably a variety over your career.
How much are you planning to draw from your accounts annually? I assume it will be less than 4% given you retired 15 years younger than your full retirement age of 66 or 67. So hopefully your CFP has set you up for your assets to last about 45 years rather than the traditional 30 expected with the 4% rule.
Based on your interview (I know you said you have a few hundred thousand $ more now, 2020 what a year!), your liquid/investment assets are about $3.5M. 4% rule allows for $40K in withdrawals (plus inflation adjustments)/$1M, so you have about $140K/year based on that. $105K based on 3% withdrawal. You’re spending $132K/year, but remember you will pay income taxes (likely going up) upon withdrawal from retirement accounts. Hopefully social security (once available) will fill the gap. International travel is pricey if you want to step it up, so you may need to cut back on some spending elsewhere. Perhaps the eating out regularly and clothing. Just an observation.
You may benefit from a lower stress job preferably with healthcare benefits to help or some consulting/gig/part time work to ensure the longevity of your retirement. It’s not easy to fully retire early. Moving to a lower COLA can also help – just stay close enough to those fine restaurants for a more occasional treat. Home cooked meals are healthier anyway.
I’d consider increasing your cash reserves/bonds to minimize SORR, given we’re probably reasonably close to a market peak. Have a plan for a 30-50+% market correction in prolonged recession. This bull run may continue a few more years, but I’m not holding my breath given recent excesses like GameStop, digital currency, SPACs, etc. US government is also poised to cut back on economic support and the Fed on interest rate accommodation in the mid-term future. On the other hand US households have more cash and less debt by historical measures. Who knows? It’s a matter of risk appetite. Without further income coming in, I think sticking with conservative investments is best in retirement also given you appear to be right around 1x your FI number.
I’m five years behind you, but for some reason the thought of retirement scares me (non-financial). I’m just not as courageous. You know of any docs voluntarily retiring early? Do a retirement interview in a year or two and let us know how it’s going.
Enjoy the fruits of your success and the newly found free time!
MI-119, congratulations on your success. Thanks for your kinds words and yes medical devices has been a terrific career to help so many patients in my lifetime. Thanks for passing along your opinion and ideas as it is always great to hear what other ESI readers are doing out there.
You asked some interesting and good questions. I have never been a fan of the 4% rule, especially for people that are doing an early retirement. If you or others want to do it, that is fine and I am sure it works for many people. We looked at a specific number to withdraw each year indexed to inflation. Currently it is at 2.95% and we are comfortable and confident that we will be in good shape financially in retirement.
Regarding your other question on asset allocation, we are currently under a growth model and have 75% equity, 20% bonds and 5% cash. If you are more comfortable with a lower equity and higher bond rate, I say do it. At the end of the day, you need to be able to sleep at night and feel good about your model portfolio. We believe we have 40 years more in the gas tank so hence why we have a growth portfolio. This may sound crazy, but I do not get too excited when the market grows fast or do not get freaked out when the market goes down in an correction. I have always been even keel as we are in it for the long term.
Early retirement has been fantastic and we are thrilled we did it when we did. We started the process 4 years before we gave our final notice to our employers. You asked about the non-financial side. My coaching to you would be to pick up the book I referenced in the interview called Keys to a Successful Retirement. The author talks about staying happy, active and productive in your retired years. We are truly enjoying this phase of our life and hope you do as well when you retire. Thanks for your insight and good luck in your future.
Also nice to see similarities in our retirement AA. I’m at 80/20 and very comfortable with that given that the 20% equates to 8+ years of living expenses. Just had to force myself to rebalance as it drifted to 83/17. Always hate selling equities but you have to stick to your plan.
MI-235, I’ve never been a fan of the 4% rule either, but for sort of opposite reasons. I think it’s too conservative for a conventional retirement, specifically for millionaires. I get that you FIRE’d so makes more sense for you to err in the direction of caution. But, more recent research has shown that in a conventional 30-year retirement, you would be far more likely to die rich than run out of money with the 4% rule.
The reason I say its conservative for millionaires is that there is likely to be a lot more fluff in your budget – if things don’t go according to plan, you could cut back on travel, eating out, housing, etc. For example, I’m budgeting $250K (including tax expense), but I know my in-laws had a very nice retirement on a budget of $70K. They simply had more modest homes, less fancy restaurants, and led a simpler life – the only travel was driving north or south to whichever home had the best weather. Could I be happy with their life… in a word, yes. I could trade in the million dollar house for something less than half as much and my quality of life would not be depressing.
Not ideal, but I wouldn’t starve or go homeless. At lower asset levels below $1mm, there is simply far less room for error – a mistake could be devastating and impossible to recover from especially if there were no pension income. There is some good research out there showing that if you are willing to follow a more flexible budgeting approach, initial WD percentages as high as 6% can be done without adding significantly more risk.
Not suggesting that to anyone, just food for thought.
good luck with the early retirement, hope it works out as planned and a shift to a different lifestyle. The hobbies and side projects are enjoyable once you hit those FI milestones!