Millionaire Interview Update 1

Many people have asked me to do updates to my millionaire interviews.

This has always been part of my plan, however I wanted to let sufficient time pass before we had any updates. Otherwise, there wouldn’t be much new to share.

I set three years as an arbitrary amount of time to pass before updating a millionaire’s story.

Unfortunately, I didn’t keep the email addresses of the first 17 millionaire interviews (with a couple exceptions) for some reason and some of those would be after the three-year time frame. So if you’re one of those and are interested in doing an update, send me an email and I’ll send instructions.

That said, I did have a couple millionaires contact me and be willing to be test cases. And that’s what I have for you today.

But before we get to that, I wanted to let you review the questions I sent to the millionaires and see if you have any suggestions to improve them. My guess is we’ll go through several sets of questions over time, as we’ve done with the millionaire interviews, improving them a bit each time.

Anyway, here’s what I sent the millionaires below regarding updates:

Please answer the following:

• What’s happened both personally and financially since the interview?
• What’s changed?
• What’s better?
• What’s worse?
• Any new future plans that are different than what you had thought back then?

Basically we’re just looking for an update like you’d give a close friend you hadn’t seen in a few years. If you like, you can simply read your interview and update what’s different. It’s up to you!

Please leave your thoughts/suggestions below and I’ll consider them as I solidify the instructions/questions for future updates.

With that said, I have two updates for you today.

The first is from Millionaire Interview 164 who did an interview with me on my original site. I recently re-ran that interview during the holidays. You may want to re-read it before you read the update below just so you’re familiar with his story.

After that post ran, he contacted me and volunteered to do an update, so let me turn it over to him…

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Almost 6 years have passed since my initial Millionaire Interview posted in March 2014, so I am providing an update to that initial post.

I am now 64 and my wife is 62. We recently celebrated our 20th year wedding anniversary and we added one additional grandson so we now enjoy 5 grandsons who all enjoy playing elite soccer.

My wife and I still live in the suburbs of a mid-size city in Western New York. Both of us have retired early (as was our plan), with me retiring 1/1/17 from my healthcare CEO position and my wife retiring from her NYS prosecutor role 7/15/18.

I did some part-time consulting work for 2 years but we are now both fully retired. We are traveling more having enjoyed a Greek Island cruise, trips to Ireland, London and Scotland and several smaller trips within the United States.

While our plan from several years ago was to purchase a second home in Virginia to spend the winter months, we have now opted to rent (Airbnb) instead and explore various areas of the South for our winter get-a-ways. Last year was Charleston, SC and this year will be Willington, NC. The plan is to see if we fall in love with someplace where we ultimately decide to purchase a retirement home.

Retirement life has been awesome! I joined a gym shortly after retiring, workout regularly and feel great. We enjoy walking, hiking, eating out and watching our grandkids play soccer. Our lifestyle pace is much slower with zero stress.

There seems to always be ample time for those routine household projects that before were so hard to get to. Time and joyful activities with those you cherish are perhaps the greatest assets one can achieve. Good financial planning is simply the roadmap to that end!

Speaking of which, in my initial Millionaire interview post, I indicated that we had a current net worth of $2.25 million consisting of:

• Savings & Investments (52%)
• Tax Deferred Retirement Accounts (38%)
• Personal Property (10%)
• Zero Liabilities

Our income from employment was $260,000-$300,000 a year leading up to our retirements.

Expenses (including income taxes) were $150,000-$185,000, which continued to provide us an annual surplus/margin of around 40% or $100,000-120,000, which we invested.

We continued to stay 100% invested in equities (diversified, low-cost mutual funds) since we always had the security of our income to ride out any bear markets or emergency needs. Over the past 6 years, we have earned $2.2 million in net investment gains riding the market (10.5%/year average). Our current net worth has risen to 4.5 million.

The “4-step process” I discussed in my original post continued to be process I used the past 6 years:

1. Work the Income
2. Manage the Margin
3. Save the Surplus
4. Ride the Market

Now that we are in full retirement mode, I do expect to make some modifications to our financial strategies, but this will likely be a work-in-progress.

First, I do recognize that bull markets don’t occur every year and that a market correction is likely eventually. Our net worth is well beyond my projections and thus we can afford to take a hit when it comes.

Our investment cost base compared to market value would create a huge tax liability if I sold off into more conservative fixed investments. However, I have been slowly keeping more cash equivalents rather than re-investing everything. I stopped the auto-re-investment of realized investment earning and instead use this income to rebalance our portfolio as well as establish more liquid funds that can be re-invested when a market correction occurs. We are currently invested 80% equities and 20% fixed (including a guaranteed 4% investment fund).

On the income side of our retirement, we are very fortunate that both my wife and I have defined benefit pension plans from our former employers that currently provide a combined annual income of $140,000. We will likely delay taking our Social Security to take advantage of the higher amounts by waiting. This will be a year-to-year decision based on current factors, not the least of which will be the status of the Social Security fund. I like the idea of a higher SS benefit in our later years when our pension becomes “diluted” by inflation.

On the expense side of our retirement, we are still learning how this will play out. Currently our routine expenses are approximately $125,000. Our vacation budget has increased, but income taxes have gone done considerably. My wife’s pension is not taxed by NYS and also provides us with affordable health insurance.

Lastly there is ample income available from our investments and eventually our deferred retirement accounts. I am somewhat over-whelmed by the income these will provide. I find that after years of being very prudent, it is difficult to become a “spender”. My wife is helping me with this! It’s a nice problem to have for sure and the fact that we have resources to fall back upon is comforting and does allow us to remain more aggressive (long-term orientated) in our investment strategy.

So as we move forward into our retirement years, I expect that we will continue to travel a lot, support our children and grand-children, enjoy our life pursuits and maybe spend more money. Thankfully we are still relatively young and healthy with good family longevity genes.

Last year, I unexpectedly had to undergo open-heart surgery to replace and repair leaky heart valves. Thankfully all went well and within 3 months I was back in the gym and feeling great.

Health is always the great unknown, so live it up while you can and: Work the Income, Manage the Margin, Save the Surplus and Ride the Market!

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Next is Millionaire Interview 12, who while not at the three year point yet, offered to do an update and since I needed some test cases to see how these turn out and get your feedback on questions, I was more than happy to include him.

Here we go with my questions (bold and italic) and his responses…

What’s happened both personally and financially since the interview?

Well, we’ve been the beneficiaries of the bull market since my interview and we pretty much have stayed the course.

Because of the bull market and continued investment here’s how our assets have changed:

• 600K in my 401K is now 940K
• 150K in my wife’s traditional IRA is now 210K
• 50K in two Roth IRAs is now 85K
• 800K in a taxable Vanguard Account is 1060K
• 200K in company stock is now 520K as the company stock price has increased significantly over the last two years and I have received additional stock.
• 120K in cash in CDs and money market checking account has gone down a bit to 90K.
• 10K in an HSA is now 35K.
• Our house valued at 220K is now valued at 260K on Zillow is paid off.

I also have about another 200K in unvested company stock. Half of that will vest at end of this month. [Editor’s note: I received this in January, so the stock has now invested.]

Our decrease in cash is mostly because we bought a 3rd car once the kids started to drive. It was a plug in hybrid that we all loved. We paid cash for it. After they left for college, that car became my wife’s car.

Our savings rate has been over 50% in the last 3 years. All together, we are thankful our net worth has gone up by about a million to 3.2 million, roughly.

What’s changed?

We became instant empty nesters. Our twins graduated and started college last fall.

Both of them got scholarship offers to multiple universities, but, they chose to go to two top ranked elite national private universities where they didn’t get any financial aid or scholarships.

Those places did not have merit scholarships and we do not qualify for any need-based aid, obviously. I know that this doesn’t quite jive with the FIRE community philosophy. Kids were smart enough and worked hard enough to get into these places and we could afford them, so, we didn’t hesitate one bit to pay full sticker. We very proudly wear swag from the schools and have gotten bumper stickers saying Proud Elite U Parent.

I still have 200K each in their 529 accounts, so, I should be able to pay the 70K+/year tuition next 3 years assuming nothing crazy happens. We continue to invest in the 529s to max out the state tax benefit.

What’s better?

Guess we are the beneficiaries of the bull market and consistent investing without changing the strategy.

We haven’t changed anything one bit. Kind of boring.

I got one more promotion that increased my annual base salary to $200K and the stock awards to about $50K. So, it has been easy to continue to put money away. We are also taking advantage of IRS catch up contributions fully as we turned 50.

What’s worse?

My work remains fickle with constant change. But, having a decent nest egg means that I don’t have to be stressed out about getting laid off.

My portfolio can support our current lifestyle at a very conservative withdrawal rate. If I get laid off, I may find another job, just to cover health benefits, but, it would be something that I really like to do.

After being relatively healthy almost all our lives, we’ve had some health issues. Nothing life threatening, thankfully, but they required medical procedures.

Didn’t realize that it costs 30K for a day at a surgery center and an MRI cost 2K and a 20% co-pay of that is serious money.

I realize the importance of health coverage and that remains a major barrier to my plans for early retirement before I can tap into my company retiree health plan. I need to work 3 more years to be able to tap into that.

Any new future plans that are different than what you had thought back then?

In my original post, I mentioned I think $4M as a goal. Right now, that seems easily achievable. But, who knows.

As long as I enjoy my work, I’ll continue to work. Like ESI, if I get a buyout offer, I may take it. Then I have to figure out what I would do with myself. There’s only so much exercising and internet browsing one can do.

Being empty nesters has given us the opportunity to travel quite a bit. We travelled some last fall after the kids went off and are planning a couple of trips to places we always wanted to go to next year.