Millionaire Interview Update 55

Today I have an update for you from a previous millionaire interview.

I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. 😉

This update was submitted in May.

As usual, my questions are in bold italics and their responses follow…

OVERVIEW

How old are you?

My wife and I are now 77.

We have been married for 56 fun filled years.

Do you have kids?

We have two sons, and six grandchildren.

One son is a retired attorney (he did quite well on Wall Street). Other son is the CFO of a small medical device manufacturer (also doing well).

One granddaughter just graduated college with a teaching degree. Remaining grandchildren are in college, high school, or working.

We are proud of them all. But how did they grow up so fast?

What area of the country do you live in (and urban or rural)?

We still split our time between midwest (MN-grandkids) and the southwest (AZ-no snow) as we have done for the past 28 years. Both urban.

By design we are residents of AZ, the lower tax state, and where we spend the majority of our time. Having my own business made this possible.

I just needed to be near a good airport. We travel back and forth in a small RV.

No, we are not “snowbirds” a term that is sometimes considered pejorative in AZ. The preferred term is ”winter visitors” in deference to the money they bring in. Since we go in the opposite direction, we call ourselves “summer visitors” who hightail it south at the first sign of snow.

The back and forth RV travel has been fun and allowed us to explore much of the west.

However, it is getting harder, so we will eventually settle down in one location. Or at least travel back and forth by air – 3 hours versus 5 days.

What was your original Millionaire Interview on ESI Money?

MI221 – the aging hippies.

Published February 2021.

Is there anything else we should know about you?

Although we have been married 56 years, we hardly knew each other. We were both going to school 400 miles apart.

After a half dozen dates and lots of letters, we decided to get married so we could spend more time together. In retrospect, a big risk — but it worked.

We met during a tour of the FBI headquarters, while both of us were at a college convention. Neither of us were looking for a mate, but we decided to hang out and sightsee together after the tour. Somewhat it clicked.

We even have a nice letter from J. Edgar Hoover wishing us well. He apparently enjoyed hearing our story. Wine was involved in our letter to him.

NET WORTH

What is your current net worth and how is that different than your original interview?

Our current net worth is about $3.2 million, up from $2.8 million three years ago.

• IRA: $864K
• Roths: $511K
• Stocks: $73K
• Rental property: $370K
• Inherited farmland: $300K
• Residences (2): $917K
• Operating Accounts (cash): $60K
• Misc property: $75K

Investments and cash are per the latest statements; property values are per Zillow; farmland and misc are best estimates.

Thanks to the market, retirement accounts are up slightly even after about $150K of RMD withdrawals and paying taxes on Roth conversions.

Personal and rental properties are up about $300K, with about $250K subject to capital gains taxes (primary residence exempt.) Farmland is probably higher, but subject to fluctuations so I keep this estimate conservative.

These figures are consistent with a detailed projection prepared by my financial advisor. Barring any surprises or extreme foolishness, we are on track to not run out of money.

What happened along the way to make these changes?

The modest increase is after a mandatory RMD of about $50/K year, along with pre-paying taxes on transferring about $300K to two Roths. Thanks to the market, the retirement accounts have stayed about the same. Not a bad experience.

Much of the increase is due to property appreciation on our two homes and one rental property. Certainly a good experience.

What are you currently doing to maintain/grow your net worth?

At our age, the focus is on maintenance rather than growth. To help that, we may sell the AZ house and move back to our rental townhome in the next few years.

As our primary residence, the sale would be tax-free. It would also simplify things.

EARN

What is your job? 

I am now 95% retired from the engineering consulting firm I co-founded 37 years ago. Lost my business partner (and good friend) to cancer nine years ago, and have been decelerating ever since.

Now down to one long-term client with whom I co-host technical training classes. They handle all the promotion and registrations.

I just show up and teach on-line for a few days — no more travel. Easy money and I still enjoy it.

$30K last year – maybe the same this year. Or maybe not — it doesn’t matter.

What is your annual income?

Varies between $100K and $150K. The “base” is $100K from the RMD, Social Security, and rental income.

The “bonus” is from training classes, and sporadic income from inherited farmland.

How has this changed since your last interview?

Overall, income has decreased slightly due to my winding down the consulting/training business. Like an old soldier, I never fully retired but continue to just “fade away.”

This is but one of the many benefits of having your own business. I never suffered the shock of a sudden retirement.

Or as my wife likes to point out — I keep “failing” retirement. Nevertheless, I am almost completely there. And what I do now is for fun, not money.

Have you added, grown, or lost any additional sources of income besides your career?

No significant changes, other than the slow decrease in business income.

Nevertheless, I toy with recording my training materials and putting them on a web-based educational platform. I’ve taken some on-line classes on how to do that, along with paying a nominal annual fee for a popular platform.

It is just a matter of learning how to best use it.

A colleague did something similar and has since brought in well over $100K from his market niche in recent years. A bit of work, but the idea intrigues me.

For the past ten years, I have run a blog on small business practices. Been considering a book or an online workshop, which could bring in some income. (Did both with the consulting business.)

Not a lot of revenue- don’t need it – but it would be fun and I could donate the profits to some favorite charities.

SAVE

What is your annual spending and how has it changed since your interview?

About $90-100K. Here are the numbers from 2021. No significant changes for the basics other than inflation.

• Housing (two homes, taxes/fees, no mortgages) :$25K
• Household (groceries, clothes, utilities, etc.): $10K
• Insurance (home/auto/umbrella/health): $20K
• Auto (fuel/maintenance/registration for used vehicles: $10K
• Taxes: $20K
• Misc: $10K

We don’t budget, nor do I track expenses, so these are best estimates. We live simply and just pay the bills every month. No long term debt.

There have been a few one-time surprises, detailed next.

What happened along the way to make these changes?

There have been a couple of recent “bad experiences.”

The first was $60K in dental expenses. Unexpected, uninsured, and out of pocket.

But I now have a movie star smile thanks to some carefully crafted dental implants. My long time dentist is not cheap, but he is an artist.

The cause was undiagnosed GERD, which can slowly rot your teeth due to the acid reflux. This was precipitated over several years of stress from an AZ HOA board.

While I did help achieve some long overdue community improvements, I will never again deal with such nasty self-centered people.

The second was a surprise $30K assessment against our MN condo, built in 2006. Seems corners were cut by using inferior siding that resulted in water damage.

Both buildings needed to be totally redone. The building warranty had expired, of course. I hope to never again deal with crooked contractors.

Both were one-time costs, so we are back on an even keel.

INVEST

What are your current investments and how have they changed over the years?

No significant changes here. We use the same financial advisor we have for years.

He is a fiduciary who has guided us well through the financial maze of retirement. He has also been a valuable sounding board for financial issues not under his management. More than a trusted advisor — I consider him a friend.

What happened along the way to make these changes? 

Several years ago, our advisor recommended moving funds from our IRA to a Roth. The gamble is that taxes paid today on withdrawal will be less than those in the future. A pretty safe bet in my opinion, but still a gamble.

It also reduces the RMD from the IRA.

To date, we have moved about $300K into the Roth, which now quietly grows tax free. We will continue contingent on the tax laws.

This also gives us some flexibility for future tax planning. For example, we could gift funds from the IRA, while withdrawing funds from the Roth if needed.

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

No real financial challenges or opportunities. We continue to enjoy life although we are definitely slowing down.

Two years ago we revised our estate plan. Laws have changed so it was time for an update. Everything is in a trust or with designated beneficiaries to avoid probate.

The Roths are part of this strategy, with interesting tax ramifications.

Overall, what’s better and what’s worse since your last interview?

We have definitely slowed down in the last three years. In our late 70s, we realize we are now leaving the “go-go” years and are entering the “slow-go” years.

But so far the health is good and we continue to enjoy life, albeit at a slower pace.

Watching the grandkids grow up and turn into young adults has been great fun. Will we be great-grandparents soon? And just how did that happen so fast?

Meanwhile, life goes on.

What are your plans for the future?

Approaching 80, we have started to think about the final chapter (or adventure?) Last year, we visited a “continuing care” community.

Although it had lots of amenities and looked very nice, we decided it is not for us. While we have friends, we are private people.

Although we could afford it, both the entry fees and monthly costs were steep. We also worried that if we did not like it, backing out would be costly.

So the present plan is to first renovate the MN condo. After sixteen years, it can use some refreshing. It won’t be that expensive and is my wife’s preferred abode if I am no longer here.

The next step might be to sell the AZ house and move back into the townhouse. The monthly expenses for the townhouse are about half those for the house.

Although we have enjoyed the house for 28 years, we rarely use the pool, and the house and yard upkeep are getting old. We will miss our great neighbors.

To some degree, the timing depends on our tenant, who plans to retire in the next year or two. When that happens, we would then renovate the townhouse. That should be minor as our tenant has taken great care of the place.

That might precipitate relocating to MN, using the AZ townhouse for a few months in the winter. Or maybe not. The annual townhouse expenses are low enough to make this attractive. Plus we know and like the area.

As a backup plan, we have our names on the list for a retirement community.

Progressive care — independent, assisted, and nursing as needed. Minimal buy-in that is refundable along with reasonable rents. My wife’s sister lived there for several years and enjoyed it. We would too.

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

Three years ago I had a heart attack scare. The good news was it was just a stress reaction from the AZ HOA. As I lay there waiting for the verdict from the ER doctor, I faced my mortality.

Fortunately, it was just a warning.

Two years ago, my wife suddenly fell and broke her hip. It happened so fast. My first concern was a stroke, which caused the sudden death of her mother.

It all ended well after several months of rehab and she is fine. But a sobering reminder of how life can change in an instant.

So my first bit of advice is to cherish each day. Don’t waste your time with jerks. Smell the roses, and take care of your health.

Not to be morbid, but none of us knows when our last day (or that of a loved one) will occur.

Next, as so many at ESI have advised, don’t delay making the jump to retirement as soon as you can afford it. Time flies when you are having fun.

Finally, as I said in my initial interview and from a couple of aging hippies — live in peace.