Here’s our latest interview with a retiree as we seek to learn from those who have actually taken the retirement plunge.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
This interview was conducted at the end of May.
My questions are in bold italics and his responses follow in black.
Let’s get started…
GENERAL OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 53 and my spouse is 52.
We have been married for 14 years.
I’m a widower, I lost my first wife to leukemia in my mid-30s.
Do you have kids/family (if so, how old are they)?
One daughter who is 21 and just graduated from college with her degree in Biology/Chemistry.
What area of the country do you live in (and urban or rural)?
We live in a small bedroom community (2,500) outside a larger city in the Pacific NW.
Is there anything else we should know about you?
Crazy times for sure. My wife no longer works and after considering early retirement scenarios, I finally pulled the plug on 9/12/19 but because of accrued vacation, etc., I was paid into early January, 2020.
But talk about retiring into the mother of all Monte Carlo simulation iterations…
I was also Millionaire Interview 96.
RETIREMENT OVERVIEW
How do you define retirement?
The age old question.
For me, it’s simply as “choice.” Choice to do whatever I want to do, when I choose to do it and if I get bored or wish a change, I can choose to do something else.
I still feel I am retired even though I have a small business which I still consider much more of a hobby than anything else. But that hobby has turned into material income.
But there will come a time when I “choose” to do something else altogether.
How long have you been retired?
My last day in the office was Sept. 12, 2019. My last day of pay (accrued vacation and sick leave conversion) was early Jan. 2020.
Normally payout of everything would have occurred upon separation but because I was leading a very large corporate project, when I knew I would be retiring, I agreed to take on Phase II of the project as long as the company was willing to work with me on some separation variables, including a “stay” bonus, letting me use vacation through the remainder of the year which then netted me my full 2019 bonus, extend my health care and get paid for almost 4 months while being ‘retired’.
Is your spouse also retired?
My wife worked in early-childhood education and was simply burned out. Because she wasn’t making much money in relation to me, we decided she could ‘retire’ and focus on the maintaining the household.
It worked out great and she’s a rock-star around the house. It made my life SO much easier since my level of stress was rising quickly over the last few years.
What was your career and income before retirement?
I was a Chief Information Officer (CIO) for a financial institution.
I have been in the financial business from the age of 19. I received my first executive job in 1997 due to a right-time and right-place scenario.
As far as income prior to retirement, it depends on how you look at it. In my formal career, I was making $203,000/yr. not including an annual bonus which could be as little as 0% or as much as 15%. In recent years, it had been about 12%.
Then I have my small business I run with a few friends. It started out with just three of us but we have added two additional partners over the past few years. I’m a 25% owner in the company and 2019 saw $70,000 in income for me.
We also have a cabin outside a national park we purchased shortly after the housing crisis. It was a short-sale and we happened to have stayed in it twice before finding out it was for sale. It nets about $15,000 year as a vacation rental.
Why did you retire?
Last day in the office was 9/12/19 but accrued vacation, etc. kept me on the books until early January, 2020.
It was VERY voluntary and I was leading a VERY large project which had two parts. I only agreed to take on the first part but when the time came for me to do volleyball set (metaphor) to one of my fellow executives to spike it home, everyone took a step back and the CEO had the “what would it take” discussion with me which ended up extending my time by nearly 18 months.
Even as my second date got close, there was another round of “what would it take” discussions but everyone knew where my mind was.
PREPARATION FOR RETIREMENT
When did you first start thinking seriously about retirement and when did that turn into a decision to do it?
Probably sometime around the age of 35. Of course not “seriously” at that time but those who know me know that I had been planning retirement from my 20s through execution of wealth creation methods, savings, investments, etc. I’ve always been somewhat of a financial nerd and financial risk-taker, within limits.
But I didn’t really start seriously considering it until near the age of 47 when much of the ‘fun’ aspect of my job was largely gone, financial regulation was at an all-time high, management of employees was getting more challenging and I was ready to begin focusing on myself and my second-act.
More than anything, I started noticing that the stress from my job, which is always high in the I.T. world, starting manifesting itself more materially in my body, sleep patterns, general anxiety, etc. I had always been an individual who shouldered stress well, could remain optimistic and empowering through it and get a job done. But over the years, the stress started building up and taking its toll.
When I turned 49, I felt the finish line was within reach. I was closing in on my financial goals, my side business was doing well, the vacation rental was performing and I planned on exiting at age 50 or 51. But just prior to that, a HUGE project came up at work which would require two separate phases, each about one year long.
In the end the first phase took about 15 months and Phase II would take 16 months before we went “live.” My expectation was for leading phase I only.
As already explained, that turned into also leading Phase II but and it added 18 months to my timeline. But in that time, I was able to focus on our income/expense sheets, reducing any/all expenses, putting away even more money and started a formal process of preparation.
What were the major steps you took from deciding to retire to developing a plan to do so?
From the age of 45 I had already started maximizing everything I could in the way of putting money into the market to capitalize on growth.
At the same time, we were streamlining our expenses and getting rid of all debt we could. All cars were paid off, I had already refinanced the house down to a 15 year mortgage but the plan was that I would pay off the house before retiring.
The hardest part, as I reached 50, was a systematic unwinding of over-weighting of growth tech stocks and poor diversification. It wasn’t “poor” based on performance and I’ve always been a VERY hands-on manager of my money via trading and investing to maximize return. But it was poor in the area of risk and I wasn’t going to create my own reality (I’m famous for saying “don’t create your own reality”) that the risk would be okay in retirement.
After the lost decade from 2000-2010, we had been riding a huge bull market and I knew the music would eventually stop playing. To that end, I started unwinding the risk, increasing my fixed income and dividend holdings and making sure my favorite stocks wouldn’t make an unwise percentage of my overall portfolio. It was SO difficult for me to do having been an aggressive trader and investor from 1990.
The initial plan/goal was to amass $1.4M in my bridge account and $1M in my tax-sheltered accounts.
My “bridge” account is a term I use to label those funds that will be my bridge from early-retirement to retirement. When I perform wealth planning for others, the “bridge account” is a term I make them familiar with and I’ve been happy to hear the term spreading.
Between the $1.4M bridge account and the $1M retirement accounts, I figured my simple net worth would be no less than $2.9M which should provide enough cushion to retire with sufficient income replacement.
Given that my side business was doing well, all my calculations were that we could retire and maintain the same level of discretionary income we had become accustomed to prior to retiring.
I should mention that part of my plan had always been to maximize my contributions to 401k to the max allowable by the government and, in addition, schedule an auto-transfer into out investment account EVERY month on the same day without fail. I always treated it as an expense just like a car payment and increased it every time I received an increase in compensation or I increased discretionary income by cutting expense. When I started it, it was $500/month, toward the end it was up to $3,500/month.
Above all else, this is one of the most powerful things you can do to fast track wealth building.
What did your pre-retirement financials look like?
Enter the bridge account related to age 59.5. Many people I speak with want to retire at age 55 but when I ask them what they will do about income during that time, they mention retirement accounts, unaware of the rules for accessing them.
In my year 49 of age, our bridge account was approximately $1.25M and retirement accounts were $775,000. I was trending well and knew that between my income over the next couple of years, side business and vacation rental, we should be able to save upwards of $140,000+ year. Around this time, I lump summed the house to pay it off as well.
Accounts were as follows:
2016
- Bridge: $1.25M
- Retirement: $775,000
- House/Rental: $700,000
- Net Worth: $2.70M
Funny thing happened in 2017, 2018 and 2019. A combination of greater focus on maximizing savings, huge bull market, some spot-on trading, house and vacation rental price appreciation and side business income increase, my balances increased sharply like I couldn’t have expected.
When I reached my separation date on 9/12/19, our accounts looked like this:
2019
- Bridge: $2.24M
- Retirement: $1.1M
- House/Rental: $700,000
- Business: $350,000
- Net Worth: $4.39M
*Note: This amount reflects a new addition to my net worth calculation – The inclusion of $350,000 which represents our calculated assessment of value for my ownership % of the side-business.
For reference, my current balances look like this:
May 25, 2020
- Bridge: $2.15M
- Retirement: $1.23M
- House/Rental: $700,000
- Business: $350,000
- Net Worth: $4.39M
So interesting to note that from year end 2019 to our current COVID situation, our net worth remains at the same $4.39M. See below under “What surprises…” for how our retirement balance managed to increase $120,000 from EOY 2019 to current day despite the broader market declines.
What was your overall financial plan for retirement?
We’ve always kept a detailed monthly income sheet so we know how much our monthly expenses are. Of course, retirement can change that but we still kept an expected expense sheet that estimated.
We estimated our retirement expenses through expansion of what we already budget for on an ongoing basis plus extrapolation into new expenses unique to retirement. I have always budgeted with a fully-loaded (maintenance, gifts, entertainment, hobbies, misc., etc.) monthly/annual income-expense sheet including not just ongoing monthly expenses but also annual expenses that are paid once per year. Once you do this, extending it into a retirement is much easier.
The one new expense we had to plan for was health insurance for the three of us. There’s no getting away from this huge item. Currently, we are utilizing a COBRA plan at a cost of $1,650/mo. The good news is that I was fully prepared for it and when we paid off the house, I simply loaded in the expected health insurance increase as a similar mortgage payment.
In our budgeting, I always use discretionary income as the measuring stick for our budgetary health.
To that end, my desire was for a full-loaded expense sheet which still yielded no less than $3,000/month in discretionary spending which would be used to fund retirement discretionary activities. So that would mean all income minus all expenses yielding a minimum $36,000/yr. in spendable dollars without further drawdown of our bridge account.
The plan further included one year of ‘laying low’ without significant expense to see the plan work, discretionary income generate and to build the discretionary income account which could then be combined with next year’s discretionary income as a bit of a slush fund or emergency discretionary account of sorts.
Without corporate income, that would mean I would have to make up our income via three different sources as followed, with the following plan:
- Investment Drawdown: $60,000
- Side-business Income: $80,000
- Vacation Rental: $15,000
Again, the important aspect of the budget is to ensure you provide an accurate assessment of annual expense and apply an accurate taxation percentage to the equation. While I’m hoping to achieve 15%, I’m using 17.5% as my first-year taxation goal and will do whatever I can to lower it after I get a full year of experience in 2020.
Based on my math and projections, we should experience no less than $4,000/month in discretionary income allowance.
Based on invested balances within my bridge account, dividends alone should make up about 80% of the $60,000 drawdown with the hope of making up the additional $10,000/year in portfolio appreciation, which should be extremely easy…unless we see some sort of pandemic scenario or the like (joke intended and more on this later).
The longer term plan has me exiting the side business between the age of 60 or 61, selling my % and living strictly out of the remaining balance of the bridge account until I reach RMD age for the retirement accounts which should be 72 by that time.
With a factor of inflation and 4% total projected return, I estimate our bridge account balance to be approximately $1.7M as I reach age 70 and we begin taking Social Security (final age to be determined much later). At that time, my expectation is for the retirement accounts to be valued at approximately $2.5M for a total portfolio value of $4.2M at age 70.
Of course, there are a lot of variables in the equation. Unexpected expenses, Monte Carlo drawdown events, side-business income reduction, etc. The key to all of this is in our initial balances combined with a discretionary income which we will not be spending completely each month/year.
Key to all our financial planning was the setup of our account structure which I developed leading up my exit. I created a structure involving three separate accounts for our bridge (non-retirement) funds, based on years of funding at $60,000/yr., as follows:
- Year 1: Bank – $60,000 – All Cash
- Years 2-8: Charles Schwab – $420,000 – 40/60 (equity/fixed income + cash)
- Years 9+: Charles Schwab – All remaining funds (currently $1.65M) – 65/35 (equity/fixed income + cash)
Each of those accounts carries an investment mix designed for proper risk tolerance. Additionally each of the brokerage accounts has a $60,000 cash holding to fund the next year of retirement spending.
The goal from these accounts is to create at least $60,000 of drawdown and, hopefully, income in a waterfall fashion such that the “2-8” account will always have at least $420,000 to fund the next 7 years of $60,000 drawdown, at least until the side business is sold, that income goes away and our drawdown requirements will increase. The goal is to leave the retirement accounts untouched and invested until RMDs are required in approximately 20 years.
Did you make any specific moves to prepare your finances for retirement?
The plans I/we made were primarily:
- Tracking all expected and desired expenses to ascertain a “what is” expectation of our lifestyle in retirement
- Elimination of all debt servicing
- Rebalance portfolio for adjusted acceptable risk/income tolerance
- Minimize expense where possible while maximizing savings/investment
All debt has been eliminated save $110,000 remaining on the vacation rental which has a value of approximately $325,000 as a turn-key property.
Who helped you develop this plan?
It’s all my own creation and I love creating models to help determine need and satisfy requirements.
When I work with individuals to help them prepare for retirement, I start by having them envision their retirement, ages, variables and then help to establish an expectation. While many are frustrated or intimidated by the markets and don’t know where to start, I keep it fun by focusing on envisioning their dream and then help them to understand how to implement a plan to fulfill that dream, which often includes the creation of a bridge account in addition to retirement planning.
It’s no different from the process and sheets I’ve created for myself. Taking control of your money and planning your future can be a “fun” process when you are willing to commit to it.
What plans did you make in advance to leave your job?
Most of the planning was financial as nothing was possible without that. My goal had always been to have more than needed when I was ready instead of being ready and potentially not having enough.
By setting minimum calculated thresholds for money, expenses and income, I wouldn’t allow myself to consider retirement until those thresholds were met. If not for that, it would be too easy to “create your own reality” of something far less due to your desire to exit the workplace.
Considering today’s FIRE movement, my belief is that too many are making that mistake based on flawed assumptions.
What were your pre-retirement concerns (financial or non-financial)?
Money was my chief concern obviously. Being that I was the main bread-winner, I didn’t want to put our family in a situation where my desire to exit the workplace created a hardship if something unexpected should occur.
Furthermore, as a career financial executive, exiting my career at 52 could be very dangerous if I need to reengage or reenter the workforce. The chances of doing so at a similar wage would decline each year from retirement in my estimation. I did work to maintain a high standing in the industry and create what I considered to be long-term relationships in and out of my company to provide options should something occur, but my goal was to do it right the first time and not have it come to that.
My second concern was engagement. The “R” word doesn’t really exist in my vocabulary and most didn’t expect me to “stay retired.” But I still have the small business which is doing well and it allows me to engage as much or as little as I like.
Beyond that, I do miss some of the engagement with my professional peers, solving problems and leading teams but not enough to go back. My body was talking loudly to me about the stress and I chose to listen. I have no desire to go back to that at this point. That may change in time or I may be willing to do a little consulting if asked to stay connected and utilize my talents of leading projects and developing people, but that isn’t a focus.
I did have some concern, more awareness, about the move from my risk-taking, wealth-building and aggressive money tactics to more of an income producing stance and how I would handle that. I found that it was just a maturation process and once I was preparing for and entering retirement, I have just as much passion for it, but with a different focus.
Beyond those few items, I really had very little concern. Just the unknown of it all generally.
How did you handle deciding on and paying for healthcare?
To me, there was little way out of it and I wasn’t willing to risk our family or finances on having no health insurance, cut rate plan or ministry/sharing plan. I’ve read a lot about all the choices and I simply decided that the health insurance variable was going to be primary for us for the next 13 years until Medicare is an option. Until that time, I allocate $1,650/mo. to insurance cost.
Thankfully, our daughter graduated in 2020 and hopefully will be entering the job market and getting her own benefits. There’s a chance she’ll first enter a PhD program which means we may need to continue paying for health care. Either way, there’s no real alternative for us other than paying it monthly.
When COBRA nears expiration in mid-2021, I will have already determined our new coverage options which will likely be a HSA based high-deductible plan.
How did you tell your family and friends of your plans?
I’m very vocal about financial preparation, envisioning and planning for retirement and life stage planning.
All my family and friends new it was coming and while some were surprised it was so soon, there was no shock involved.
THE ACT OF RETIRING
How did you ultimately retire?
Because of my large project, the time flew by. There were long days, a lot of meetings and employee management.
To fulfill my part of the contract agreement that I had in place, I had to stay until at least August, 2019. But because I wanted to ensure I got my full annual bonus, I negotiated a plan to use all my vacation time to get me to 2020.
Counting backwards from the end of the year utilizing my number of vacation days (89 I believe I it was), the retirement day was set as Sept. 12, 2019. I asked that there be no money or parting gifts as I didn’t need them and I didn’t want my retirement to set others back financially. Instead, we just had a get-together at a local tavern and management was invited. My direct reports had a lunch and an after-work get-together in the banquet room of another establishment the week of my retirement.
Strange thing was that what I was fearing most was the ‘walk’ to my car with my boxes. So starting two weeks before my last day, I started taking things out little by little so that when the time came to leave, I only had a very small box of items, a few small gifts, etc.
I wasn’t sure what the emotions would be at the time and, surprisingly, it was as if I was fully prepared and it was just another day. The funny thing was that there was that my get-together was planned for the night of my last day so I had to stay at work all day rather than leaving early, which seems to be customary.
One of the great parts about my retirement was getting to help interview and suggest individuals for my replacement. The gentleman who eventually took my job was someone I have been friendly with for 15 years so the transition was super smooth and relaxed.
I don’t remember the drive home, but I do remember walking to my car. I read somewhere else here that everyone talks about missing the people and the friendships you made while working and one of your respondents mentioned she ended up not missing any of them. I won’t go that far necessarily but largely agree that after 20 years at a single company, I didn’t know what to expect.
I thought I may have had more friends there but that doesn’t seem to be the case. Sure I was an executive and that may color the relationships a bit but I get the distinct impression that if I wasn’t reaching out to some of them, they would not be reaching out to me. This isn’t a regret as much as it an understanding about the nature of corporate relationships. There are a couple that I’m surprised that seems to be the relationship we have as I didn’t expect it. But that’s okay. I didn’t retire to stay friends with those who I work(ed) with.
What went well?
The last three years of market gains and our ability to not only realize some large profits in our portfolio but also put significant amounts of money savings away to prepare was far above expectations.
In the last three years, we’ve added more than $1M in net worth and the bridge account alone was up more than $500,000. Where I thought I was comfortable with our generated amount over the threshold, the last three years added a lot of cushion.
What didn’t go so well?
Aside from the Corona virus, everything has gone really well. I’ll talk about the virus below.
Other than struggling a bit with my daily routine time again and some neck/back issues (I expected the reverse to be true) as a result of the environmental change, everything has gone really well.
As it turns out, my belief is that I had adjusted my new standing desk such that the monitors were too high and it has impacted my neck adversely. In tracking back when I started having problems, it was toward the end of the year, right around the time I got my new desk. In mid-May I have readjusted and I think that may be the long term fix. *fingers crossed*
Because of the COVID virus, our daughter had to graduate at home in front of the TV. She lost her grant she had been awarded for her biology project for the university lab, lost her opportunity to present the findings at two industry conferences, including one that also doubles as a job fair and now has to enter a very uncertain job market.
We had a long and expensive Alaskan Cruise-Tour booked and that has been a nightmare trying to cancel, get refunds and decide what to do from here. I’ve been able to recapture some $4,000 in refunds but still have over $9,000 outstanding.
How did you ultimately find the courage to do it?
Planning, running the numbers, planning, preparing, running the numbers, rinse and repeat.
My body was telling me not to do one more year. Even my wife noticed the shift in my emotional well being and stress level. For the first time in my life, I had one or two middle of the night panic attacks where I woke up and couldn’t breathe.
It was a culmination of a lot of little things that helped me to prepare and the planning along with the combination of the large project provided the perfect dismount. It didn’t involve a lot of courage as I “knew”, to the best of my ability, that I was prepared.
RETIREMENT LIFE
How was the adjustment, especially the first few months after retirement?
It’s been awesome, purely! A few realizations that I will list below.
I’ve always been an early riser 4:30 – 5:30 AM and I keep with that routine. I can get everything done in the first few hours of the day and then I do whatever I want.
I often can lose track of time for all the things I’m doing and I have at times struggled with balance/routine. More on that later.
How is retirement life now? What do you like about it and what do you dislike?
It feels much like it did in the first couple of weeks. My mind is still fully engaged in a million different things, I’m still busy, I’m still on the computer way too much.
I’m in my “man’s room” usually from 5:00 AM to 5:00 PM doing some of the side business, working out, stretching, watching the markets, trading/investing, having phone conversations with a couple of friends about the markets and trading, watching my investments, listening to music, etc.
I often go for walks with my wife but usually in the afternoon.
My wife and I watch TV at night while sipping our favorite wines. We both enjoy our own activities but we are very good together as well. There have been no issues in co-mingling our lives.
I even took a part time job in a wine tasting room for my favorite winery just for fun and it’s been great. Funny thing though, I NEVER look forward to going to work, but I always have fun when there.
There’s not much I dislike because I can change whatever I want but I have so much free time, I sometimes allow myself to get out of the established routine that works best for me.
What do you do with your time? What does an average day look like?
- Up at 4:30-5:30 each morning – I survey the markets to determine the direction of the day and the noteworthy news items. I perform two daily routines for the side business which takes me about 15-30 minutes.
- 6:30-7:00 – Watch the markets open, survey trade possibilities, evaluate opportunities
- 7:00-8:00 – Morning stretching, workout, yoga, weights, etc.
- 8:00-11:00 – Mix of side business, stock market research, investment review
- 11:00-1:00 – This is my free time when I have stock market chats with friends about investment mix, research, fundamentals, etc. Reading, wasting time doing things I like.
- 1:00-3:00 – I like watching CNBC during this time for market recaps, Closing Bell, Fast Money, Options Action. Sometimes a nap fits in here nicely.
- 2:00-4:00 – More side business stuff, chats, side work, research, etc. Sometimes the walks or sitting outside occurs here.
- 4:00-5:30 – Me time. This is where I may game (PS4 or PC), play guitar, etc.
- 5:30 -6:30 – Migrate downstairs to spend time with wife before dinner, maybe sit outside, have a drink.
- 6:30-7:30 – Dinner with family/wife, discussion.
- 7:30-10:00 – Wine and music eventually leading to some TV time.
- 10:30 – Bed
I use Saturday and Sundays to get my inside-tasks/projects done and typically don’t leave the house as this is when everyone else is out. Weekdays are our ‘play’ days when desired.
Tuesday is a day my wife and I call “TuesDate.” We usually spend time together after about noon for the rest of the day. Could involve a hike, adventure, going out to eat, playing pool at the house, drinks on the patio, wine and cheese at night etc. – Or all of the above!
What are the major activities that fill up your time in retirement? Are there any new ones you’re planning to try?
Two primary things I’m planning and one third item I’m considering:
- Writing a book or books
- Learning a language (probably French to start)
- Starting a Dungeons & Dragon campaign. I used to play back in the 70s after it first came out and was really deep into it. My daughter plays now and wants me to start a campaign. I may even consider one for early-retirees that used to play.
What is your social life like?
This is really sad to say but the social distancing movement has played right into what my wife and I really like: no commitments, few social gatherings and having quiet time.
We like to get out to hike, go for walks, we’ve started mushroom foraging and we will go out at least once a week on our TuesDates but other than that, we just like doing what WE want to do when WE want to do it.
Looking back, what would you have done differently?
I can honestly say I don’t think I would have done anything differently.
My first thought was that I was going to regret waiting the extra 18 months, but it worked out so well in that I was ready monetarily, emotionally and physically. Since I was prepared in advance, it allowed us to really focus on the months leading up to it and have greater focus on what was to come.
Was there any emotional impact from leaving the workforce?
Nothing negative at all. I was obviously ready and well prepared emotionally and physically. I haven’t looked back once, regretted the decision or missed that engagement.
It’s still only been 8 months but I don’t see it changing. I could see myself doing some side consulting if someone were to call but outside of wealth planning, I don’t have a desire to return to work.
What surprises (financial or non-financial, good or bad) have you had since retiring and how have you handled them?
The COVID crisis has been the only real surprise. And what a doozy. When I talk of retiring into the mother of all Monte Carlo simulation iterations, this is what I’m talking about…and I’ve used as an example when I talk to others about financial planning topics, especially portfolio diversification/mix. No one saw this coming, it wasn’t in any of the economic indicators, it couldn’t have been planned for and there were no present-day models for how to invest in/around it.
EVERY fiber of my being heading into retirement didn’t want to rebalance my portfolio to remove my favorite growth stocks, lower my exposure and invest in fixed income. But casting aside my desire to create my own reality about the safety of my current diversification, I took some monster capital gains to reduce exposure and risk in my portfolio, purchase fixed income beta-smoothing issues and get greater access to income-producing vehicles.
Had I not done that at the beginning of 2019 and 2020, I would have been in a world of pain when the impact of the virus was realized in the markets. It HAS to be done and this is the perfect example of what can happen if you don’t have a well-balanced portfolio taking into consideration your time horizon and risk tolerance.
However, there was an enormous stroke of luck that occurred as well. Upon leaving my employer, I had a 401k with $987,000 in it. I needed to roll that over to my brokerage account as a rollover IRA but didn’t want to do so in the middle of a market rally.
Following the end of the year (2019) I was waiting for a time to roll this account over. I had become more and more uncomfortable with the froth in the market and was trying to time it such that I could go all-cash for the roll over. As it turns out, I picked early February and went all cash during the week of February 10, nine days before the S&P an all-time intraday high.
In fact, $987,000 was deposited into my new IRA account on 2/19, the day of that high. Uncomfortable with investing the money so quickly into what I was concerned was an over-bought market, I started planning on how I would be investing the funds.
Instead, the COVID virus hit with enormous force, sending markets reeling. I didn’t trade/invest the funds until we had already dropped 25% from highs and I continued slowly purchasing good balance sheet companies with sustainable dividends and strength into the bottom, but at a very slow rate.
At this time, I’m still only 51% invested and holding out the remaining 50% for purchase of some fixed income, growth and additional income producing names as the market heals over time. Since 2/19, this money is now up 10% to $1,083,000.
Sometimes luck is a viable strategy.
What are your future plans?
No immediate changes though we are going to lay low for the rest of the year. I may need a knee replacement unfortunately and I’d rather do that while on our existing insurance due to favorable limits.
We will start taking some little trips here and there this summer but nothing large. We are in no hurry being that we’re still young. Primarily, however, we plan on doing two large things annually:
- Spend a month at our cabin during the shoulder season (so as to retain as much peak season income as possible)
- Vacation for 4-6 weeks in a new location each year. We will either drive or fly/rent in a selected location within the US or outside for at least a month at a time and immerse ourselves in the surrounding area.
Aside from that, little trips to see our favorite sports teams play and weekend beach get aways will keep us busy with something to look forward to.
RETIREMENT FINANCES
How has your financial plan performed compared to what you had estimated before retirement?
All things considered, very well. Like everyone else, I had gotten spoiled with all the great returns for the past decade. Much as changed now and the near-term is very uncertain.
But I’ve always been one to capitalize on fear, greed and risk. My all time recorded high for my bridge and retirement account was $3.476M (excluding real estate). As of 5/25/20, my total is $3.39M. My bridge account is down $120,000 from the all-time high but my retirement accounts are up. So total portfolio balance is down -2.4%. Not bad considering the markets are down approximately 13%.
Can you give us some insights into your post-retirement spending and income? How much do you spend annually and on what? And where does the income to pay for your spending come from?
As we haven’t ramped up vacation spending, our annual expense remains about $78,000, but that is fully loaded including $20,000 for health insurance, $15,000 for food, $3,600 for dining out and $3,600 for gifts. Once our daughter secures her full time job and exits the home, expenses should drop dramatically.
Income is currently projected at $155,000 as explained above. Note that the COVID crisis has also impacted our vacation rental income for 2020 but all indications are for a quick rebound as it’s just outside one of the western national parks.
How are you handling Social Security, required minimum distributions, tax issues and the like?
Plan is for me to wait as long as possible (70) and to potentially plan for my wife to start taking ½ of mine at 67 but nothing in stone at this point.
RMDs won’t happen until they have to, currently pegged at 72.
My goal for 2019 is to get our taxation figured out and then put in a plan to become more tax efficient through use of IRA contributions, HSA contributions and a move to qualified dividends for the lower tax rate. I’m working with a CPA this year.
Did you return to paid work? Why or why not?
I did pick up a wine tasting gig one day a week for engagement and fun. My favorite winery was opening up a new tasting room and I contacted them before it opened and was able to be hired on.
As I said before, I don’t look forward to getting ready and driving into work but I always have fun once there.
Did you find it hard going from being a saver to a spender?
We have such regimen and routine for spending and savings, we haven’t had any difficulty as of yet.
But, we are still within the first year and are slow-playing it so being in ultra-safe mode means we haven’t experienced our ‘real’ retirement just yet. We’ll see.
Looking back, what do you wish you knew in advance?
I wish I would have known the COVID crisis was coming and how deep the market impact would be. Given my quick trading fingers from past experience, I could have been up seven figures if I hadn’t been in full retirement mode but this is not a sound retirement practice so I’m not looking back.
I can’t think of anything I would have done differently or that has truly surprised me such that it changes my perspective on my process.
What advice do you have for those wanting to retire?
I’ve thought a lot about the FIRE movement — about how many 30-40 year olds have been profiled as retiring early on “their own terms.”
Meanwhile, most/many of them have created their own reality aside from what is really going on in the world and, thus, they have taken significant risks they don’t recognize. We have just come out of the longest bull market in history, putting those FIRE individuals in their 20s when they graduated from college, secured their first high paying careers and started investing/creating wealth.
Their experienced reality is that the market rises double-digit percentage points annually and growth of investment accounts does nothing but go through the roof. Hey, I’ve benefitted too but with no expectation that I was retiring with as little as $1M-$1.5M and 100% invested, with a child or two and thinking I will make it a lifetime with $3,000/month of expenses.
Meanwhile, their skills may be diminishing, they are no longer contributing to their profit-sharing and 401k plans and are losing their prime earning years which also sets up social security earnings.
For the rest of the individuals, a number of things come to mind:
- Live below your means please. Think minimal debt servicing.
- 15 year mortgage.
- Develop and learn to use a detailed monthly/annual budget.
- Pay yourself first. I always made my monthly Schwab investment an expense just like my water bill.
- Consistent and increasing automatic investing.
- Every time you pay off a bill or receive a raise/promotion, increase your saving/investment allocation.
- Find the courage to take calculated risks.
- Envision your retirement and plan for that vision.
- Work with someone, anyone, to help you take these steps if you aren’t able to make them yourself.
- Have fun on the journey. Once you realize you CAN do it, and take control, it’s fun and empowering.
Duke33 says
Care to share more details about the side business you mention?
Jeff says
Hey there, thanks for the question.
My side was profiled here as a “Side Hustle” interview at some point but I’m not finding it at the moment. It’s an online sports hobby related business we started back in 2005/06. All online and we have monthly/annual membership in addition to a large community forum.
We’re the biggest in the world for what we do, continue to grow annually and the best part is that I’m able to do it as much or as little as I’d like …. but it’s actually turned into a ‘real’ business which could use more care and feeding. We have a lot of opportunity for significant growth. If you want to know something more specific, let me know.
Duke33 says
Yea, would be curious to hear some more details on this side hustle.
Jeff says
Was able to find my side hustle interview here:
https://esimoney.com/side-hustle-interview-3/
Stan says
A lot of great detail. Especially like the way you “bucketed” and funded the future years of retirement. This would be a great case study to check in every year to see how the master plan is going. If there is any way to stay in contact with you I would appreciate the opportunity.
Jeff says
I’m really curious as well. While I’m a very “what is” sort of individual, almost everything I do is of my own creation but probably gleaned from thousands of others’ ideas all mixed in. I’m a big believer in standing next to very smart people.
I’m sure we could figure out a way to stay in touch if desired. I’m pretty transparent when it comes down to it. If you want to pass on your contact info here or have the blog owner pass it on to me, I’ll reach out.
Stan says
I set up a new gmail account called [email protected]. If you are interested in quarterly conf calls to discuss finances, travel, spousal relation (careful here), food/beer/wine, fitness/health, finances, let me know by sending an email to this address. It is a “baby idea” but may be interesting. I would email a standard agenda ahead of time and keep it to 1 hour each quarter. Could be a good way to share ideas. Thinking 4-6 people/couples to start.
Stan says
Try [email protected] to email for the quarterly conf calls. Forgot the “s” in my last response in the email address. Correct email is [email protected]
Jeff says
Sent
MI 160 says
What a great plan and retirement. Congrats! You are describing much of what my ideal retirement will look like for me and my wife. Maybe we will cross paths in the PNW down the road!
Cheers to you!
Jeff says
That would be great! Always willing to. I’m an open book and very transparent and down to earth. I actually really enjoy talking to others on similar paths, etc. I love the dynamic aspect of planning for the future, execution and having random events thrown in you have to adjust to.
If you want to, I’m sure the blog owner would pass on your information to me and I could reach out. Probably best not to put it here.
MI-21 says
Great interview and congratulations on your successful retirement! I was amazed at how similar your situation is to mine (I am MI-21 & RI-23). I retired at the same time, with similar assets and in a similar situation. Biggest difference is that I’m about 5 years older than you. Very interesting to compare our journeys. Best of luck to you!
Stan says
I think there are a few of us in similar situations. Do you think anyone would be interested in quarterly or semi-annual conf calls to compare notes and ideas? I think it would be interesting and educational to exchange ideas with people in similar situations. I would be happy to coordinate the calls if anyone is interested. We would have to set some ground rules about sharing info but the concepts and ideas and activities would be interesting and supportive in my opinion. (It would also be interesting to get Fritz on a call since he also seems to be in a similar situation.)
Jeff says
I’m in.
Any of you on Silicon Investor? I have a stock trading thread there I started back in the late 90s *cough*
Jeff says
I’m sure we can find away to get a small group together is what I’m saying.
Stan says
Jeff, there are a few people who responded for the quarterly conf call discussions. If you can send me an email address to [email protected], I will email you the outline and the call agenda we created. Thanks
Mi-77 says
Thank you Stan for organizing this conference phone calls. I just emailed your and signed up. I am sure it will be very helpful. I think I am speaking for everyone when I say THANK YOU for taking the time to do this!
Jason
https://esimoney.com/millionaire-interview-77/
ESI says
I’m actually working on something that could facilitate this. It should be ready in early fall.
Hoosier at Heart says
I am interested in such a group as well. I have silently followed the blog for awhile and thought it would be useful to tag posts by age and net worth. I am mid 50s, live in the midwest with about 5 million in assets, and thinking about when to pull the trigger.
Tom from MD says
Hoosier at Heart, this is a GREAT IDEA! I definitely relate to the late 40s-50s folks with anywhere from $1.5 to $3.0M in assets, trying to figure this thing out. You sound slightly ahead of me in age, and WAY ahead of me in assets, so I would value your opinion, as well as that of the others here.
Brian says
I am in my mid 40’s and nowhere near retirement but would definitely be interested in something like this. Thanks.
Stan RI #19 says
RI – 19. I’m interested. Let me know what works.
MI 160 says
I’m in too
Jeff says
Thanks for the comment. Always love finding those on a similar path and sharing stories, thoughts, etc. Money unfortunately tends to separate many but it really shouldn’t. In the end, it’s far more a byproduct of successful planning, regardless of what the number is.
I enjoy talking to those in their 20s and 30s with similar plans as much as I enjoy talking to all of you who are my age or older having executed those plans and seeing the results of good planning. It’s the mindset over the $ that should bring us together and create common bond.
Stan - RI -#19 says
I’d be interested in your calls as well. I retired at 54 (RI – 19) with similar assets and net worth. I’m curious the reason your goals is $4.2M at 70. Significant RMDs and a likely large tax rate increase seems daunting. Why not enjoy more of your $$ now especially if you’re having physical challenges with your back and knee. We’re looking at the next 20 years as our “mobile retirement years” and are judiciously front loading out decumulation phase with trips (on hold) and enjoyment. My kids don’t expect a large inheritance and I didn’t work my ass off to leave them one. Good to hear you’re enjoying your retirement. It’s been almost 3 years for me and I’m eternally grateful every day.
Jeff says
Good thoughts Stan. I hear what you’re saying and we will certainly ramp up but before we do that, I wanted to take a year or two and see the numbers work. My belief is that our spending allows for us living our retirement life to our expectations as is, without needing to spend extra. So the $4.2M at 70 is more a projection based on how I see our retirement spending IF things don’t change.
But loaded into that is about $4,000 of discretionary monthly income which will provide everything we want to do. There’s also a looming property change and perhaps a ‘fun’ purchase that I may make but not in the immediate future. So there’s a possibility of a couple 6 figure material outlays which could lessen those numbers.
But I can nearly guarantee our retirement spending will increase as I see the model work. I do want to leave a bit of a financial legacy but I’m strongly considering setting up a foundation or a charitable trust as well. Just starting research on that and what it would take to fund that to start.
RI 19 says
For as well thought out your financial plan appears to be, I figured you had a “fun” budget calculated. Have a blast with your new found freedom. It certainly is a privilege you’ve earned. Cheers! I’m curious your thoughts on SS. Given the Trust fund will deplete by 2035 and likely sooner and the projected 78% payout for us as well as likely means testing since taxes will go up and fewer people paying in, why not start at 62? That is our plan. And that $44k goes to travel and entertainment as well as allows for a lower withdraw of IRAs and other equities. Thoughts?
Jeff says
SS is one of those mystery areas and rather than have any ‘concrete’ plan in place, it’s going to be far more “we’ll see.” I do have concerns about the depleted trust but also fully believe it will be replaced by something else. If there’s one thing this govt. does well is print money to fund whatever they think we need … regardless of how it’s justified. That said, in about 10 years, I will be looking at our overall financial situation toward determining how material delaying would be vs. the current income provided to make my decision for my full retirement age. For me it’s a decision between taking it at 65 or waiting to 70.
If my “bridge” and retirement funds are tracking well, I may well decide to simply protect them further by taking SS earlier and forego the added benefit by delaying. It’s a very real possibility. Knowing me, I’ll model it to see what the difference looks like in the balances for every 5 years (65, 70, 75, etc.) just to gauge the impact.
Definitely two schools of thought there whether taking earlier or later. I’ll cross that bridge in about 9 years to start making the plan.
Stan says
I set up a new gmail account called [email protected]. If you are interested in quarterly conf calls to discuss finances, travel, spousal relation (careful here), food/beer/wine, fitness/health, finances, let me know by sending an email to this address. It is a “baby idea” but may be interesting. I would email a standard agenda ahead of time and keep it to 1 hour each quarter. Could be a good way to share ideas. Thinking 4-6 people/couples to start and then go from there.
Rex says
Love this Retired interview. My story is similar to yours but I’m about 6 years behind. My plan is retiring at 53 after being at my current company for 20 years in November of 2026. I will also have enough PTO stored up to get paid well into the next year.
Jeff says
Sounds nearly identical Rex. I crossed my 20th on 8/8 of 2019 and was out the door on 9/12.
Thanks for the comment and continued luck and health to you! It’s nice to have a purpose to the time you are putting into work.
Emily says
Congratulations to you and your family on your successful retirement! I just wanted to chime in and say that I was a Molecular and Cellular Biology undergrad and went on to do my PhD in Genetics (finished 3.5 years ago). If she goes to grad school in a similar field, in a research lab, she will receive a stipend and typically very excellent healthcare is included. I feel for her graduating at such a crazy time! Congratulations to her! Good luck with the job hunt and graduate school applications.
Jeff says
Genetics is one of the areas she would love to get into. Sounds like you would have great information for her if you were Open for communication with her? She’s a young graduate at 21 and is hoping to get into grad school this fall but it doesn’t look promising. Not having much luck on the application front to get into the lab for experience to help with getting into grad school. Any information Or suggestions you have would be very much appreciated
Emily says
Happy to chat with her! I think it might be a little late for grad school apps this Fall, but a gap year is very common and a good way to get experience. Although I am sure COVID is making this much more difficult right now. I know a lot of labs just started to reopen. She can email me at e_miller2892[at]yahoo.com.
jeff says
Thank you Emily. She’s already applied to and been rejected by all but one of the universities … but she missed the priority reg date. That said, being on the young side it really sounds like she needs to have experience and she lost her big project, grant and chance to present at multiple conferences because of COVID so it was a big blow. She did get to work in the university lab for almost two years.
She’s planning on the gap year obviously unless this last university (Oregon State) offers her a place in a remote learning capacity which she’d do in a heart beat.
Congrats to you on finishing your advanced degree and being on a path of eventual retirement yourself. If I can help in any way, just let me know. Thank you for your willingness to be a sounding board for my daughter, I’ll pass on the info.
Emily says
Yes, I imagine this is very hard with COVID. I am sorry she lost out on those opportunites. I will keep my fingers crossed for her at Oregon State!
CB says
Congratulations on your retirement and enjoying life. Thank you for sharing details on your strategy. We are retired as well and I was interested in your comment about moving your 401K to a rollover IRA. Did you rollover into a Roth IRA? You didn’t mention that so I am assuming you didn’t. But you are working with a CPA to review tax efficiencies. We don’t have children so inheritance isn’t an issue so we are debating on moving some or all of a 401 into a Roth but paying taxes now is a big question. How did you find a CPA who is skilled with tax efficiencies? I have been searching but haven’t found one yet so doing something wrong. I would like to hire a skilled person to review our assets and help with tax planning, especially after paying the 1040 amount. Thank you for sharing any updates.
Stay happy, keep walking and be safe.
Jeff says
Did not roll it over to a Roth. I did a couple of calculations and it seemed best not to but I’m going to address that specifically again with an individual. Both calculators I used suggested not to. I’m assuming because of the number of years left into the value of it.
I just left one CPA who wasn’t very complete and I found a huge error on my taxes. I could have done them myself and saved the big cost and done them as well. A $4,000 mistake in my tax bill is enough to say “goodbye.” I haven’t found someone yet who is very good with tax efficiency but hoping this new person is. She seems better but the jury is still out.
CB says
If possible, can you provide the names or websites of the calculators you used to test the Roth conversions? I wasn’t aware of those and have been struggling.
thank you
Brian says
Thank you very much. This was a great breakdown – one of the more enjoyable (& informational) that I have read in awhile. Thank you for sharing and breaking it down the way you did.
I’m about 10 yrs behind you age wise and a little further behind in getting the financial side up to your levels – my wife and I are slowing working on getting things going so we can be in a similar spot as you at some point down the road. I would love to be part of a further discussion if ESI sets up something in groups, etc, like is mentioned above in the replies. Love finding out what works for others who have already reached retirement and setup a process that has worked for them and finding a way to make it work for us.
Thanks again for discussing your process.
Jeff says
Thanks for the comment Brian. I love hearing about people younger than me being on the same path, it’s a bit of a passion of mine. Just the fact that you are on that path, researching and using others as the guide is a HUGE step in the right direction and I’d bet your future is golden.
If there’s anything I can do to help, please let me know!
Cheers!
RE55 says
You may have explained this in your MI post but I couldn’t find it quickly so I’ll ask here.
When did you start your bridge account?
What was the priority order in funding your accounts and where did your bridge account rank?
For example:
1. Max Roth IRA
2. Max your 401k (thoughts on Roth vs Traditional as I have the option?)
3. Funded your Bridge account
4. Paid down mortgage early
5….
Jeff says
Hey there, thanks for the question.
Like most all who are on this path, it’s been a work in progress for decades. Thankfully I found the markets in my early 20s and I went down the rabbit hole. I’ve always been somewhat financially minded for whatever reason. And like most, I’ve made lots of mistakes, reformed a lot of opinions and been a slave to adjustment and new realizations.
There was never a formal beginning to my bridge account. I would say it really started in the late 90s during the .com boom when I started my trading stock thread and professing taking money ‘off the table’ (out of the markets) when you’ve made good stock trades toward building a fund for down payment for a house, emergency fund, discretionary spending and a lump sum for possible early retirement. I didn’t start using the term “Bridge Account” until probably 2005 or so because it seemed to fit. Once I got it started, I really saw the benefit and a door really opened up in my mind. Other people seemed to get the concept well so it’s been my foundation of sorts when I help others.
My priority has always been a bit wonky, partly because of my own desire and partly due to poor commitment/execution. I’d say it has been:
1. 401k
2. Bridge Account
3. Mortgage
4. Roth
5. Other
Huge believer in maxing out the 401k to the max employer contribution amount. For those not able to do so, slowly increasing the contribution over a long period of time.
After that I was really enjoying building my bridge account as it allowed for many different purchases, investments, flexibility, etc. My Roth was/is the big failing and I’m only now getting back to it. By the time I really found the value of it, we were making too much to contribute to it. I’m now going back to funding it since I still have the side gig and can. As such, it only makes up a small % of my overall accounts, something like 4%.
Paid off my mortgage in my late 40s. Had made some extra payments, never refinanced it to a higher amount and it was easy to lump sum it when I had extra cash from the bridge account. Also was able to take advantage of the housing collapse to purchase the cabin out of the bridge account when the opportunity presented itself back in 2011 or so.
One thing I’ve never really done very well IMO is be very tax efficient. I’ve always prioritized building my accounts, keeping debt low, balance spending, etc. Could have done more to offload some of that income for tax efficiency but never put enough time into it. Probably still the case today. Can’t say I’d really change much because it all worked well but funding that bridge account became my own personal M.O. and its growth allowed for so much flexibility and options into other areas.
Hope that helps a bit.
RE55 says
It does. I’m low 30’s and want the flexibility of retirement at 50-55 so I was just curious how you planned (or didn’t) for that account. There’s always somewhere to put your money and neither place is necessarily wrong but rather more advantageous based on goals.
Jeff says
Well, I would definitely take advantage of all tax sheltered/advantaged opportunities, especially the 401k and Roth. If you start young enough with those two, you’ll take care of the 59.5+ years. So your goal will need to then be planning for the 50 to 59.5 years.
This is where your budgeting and income/expense control come into play, understanding what you need to leave to your desired lifestyle. This is where I spend most of my time when I help people come up with early retirement plans, investing strategies, etc. If you need $60,000 a year, then figure out the number of years you will need the “bridge” to cover and invest toward that goal. So if you desire to retire at 52 and need a minimum of 7.5 years of income, the initial goal would be $450,000 not accounting for inflation.
Of course, I would recommend a saving/investing strategy that accomplishes something more than that to provide maximum flexibility, perhaps such that you don’t have to touch your retirement funds until after your social security full retirement benefit but that will be dependent on your income, debt servicing, discipline, etc.
You’ve got youth and time on your side and you’re obviously thinking about it the right way. If you want to email me, you can at “InnerCircleTI”, it’s a gmail account.
Good luck to you!
MI#101 says
Enjoyed reading this as well as your Millionaire interview. Not ready to retire here yet but certainly have been thinking about the transition from working to retirement. I saw in your MI96 interview that you thought about working in New Zealand for a year or two. Given I live in New Zealand interested in what made you consider it an option
Jeff says
Thanks for the read and the comment. I still think about NZ even if it is not to work. For whatever reason, there are two areas I feel very close to even though I had/have never been to either, Scotland and New Zealand. My sister spends a lot of time in Scotland and I’ll be going within the next couple of years. As for NZ, I think it’s a combination of people I’ve met, things I had learned through research, etc. I can’t really explain it. And the when Lord of the Rings (my favorite movies of all time) came out, it was sealed.
We finally got to visit your fine country a few years ago for almost three weeks. Only saw the north island and would like to make it back to see the southern. The time we had there was perfect and I love your country more now than I had even before going. The people are fantastic! It reminds me a lot of the Pacific NW here in the States.
Protect what you have there fiercely.
MI101 says
Agree with your comments about NZ feeling similar to Pacific NW. I have a friend in Seattle whom I have visited a number of times in last 25 years and thought the same. In fact if it was not for Covid 19 we would just have arrived back from 5 weeks in US including visit to Seattle and Alaska.
We live on 45th parallel southern version and during a visit to Portland a few years ago did a day trip around Mt Hood area and was struck by the the orchards which grow apricots and cherries which is exactly what is here along with vineyards
Jeff says
We loved the Napier area there when we visited and being wine people we made sure to spend a few days there and rode bikes to the vineyards, etc. Was a lot of fun. We are actually considering moving to Walla Walla because, to us, it’s the best wine region here in the PacNW and it shares the same latitude as the Bordeaux region of France, 46 degrees N. Though topography is different. Even where we live now, small vineyards are popping up practically in our back yard. Young wine makers without a lot of experience but up and coming and easy to support.
For now Portland is in our back yard and we love the PacNW.
Jules says
Great interview! I’d like to hear more about what your conversations sounded like with your employer when you tipped your hand at wanting to retire early especially at such a young age. It seems you negotiated a great “final lap” or two that really paid off. I’m a 51 year old senior executive at a financial services organisation and have almost 29 years of service under my belt. Also currently leading a large strategic initiative. I’ve hit FI and am really getting beat down by stress and an unpleasant boss. Any insight or suggestions on how to have that conversation would be very helpful?
Jeff says
Howdy Jules … sounds like me. Was a senior level exec (CIO) for 20 years at my last financial services organization. This will probably resonate with you but my last project was leading a core conversion, starting with RFP and all the way through the conversion. We converted on 6/1/19 and I retired on 9/12/19. They asked for at least three months after the conversion.
The stress had been building for a long time and i’ve been in I.T. my entire life. Always handled the stress well and even thrived on it but as I got older, as I mentioned in my interviews, it started impacting me in ways that surprised me. It wasn’t just the management, project, etc. work but really all the new regulation, policy/procedure, audits, etc. that took the fun out of the job. I still loved my staff and the organization but it was time for me to execute my 2.0 as I came to call it.
The one thing I didn’t really want to ever do was a core conversion but as I was nearing the finish line, the core conversion became a necessity. The CEO (a good friend) knew my time was near but I committed to doing the first part of the project but let him know another exec would need to finish it up. Each part would take about 12-18 mos. and we took our time. After I finished up the first part all the way through contract, discussions began about who would run with the actual conversion part of the project.
Long story short, everyone took one big step back. Eventually the CEO called me after work to have the “what would it take?” discussion. I’ve always been a company first person so I didn’t ask for much and knew in my heart it was coming so I had mentally prepared myself anyway. But figured I’d use it to my benefit so I negotiated a small bonus, ensured they’d let me keep my benefits after my physical last day while I used all my vacation to get me from 9/12 through early January. They got me VERY cheap and I didn’t ask for much. I was in very good standing within the organization and was even in line for perhaps being the CEO but I decided it was time for my 2.0.
Up above we are getting a group together so I’d suggest getting involved by sending an email and maybe we can chat and compare notes. Sometimes just knowing your finish line is in site can give you the purpose needed to endure another year or so while you finish strong for your organization.
Hope that helps
Tony says
Great move with holding on to the funds after rolling over your 401k into the brokerage account. A similar event happened to us after relocating from new England to mid-west in 2019. I started consolidating all prior job retirement accounts to Schwab and sold two houses. By the end of 2019, we had a majority of assets in taxable and about 50% non-taxable accounts in low risk funds, money market and cash. In beginning of 2020, I started getting the itch to jump in early February. I invested most, and still am to some extent, between mid-Feb to present. I am positive by over $350K right now with a combination of buying and reallocating portfolios over the past 5 months. It was luck and timing.
I thought I was stupid at first for keeping so much in cash and safe assets from Oct-2019 to Jan-2020. I thought (like you) the market was over bought. Plus, I was scared and feared taking any losses. I kept getting the calls and push from the people at Schwab to buy into one of their financial management plans and did not pull the trigger because I wanted to learn and do myself.
Looking back, I think if i would have jumped in at that time and bought in I would not have been better off.
I am 48 and would actually like to retire in the next 5 years. I really liked your MI and RI interviews
Jeff says
Thanks for the comment Tony. I hate being out of the market but, at the same time, I’m also a realist related to a 10 year bull market. But I’ve tried and failed many times to time the rise and fall and while I’ve been successful some times, it’s a fool’s errand and I recognize that. I just chalk this big event of fortune as good luck and I’m doing my best to make sure I use it well. I’m still scaling into long term positions and will go hands off at some point, although I do plan on selling calls against some of the positions for added income.
Sounds like your on the right path being five years my junior and will be able to make an intelligent call on your ultimate date to pull the cord when you get closer. I would definitely advise though to take a look at your diversification to ensure it’s what you want to take into retirement … which will allow you to start rebalancing well ahead of the actual date so you don’t have to take too many cap. gains in one or two years. It’s painful. Just slowly start rolling into your retirement mix so when you do pull the cord, you’re all set.
Thanks again!
Tom from MD says
This is a great interview – very candid and full of nuggets. I started reading it last night, and this morning was talking about the idea of a “bridge account” with my wife over morning coffee. I *love* that concept! Previously, I had mapped out our income over the years, noticing that several years (from whatever date I stop working until I take various benefits at 62, 67, or later) were sparse. My thought was to simply take more funds from a taxable account, but now I have much better clarity. I’m going to start that bridge account and fund it to cover the income gaps. Brilliant!
This interview, and the MI companion interview, are two of my favorites, and I think I’ve read most all of them. Thank you for contributing!
Jeff says
Thank you very much Tom. I absolutely love it when someone can use any of my strategies, constructs or passion to assist in their own situation. It is really amazing how developing your “bridge” can give real purpose to your working years while also providing so much flexibility if/when that time comes you are prepared to step into retirement ahead of 59 1/2.
If I can answer any further questions, don’t be afraid to ask, comment here or email me at “InnerCircleTI” at gmail. I ran a very successful stock trading threat back in the day (late 90s) on Silicon Investor called Trader J’s Inner Circle. I’m more active there recently since I retired and finally set up an email.
Continued luck to you!
Amanda says
My bridge account now at 49 years old is at $518K which is much lower than yours at same age. I’m curious how you invest that bridge account funds? It seems very high bridge account that you have and I wonder why you didn’t retire even earlier. As, my anticipated spending won’t be over $50K/year even if I retire at 50, I would have sufficient funds. The bridge account was started about 6 years ago after realizing the concept of FIRE.
Jeff says
Hello Amanda … thanks for the comment.
Congrats on having a that great bridge … that’s awesome work there. In my mid 40s, probably about 46 or 47 I had actually put a $1.45M bridge target/goal in place as my “ideal” level that I felt would allow my to secure a safe early retirement. My upper end (dream) goal for the bridge was 1.75M. At that time, I wanted to have $1M total in tax advantaged accounts.
Take a quick look back at the above section for more info: What did your pre-retirement financials look like?
Simply put, this past 5 years of the bull market combined with my extra focus on putting away money combined to create a firestorm of account growth. Even in my wildest projections, I didn’t expect to see the numbers I did. I had some very fortunate stock trades in addition to my “safe” investments.
So, I could have retired sooner knowing what I know now but two factors stopped me from looking at age 50:
1) Dedication to my employer with a big project on the horizon
2) As my old CEO and I used to say all the time: “Once you retire, what you have is what you’ve got” meaning it’s much more difficult to add to the coffers after you step away from a good salary, benefits, etc. So whatever you have better make it. Age 50 would have been great but I wanted to ensure I padded as much as I could to weather storms, unplanned events, possible health emergencies, etc.
As it turns out, being that those extra three years were so good to me financially, I wouldn’t have done it differently. I knew the end was in sight, it gave me some empowerment and purpose to my work and it allowed me to focus even more on the ultimate prize of early retirement.
Hope that answers your questions. Feel free to add comments here or email me a “InnerCircleTI” at gmail if you have other in depth questions.
Amanda says
Jeff,
Thanks for the clarification. I think we are definitely on the same page. You definitely made a solid plan and executed well.
Mi-77 says
Thanks Jeff for the article. It’s amazing to see you took the time to plan and organize your finance to get ready for the retirement. I am semi-retired myself and I can relate to a couple of things you are saying. 1)People at work is just that, people I worked with, keep it professional and once I retire, I don’t expect to socialize or interact with them again, unless of course they take the initiative. It’s sad, but it’s just business. 2)I also found my NW grew tremendously in the last couple of years without me really paying attention to it. I guess what Napoleon Hill said in his book is true, “Think and Grow Rich: 🙂 Thanks again for your insightful article, I learned a lot. Thank you thank you thank you!
Jason
https://esimoney.com/millionaire-interview-77/
Jeff says
Howdy Jason,
Thanks for the comment. To me, it doesn’t seem to be “amazing” because it’s just who I am. I have a saying about “who you are vs. who you are trying to be” and when something is already who you are, you do it naturally/organically without much though. That’s not to say it doesn’t mature and grow and I certainly did. Made plenty of mistakes and could have done so many things much better but that’s all part of the process.
As for your two points, completely agree with that. I didn’t really have much expectation in any broad sense but thought some of the relationships would be a bit more durable. While others I thought would fall away actually went the other way. But I can’t say any have been real deep so I guess it was just business as you say. It’s all part of the experience. And you are spot on about how the NW can grow without a lot of attention. With a proper foundation and a little cultivation, time and pragmatism can yield great results and I find it’s better in many cases when I just take my hands off the wheel.
Thanks so much Jason and I’m going to go back and read your MI.
M73 says
Really enjoyed this and the methodical and detailed approach and congratulations and thanks for sharing.
Curious if you lead an Oracle or SAP project as the Phase 1/2 and long duration is typical. Asking because I work as a SAP consultant.
The retirement interview series has become my new favorite and that says a lot given the Millionaire interview series is one of the best in the personal financial space.
M73
https://esimoney.com/millionaire-interview-73/
Jeff says
No, in my line of business, Oracle/SAP are rarely/never seen. The solution is just too big and too expensive in most cases I think. In my business, solutions are usually provided by a third party provider who are very specific to the industry. For the most part, there are only three large providers if you have an institution of any size. Have heard great things about Oracle and SAP though.
Wind says
I really enjoyed this. Thanks to Jeff and ESI!
I love ‘bridge account’ idea. We are heavily invested in 401K and not much in brokerage account. I found out about FIRE about 2 years ago and have been tracking expenses.
I am 38 and my husband is 44. We are living in north eastern area where everything is expensive.
I think we can leave corporate sooner than 60 years old but my husband doesn’t really believe it. We have about $1M excluding our 1 bedroom condo but about $800K is in 401K.
I want to ask if we can reduce contribution to 401K and focus on building ‘bridge account’. We have been maxing out 401K so I want to reduce it to just company match and re-direct money to ‘bridge account’. I think 401K will grow to over $1M by the time we reach 60 yrs old even if we stop contributing.
Can you share what calculator/spread sheet you use?
I love idea about small group to share idea, progress, plan, strategies, etc.
Thank you! 🙂
Jeff says
Thanks for the comment!
Firstly, given the age difference between you two, I’m going to assume when you say 60, you are talking your husbands age, 16 years from now which would put you at 54. Sounds like 80% of your funds are in a 401k with the remaining in your growing bridge account.
Not knowing much about your income, investment allotments, etc. Let me take a different kind of approach. Without any other continued investments, your $1M nest egg in both accounts should double as long as you have them in other vehicles beside money market, cash and CDs. As long as you have a 60/40 investment mix or greater, I’d wager that (given historic returns) your balances would be somewhere in the $2.2M-$2.5M. That is not taking into account any inflation or additional investment.
That stands to reason as I was at a similar place when I was 44 so I think you are most definitely tracking similarly. And if you are contributing a good amount regularly, you should be able to be north of that figure. Again, that does require an investment mix generating 6% returns or so.
As far as redirecting your money to the bridge account from your 401k, I would say “no.” I always advise to max out your tax advantaged accounts to the best of your ability, that means $19,500 max and using the catch up contribution increase when you reach age 50. Instead, continue to be efficient with your debts and debt servicing, and continue to funnel ‘extra’ or additional money to your bridge account. With no further investment, I think that could rise to $450,000 or so in that same time frame, but further investment takes that well north of that figure, providing a nice bridge for your early retirement.
As far as what calculators and spreed sheets I use, for the most part i use my own which I have come to trust but I did purchase a relatively complex piece of software from Pralana (private individual who created his own software) for when I consult/plan for others. Most prefer me to do it for them to avoid the complexity but it’s a great tool.
I would say you are well on your way and things are looking good for you. Stay the course, keep giving to both accounts and mind your debt and you will be able to consider FIRE earlier than expected.
Hope that answers your questions. Feel free to add comments here or email me a “InnerCircleTI” at gmail if you have other in depth questions.
Wind says
Thank you for your quick and detailed response! I will reach out to you. 🙂
David says
Jeff. Congrats man. Can you explain how and when you started to re-balance into safer assets? I’m about 10 years to fire, so currently sitting at 100% equities. I’m thinking 5 years to fire, I’ll start to add bonds into the mix.
What was your strategy?
Jeff says
Hello David, thanks for the comment.
I started rebalancing essentially 18 mos. before I pulled the cord. But mentally i began about 3-4 years prior. Mentally in the fact that I wasn’t engaging in riskier trades and had really stopped most of my trading activity and started picking up better names slowly over time starting 3-4 years before.
But the problem was that there was no way I was going to truly be able to rebalance through that effort, it was going to have to take some very large sales of equity positions, think Apple, Google, Facebook, Alibaba, etc., to the tune of six figures of capital gains … and then rolling those funds into more well balanced or income related vehicles, like bonds, some cash, blue chip income, foreign, etc.
It stung badly and I had to stage the bulk of the rebalancing over two years, at the beginning of 2018 and again in 2019. Note, however, that the second account of my “Bridge” is for years “2-8” so as long as I had that diversified fairly well, anything left over in the 9+ account could be a bit more aggressively invested. I had to resist the temptation to just let it ride knowing that I also had my retirement funds to back stop me should the market tumble a bit … rather than force the cap. gains for rebalancing. So I bit the bullet, rebalanced, build my 2-8 account with a level of safety I felt good about and let the rest go to my 9+ account where I added a good measure of bonds, foreign and income plays.
Your strategy sounds realistic to me but that may be dependent on the size of the bridge. If you are projected to have excess bridge funds, you may be able to be a bit out of balance and slowly scale into it. But if you are threading the needle with your bridge with just enough to last until 59.5, you want to be much more careful with your balance. This is where I suggest FIRE individuals really prepare early, get debt paid off and then lengthen the career for a year or two to provide that cushion if you can stomach it.
Hope that helps a bit. Stay on the path … you’re obviously doing well.
Feel free to reach out at “InnerCircleTI”, it’s a gmail account. The TI stands for Trading and Investing and is the name of my stock trading thread on Silicon Investor that I started back in the 90s
David says
Fat fire is the goal (~100K annual spend). My biggest concern are capital gain taxes, but I’ll bite the bullet early. I can make that up with many years/decades of Roth conversion ladders.
I’ll see where the market is at during those 5 years, so ideally it’ll be 90/10, 80/20, etc. till it’s time to fire (50/50).
Jeff says
Seems reasonable and sounds like you have many years to adjust as necessary. Congrats on your discipline and results thus far.
YS says
When they asked “what would it take”, did you ask for subsidized healthcare to bridge you to Medicare?
Jeff says
No, they wouldn’t do that and I wouldn’t ask. It wasn’t an expectation from myself. Perhaps it should have been but I’m not really wired that way.
JeffB MI20 says
I feel your pain about the travel refunds. I started a travel agency as a side gig in retirement for friends. I have had our Panama Canal cruise cancelled and our African safari and probably our cruise in November. I have received all of our refunds except the money down for Africa, which we moved to April. I get that the companies can’t just give refunds out all at once, but this is an unprecedented time in travel history. Like Airplane, “I picked the wrong time to start a Travel Business”, but for me, it’s more of finding deals to save money than to make money.
JEFF says
Thanks Jeff. Yeah, seems like a great business to be in but just bad timing. LOL. No one really saw this coming. If I had I may have stuck around for another year. Heck, if I knew I was going to be able to work from home, avoid the drive and approximate retirement, why not get paid too?
Would love any travel tips you have. You can always reach out at “InnerCircleTI” … it’s a gmail address
sean says
Sorry if you mentioned it somewhere here, but I notice you talk a lot about the need for a bridge fund. Is there a reason you didn’t look into doing SEPP withdrawals? This, of course, is allowed at any age penalty free.
Thanks
JEFF says
Howdy Sean. No apology necessary and no I didn’t mention any SEPP withdrawals. It’s not something I ever would have considered. I’m actually far more of a fan of people using their working years to fund their retirement accounts and then not access them for as long as possible, rather than tapping them early for early retirement. Sure, if there is an emergency or the like but once you do, last I heard you had to keep taking substantially equal payments for at least 5 years or until you reached 59 1/2.
I think SEPPs would be great for times of unexpected need but if individuals are working, I strongly recommend giving to the max possible and then not touching that money while using good financial practices to build the after-tax bridge fund.
Once you start tapping retirement accounts under SEPP, which will still be taxed, it’s a slippery slope and I’d worry many wouldn’t have the balances to fund the remaining years of their retirement. If that was something a client or someone I was working with was considering, we’d model it but I’d strong suggest they instead use another couple of years to focus on building the bridge such that they don’t have to tap retirement accounts.