Retirement Interview 40

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 in August.

My questions are in bold italics and their 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’m 49 and my husband is 51.

We’ve been married for almost 20 years.

Do you have kids/family (if so, how old are they)?

No kiddos for us.

We’re pet parents. We currently share our home with a rescue mutt who keeps us active on daily walks and ball-throwing sessions.

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

We’ve lived in the Southwest U.S. for nearly 20 years.

We’re in a suburban neighborhood, about 20 miles outside the city.

Is there anything else we should know about you?

I’m Millionaire Interview 346.

RETIREMENT OVERVIEW

How do you define retirement?

For me, retirement means no longer working as a full-time employee.

It’s about reaching a financial position where work and earning money becomes optional.

Retirement is about freedom to choose how I spend my time.

How long have you been retired?

After exceeding our target net worth in 2020, I chose to retire in February 2021 after spending 25+ years working in the tech sector.

Is your spouse also retired?

My husband chose to semi-retire from his 20+ year career in 2021. This was not planned but has turned out to be a great decision for us.

A month after I retired, my husband’s employer restructured the company. As a result, his role and reporting structure changed—and he wasn’t happy about it. He quickly decided to quit and join me in retirement. Shortly after, several of his coworkers also joined in on the “Great Resignation” and left the company to take other jobs.

Had this corporate restructure happened a year or two earlier, I do not think he would have quit his job. But that’s the beautiful thing about achieving financial freedom. It gives you options!

So, unexpectedly, we enjoyed our early months of retirement together, decompressing from our hectic careers.

However, after only a few months of retirement, my husband was asked to support a former client on a part-time basis. He soon realized he enjoyed the consulting work, and freedom of working remotely, and plans to continue doing it for the next few years.

The primary reason my husband continues to work is to keep himself busy doing work he enjoys with people he enjoys. But it also helps provide further assurance that we have accumulated enough to maintain our current lifestyle. He worries more than me.

What was your career and income before retirement?

I spent my career working in marketing roles for large and mid-size tech companies and gradually climbed my way up the ladder into a c-level position.

My income averaged $800K during the last few years of my corporate career as a combination of base, bonus, and equity.

Why did you retire?

My retirement was voluntary.

After achieving our goal of financial freedom, my motivation to continue working in a corporate environment rapidly declined. When earning more money became a nice to have versus a need to have, I lost interest in the corporate hustle. It became harder and harder for me to give my best at work.

I had always dreamed of the day I could wake up and do whatever my heart desired. I realized there was nothing stopping me from making this day a reality. So, I gave notice to my employer and quit my job.

PREPARATION FOR RETIREMENT

When did you first start thinking seriously about retirement and when did that turn into a decision to do it?

I started thinking seriously about retirement in my early 40s. It was around this time that I realized the possibility of retiring in our early-to-mid 50s was within reach. Setting an early retirement goal helped motivate me to advance my career and grow our earnings.

Then, about 2-3 years ago, the stress of my career began to wear on me, and I found myself spending more and more time running numbers to see how quickly we could reach our target net worth. I projected this would happen in 2022.

In 2020, despite the pandemic being in full swing, the stars aligned for us. The company that I worked for was acquired and my equity immediately vested. Earning this payout suddenly pushed us past our target number!

At first, I planned to work one more year to make the most of my annual bonus and newly granted RSUs. However, over the next few months my motivation to give my best at work rapidly declined. I soon decided I was ready to begin my next chapter and gave my notice.

What were the major steps you took from deciding to retire to developing a plan to do so?

Once I decided to retire, my first step was to put my employer-provided insurance to use while I still had it. I scheduled an overdue physical, colonoscopy, dental cleaning, and eye exam. I also maxed out my vision benefits with new glasses and contacts.

My second step was to lower our taxable income. I worked with my employer to max out my 2021 contributions to 401k and HSA accounts in my final paychecks.

My next step was to review and update our insurance policies (auto, home) and add an umbrella policy. I also looked at long-term healthcare insurance but decided to wait a few more years before buying.

My last step was to sign up for my husband’s employer-provided health insurance. However, that plan changed after he decided to quit his corporate job. I signed us both up for Cobra plans with the intent to move to a high-deductible ACA in 2022. I would have moved us to ACA immediately, but our income wasn’t low enough last year to qualify for subsidies.

At the time, I didn’t plan to withdrawal money from our taxable investments to cover our living expenses. I expected our annual expenses would be more than covered for the next few years by my husband’s income plus annual deferred compensation payouts from my prior employer. I also planned to eventually earn a small amount of income myself from hobby-related pursuits.

What did your pre-retirement financials look like?

Our pre-retirement financials were roughly $4.5M:

• ~ 30% in pre-tax accounts (index funds, low cost mutual funds)
• ~ 55% in taxable accounts (cash, index funds, stocks)
• ~ 15% in home value (no mortgage)

We do not carry any debt or earn any side-income from rentals, etc.

What was your overall financial plan for retirement?

The first step in developing our financial plan was defining a target net worth to support our lifestyle in retirement. For us, this meant having at least 30x our annual estimated spend in our investment accounts (we did not include our home value as part of this amount).

So how did we estimate our annual spend? I’ve been tracking our income/expenses in Quicken for the past 20+ years, so I already had a good idea of how much we spent each year. I then increased this amount to account for higher medical insurance and created a cushion for additional recreational activities.

In addition to building a nest egg of 30x our annual spend, we also planned to pay off our mortgage prior to retirement. It was important for us to be debt-free before quitting our corporate jobs.

In building our financial plan, we looked at our retirement timeline in two phases:

Phase 1 = early retirement and managing our money over the next 8-10 years.

Although our financial plan was built to fully fund our early retirement, our goal during this timeframe is to earn enough income to cover most, if not all, of our annual expenses and let our investments continue to grow.

We planned to do this by doing work we enjoy. For now, that means part-time consulting work for my husband, and pursuing a new hobby-related business for me.

We also expect to pull money from our taxable accounts during early retirement to cover big-ticket expenses, like buying a new car or major household repairs.

Phase 2 = long-term retirement and managing our money from age 59 onward.

At this point we expect to begin withdrawing money from our retirement accounts. I’m not sure exactly which accounts we will pull from first, but my priority will be to establish a plan that allows us to be as tax efficient as possible and lower future RMDs.

Did you make any specific moves to prepare your finances for retirement?

Paying off our mortgage. We did not want to carry any debt into retirement.

We also renovated our home 3 years ago. It was something I had wanted to do for some time, and knew we had to do it while I was still earning income. It’s not the kind of expense I wanted to take on in early retirement.

Of course, it started off as just installing new flooring, but ended up being a full renovation—new kitchen cabinets, island, countertops, flooring, fireplace, interior paint, office built-ins, and new furnishings. And I love every part of it!

Who helped you develop this plan?

About 10 years ago I started working with a financial planner. That lasted about 2 years before I realized they weren’t doing anything more than what I could do myself. So, I ended up developing our financial plan myself.

This included reading several books and blogs, spending countless hours number crunching with excel spreadsheets, teaching myself about different tax strategies, and using several online tools and calculators to pressure-test different scenarios and assumptions. For example, I used Fidelity retirement planning tools and Monte Carlo simulations.

Luckily, I love learning about financial planning and continue to learn more each day. It’s a fun hobby.

What plans did you make in advance to leave your job?

My plans consisted of tying up loose ends with my job.

That meant getting my budget and operating plan locked in for the coming year, completing performance reviews for my direct reports, and doing what I could to make the transition go as smoothly as possible.

What were your pre-retirement concerns (financial or non-financial)?

I didn’t have any big concerns prior to retiring. I had done so much number crunching and planning over the years that I felt comfortable with our situation.

My primary focus was helping my husband feel comfortable with my decision to retire. Evidently, I helped him feel very comfortable since he opted to retire shortly after me!

How did you handle deciding on and paying for healthcare?

Initially, I planned on signing up for my husband’s employer-provided insurance plans.

Instead, we paid for Cobra the first year of our retirement and then signed up for a high-deductible ACA medical plan for 2022.

How did you tell your family and friends of your plans?

Telling my parents was easy and they were both very excited for us. They knew how hard I had worked over the years and were happy to see me slow down. Both of my parents retired early so they thrilled and proud to see me be able to retire even earlier than they did. They were especially happy I would have more time to spend golfing with them.

My brother was less than enthusiastic about my good news. He would love to be able to quit working, so I think it brought about some feelings of jealousy.

My husband shared our good news with his family. His dad’s first reaction was surprise and concern. He wasn’t convinced early retirement was a good idea, but he’s mostly been quiet on the topic.

Sharing the news with my friends was a little awkward. But this was more about my own feelings. It was strange for me to say the words, “I’m retired” out loud for a while. Mostly my friends were happy for me and curious to hear how I planned to keep busy without work.

THE ACT OF RETIRING

How did you ultimately retire?

You might say I took the easy way out.

Instead of telling my boss I was retiring, I positioned my resignation as a career break. I was only 48 years old, and it just felt easier to say I was taking a break from work for a while.

This was in early 2021, after a year of working from home during the pandemic, so my boss and everyone else completely understood my desire to take a break from work. In fact, after I told my boss about my plan to take a break, she confided that she had been considering doing the same thing.

So, I turned in my resignation and then proceeded to tell my team and coworkers about my career break. No retirement party for me.

What went well?

Although I wasn’t looking forward to turning in my resignation, the conversation with my boss went well. As I shared above, she could relate to my desire to take a break from work.

My final few weeks working went according to plan. I was able to wrap up loose ends and leave my company on good terms.

What didn’t go so well?

Nothing comes to mind.

The process of retiring went well for me.

How did you ultimately find the courage to do it?

Initially, I planned to work one more year before retiring.

But in the end, I simply couldn’t do it. My head and heart were no longer invested in my corporate career. I couldn’t meet my own work standards, and that didn’t leave me feeling great about my performance.

I knew it was time to embrace my next chapter.

RETIREMENT LIFE

How was the adjustment, especially the first few months after retirement?

My adjustment to retired life was very smooth. My husband didn’t retire until two months after me, so I spent the first several weeks enjoying retirement on my own and settling into a new routine.

This included waking up early, taking long walks, reading books, enjoying afternoon naps, catching up on household chores, booking several getaway trips for the coming year, learning how to golf, and journaling about the joy of my new retired life.

How is retirement life now? What do you like about it and what do you dislike?

I enjoy everything about retirement life.

I’m living my dream.

What do you do with your time? What does an average day look like?

I haven’t had any problem keeping busy since retiring. The first few months of retirement were about decompressing from my career. This meant more time hiking, biking, walking, napping, reading, cooking, and working out. It also meant tackling an overdue list of household chores. My house has never been cleaner! We also enjoyed a few road trips and vacation with friends.

Once my second year of retirement rolled around, I finally decided to start building my new business. It’s more of a hobby, but I treat it like a business with goals, objectives, timelines, etc. My work/hobby is now a large part of my routine, but it’s fun and enjoyable work that provides a great creative outlet. Also, I’m not earning any money…yet.

Today, an average day looks something like this…

5:30am — wake up early because I’m excited to start my day. Feed our dog and spend the next 1-2 hours enjoying coffee, breakfast, journaling, and surfing the web for the latest news.

Morning Activities

• Orange Theory workout. I’m on a pretty good routine of doing this 5 x week.
• Work on my hobby/business for a few hours
• Meet up with friends a few times a month

Noon

• Enjoy lunch with my husband, followed by a long walk with our dog if it’s not too hot out. We make lunch at home most days, but often go out to eat on the weekends.

Afternoon

• Household chores, running errands
• Spend more time on my hobby/business
• Meet friends for drinks or dinner 1-2 a month, Facetime chats to catch up with out-of-state friends

Evening

• I cook dinner 5-6 nights a week, and then we eat out 1-2 times too.
• Watch TV, read the news, work on my hobby
• Join my husband for a long walk with our dog

We also golf once a week, hike occasionally, and in the winter we head up to the mountains for several ski days.

What are the major activities that fill up your time in retirement? Are there any new ones you’re planning to try?

Golf is a new activity for me.

Shortly after retiring I signed up for golf lessons. I had always wanted to learn how to golf, but never felt like I had the time to focus on it. I’m really enjoying it, and it provides a fun way to spend time with my husband and parents.

What is your social life like?

It’s good. We are both home bodies, so going out to dinner a few times a month with friends/family or spending a day golfing with friends/family suits us perfectly.

We also have another couple who are our perfect match for active, outdoorsy vacations.

Looking back, what would you have done differently?

I sometimes wish I would have refinanced our home before I quit my corporate job. Interest rates were so low, and it would have been great to have that additional liquidity.

But it also feels great to have our home fully paid for and mortgage free.

Was there any emotional impact from leaving the workforce?

Yes, I was elated. Leaving the workforce was blissful, just like I imagined it would be.

Like many workers, I didn’t realize how much stress I had been carrying around with me over the years until after I quit my job. An enormous weight was lifted from my shoulders. I was finally able to enjoy my full weekend and not start thinking about my upcoming work week on Sunday evenings.

What surprises (financial or non-financial, good or bad) have you had since retiring and how have you handled them?

Surprise #1 – I was shocked to see our home value skyrocket. I expected and hoped our home would continue to grow in value, but never would have imagined it to go up so much. It did make us consider selling and downsizing our home to invest the proceeds. But I’m not ready to make that move yet.

Surprise #2 – I was not expecting my husband to quit his job so soon. But I am so happy we were in a financial position where he could choose to leave a bad situation. This was the whole reason we saved and invested—so work could be optional. And his new work setup consulting on a part-time basis couldn’t have turned out any better.

What are your future plans?

Our future plans are to keep doing what we’ve been doing. We want to stay active and healthy and just enjoy each and every day. This means more time in the mountains hiking and skiing, as well as spending quality time with our families.

We both feel so fortunate to be in the position we are today and just want to make the most of it.

RETIREMENT FINANCES

How has your financial plan performed compared to what you had estimated before retirement?

Our financial plan has performed as expected. It’s been disappointing to see our investments decline this past year as part of the market downturn, but at the same time we aren’t withdrawing from our accounts at this point.

The biggest surprise has been seeing our home value explode. This has been a nice surprise, and hopefully someday we will reap the rewards when we decide to sell.

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?

Our post-retirement spending is $100-110K/year. Here’s a rough breakdown of spend categories:

• 15% – food
• 10-15% – medical, dental, vision (not including potential ACA subsidies)
• 15-20% – vacations, recreation
• 10-15% – home (maintenance, repairs, taxes, HOA)
• 10-15% – misc (clothes, gifts, pets)
• 10% – utilities, cell phone, internet, etc.

My husband’s part-time consulting work and my annual deferred compensation payout more than covers our annual spending.

How are you handling Social Security, required minimum distributions, tax issues and the like?

Much of these decisions are still in flux. I certainly want to take any steps we can to minimize taxes and have control over when and how much we withdraw from our investments.

I would like to move some of our pre-tax investments into a Roth account to lower future RMDs. To date, our income has been too high for this to make sense.

As for Social Security, my current thinking is we will wait until age 67 before taking payments.

Did you return to paid work? Why or why not?

I have not returned to paid work.

However, I do hope to eventually turn my hobby-related pursuits into a side income. This is less about earning money to pay the bills, and more about challenging myself to achieve a new goal.

Did you find it hard going from being a saver to a spender?

Not really. I’m sure this is because we’re still earning enough income to cover our annual expenses. I do find myself thinking a bit more carefully about how I spend our money. For example, I look more closely at prices at the grocery store than I did before.

Also, because we have a good amount saved in our taxable accounts, we will likely continue to contribute income to retirement accounts the next few years to further lower our taxable earnings.

Looking back, what do you wish you knew in advance?

A few things I would go back and tell my younger self…

• Save and invest more sooner. Although I began contributing to my 401K as soon as I joined the workforce, I should have maxed out my annual contributions immediately.
• Invest in low-cost index funds sooner. My investments were not optimized for growth for the first 10-15 years of my career.
• Don’t sell your homes. Instead, keep them and rent them out. I bought a townhouse when I was 22 years old and should never have sold it. Same thing with the first home we bought as a married couple. It was a great starter home, and we should have kept it and rented it out. It sure would be nice to have both of those as income now that we’re retired.

What advice do you have for those wanting to retire?

My advice is to plan for retirement. Spend time really thinking through what you want out of retirement.

• How do you want to spend your time?
• What will make you happy?
• What’s must have vs nice to have?
• How will that change over time? (I found it helpful to think about my retirement in phases, both in terms of interests/activities and financials)

Once you understand the type of retirement you want to have, then you can run the numbers and figure out what it will take to get there.

And last, retire as soon as you can. It’s wonderful!