Retirement Interview 49, Part 3

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 May.

Today is the final post in a three-part interview series that is simply amazing. In case you missed part 1 or 2, check out Retirement Interview 49 and Retirement Interview 49, Part 2 before reading this post so you’ll be caught up before proceeding.

My questions are in bold italics and their responses follow in black.

Let’s get started…

RETIREMENT LIFE

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

Life settled into its new routine. We were still parenting a nine-year-old who showed early signs of teenager, and we had a lot of home-improvement projects to catch up on.

For about two months, I took a daily nap. That doctor’s joke about chronic fatigue wasn’t a joke after all.

A few months after I retired, my last military haircut was getting shaggy. I’d grown up in 1970s Pittsburgh before joining the military, and now at age 41 I’d never in my life been allowed to choose my hairstyle. (I have the school photos to prove it.) I decided to grow a freedom ponytail, even if the experiment turned awkward.

A few years later I had the longest hair in our household. My spouse liked it. Our teen was mostly embarrassed but she already avoided being seen in public with parents. Surprisingly, my ponytail gave me surfer-dude credit in the lineup at my favorite break. Of course everyone can tell you got thrashed on that last wave when it pulls the elastic band out of your hair.

A few years later I considered cutting it off, but my spouse admitted that she liked the look. These days I still celebrate the anniversary of my last haircut on social media.

I grew the freedom beard, too, but submarine crews have always grown beards when we’re underway and under water. On permanent shore duty it was too hot for Hawaii weather, and these days I shave the fuzz off my face a couple times a week.

I started new exercise habits. I’d had a baseline for the military’s physical-fitness requirements, but now I could surf and lift weights on my terms. We used the local military base’s free gyms and eventually filled a room at our home with our neighborhood’s garage sales of used gear.

I spent some of my new 40 hours per week doing more of what I’d done with my few hours of free time during my working years: reading books and posting on Internet forums. I explored investing in more detail, especially asset allocation.

In October 2002, four months after I retired, the stock market (and our net worth) bottomed out from the Internet Recession. Of course nobody knew that at the time, and we were pretty sure it was all going to zero (especially the NASDAQ). I kept up with the headlines and we had a couple of intense spouse discussions about stocks & volatility. However we still had pension income and nearly two years of cash to get through those months, and our concerns faded away as we became comfortable with our new normal.

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

Life is good! Every few years we settle into a different theme or a new routine.

The best part of financial freedom is having more control over our time and our lifestyle. We can explore interests and new hobbies without having to cram them into evenings & weekends. We’ve still encountered surprises and challenges (especially parenting), but we’ve had the time (and mental bandwidth) to deal with them.

We love the slower pace, and we try to avoid obligating too much of our time. We don’t have to push for deadlines or artificial goals. Even when we’re traveling we can set our own pace and take a down day 2-3 times per week.

I’ve mentioned several times how starting our family changed our priorities. I’ve been pleasantly surprised at how grandparenting has changed our priorities too. (Every grandparent reading this just thought “Duh.”) We’re really looking forward to her move back to Oahu and watching her grow up. And spending more time with her parents too!

We added slow travel to our lifestyle when our daughter started college. We prefer spending weeks in a location, exploring the neighborhoods and living like locals. As military retirees we can fly Space A on Navy or Air Force aircraft anywhere they fly — mainly across the U.S. and to Europe & Asia. Retirees have the lowest priority (if the aircrew is even taking passengers) so we don’t usually know exactly when we’re flying, and occasionally the crew will change the plan at the last minute. We like the adventure and the camaraderie of flying with servicemembers.

As you might expect, we hate having our time wasted by other people or bureaucracies. Although we love being responsible for our own entertainment, there are still times when we tackle too many things at once. That turns into a very tiresome day (or even week) and we have nobody to blame but ourselves. We keep re-learning to leave blank days on the calendar to allow space for the unexpected.

Oh, and it’s been over 21 years since my last haircut. I still have the ponytail but my family genes of male pattern baldness are slowly eroding the rest. I doubt I’ll ever visit a barber shop again.

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

People still think I’m joking about starting every morning with the surf forecast. I usually wake up at 4-5 AM (after 6-7 hours of solid stress-free sleep) and eat breakfast. I’ll paddle out at dawn for the calmer winds and (slightly) better waves. I’m back home by 9-10 AM for chores or errands, lunch, and perhaps a nap.

I paddle out 2-3 mornings per week with recovery days in between. (I try to avoid the weekend crowds.) If the swell is very good then I might go 3-4 days in a row (even on weekends), although my muscles will struggle to keep up and I’m chugging ibuprofen. I’m comfortable in waves up to 20 feet, although I greatly prefer 4-6 feet and an occasional North Shore winter proficiency session up to 15 feet. I’m a longboard dude, but if the waves are small (and the winds are calm) then I’ll use a stand-up paddleboard.

If I’m not surfing that morning then I’m writing for at least 20 minutes (and frequently longer). I’ve learned that I do my best work in the early hours (when I’m fresh) so that I can play guilt-free for the rest of the day. Most of the writing time is supposed to be on my next book but I’m frequently distracted by other fun projects (like this one!), reader questions, Internet forums, or social media.

Afternoons are more free time for home-improvement projects with my spouse, financial research & spreadsheets, or just relaxing with a trashy novel. We have neighborhood eight-year-olds who drop by several times a week to play games or hang out for an hour. (We’re surreptitiously training a yardwork crew and future babysitters for our granddaughter. We pay well, too!) Other afternoons we’re just talking story with the neighbors.

I’m building a new habit of an evening walk for 30-60 minutes (preferably on a treadmill with an eBook). As I get older, if I attempt intense exercise then I usually injure myself within a few weeks. Surfing and a brisk walk are more sustainable.

I rarely watch TV or movies (usually with family). I can barely focus on podcasts or audiobooks but I’ll skim transcripts. I can’t sit through videos, although (nerd alert!) I learn a lot from the Master Samurai webinars on appliance DIY troubleshooting & repair.

We employ a weekly housecleaner, but somehow we can’t give ourselves permission to be idle while they’re cleaning. Instead we’ll do weeding & pruning that’s difficult to hire out to a service — and it’s functional fitness with heavy lifting of green waste. My spouse manages our rental property, and I show up with her for troubleshooting repairs. Every 4-6 weeks we’ll spend a few hours there on yardwork or maintenance.

I keep an eye on our maintenance calendar for our houses & yards. We plan some of our slow travel around family visits and financial conferences like FinCon, MilMoneyCon, Camp Mustache, and CampFI. I usually meet up a couple times a month with local readers who want to discuss financial independence over a cup of coffee, and I’ll occasionally give a financial literacy talk at a military command.

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

This is going to be a long answer (with stories). I’ve been retired for over 20 years and I’m perpetually inquisitive!

Investing

During the first 15 years I spent a lot of time improving my financial skills.

As we came out of the Internet Recession in 2003, we realized that exchange-traded funds had much lower expense ratios than most mutual funds. We gradually cashed out our mutual funds and shifted to an asset allocation divided among three ETFs and Berkshire Hathaway: a dividend fund (DVY), an international value fund (EFV), a small-cap value fund (IJS), and Berkshire’s B shares. Our fund expense ratios dropped to 0.25%-0.40%. (Berkshire shares only cost a trading commission.)

We had generous rebalancing bands around these assets and only needed to move shares around every 2-3 years. Usually we could rebalance by taking our annual 4% SWR out of the part which had grown the most.

We also learned about bucket strategies and sequence-of-returns risk, so we still kept two years’ expenses in cash. We replenished the cash each year when the stock market was up, and kept spending it when the markets dropped. This tactic persisted for our first decade after retirement.

The markets recovered in 2004, our lower expense ratios let us keep more of our money, and our net worth crossed over $2M.

During my first few years of retirement I also experimented with all sorts of personal active-investing techniques: stock-picking, momentum, IPOs, technical indicators (yeah, I know), and margin. I limited this asset-allocation experiment to 10% of our overall portfolio. That was big enough to move the needle on our net worth if I turned out to be a brilliant investor, yet small enough to limit the damage if I…wasn’t.

In late 2006 my stock-picking valuations climbed to new highs. I was briefly beating the S&P500, although early in this project I’d lost a lot of ground while I learned the analysis. I was better at evaluating fundamentals and building spreadsheets, but most of our wealth grew in our main asset allocation and our houses. Our net worth soared over $3M, although in retrospect that was driven by low interest rates and Oahu real-estate values.

By 2007 even I was concerned that values were too high, and I was skeptical that I was a brilliant investor. Just as bad, I realized that I’d created a part-time job for myself with new research and perpetual spreadsheet tracking. We harvested the capital gains (and the losers) and stayed with our ETFs and Berkshire.

Coincidentally our daughter turned 15 years old, so we cashed out the overpriced stocks in her college fund and put that into CDs. (This was our college plan from 1992, and our plan intersected with totally lucky timing.) When she started college in 2010 we’d spend her old EE bonds and I bonds first (tax-free!) and then the cash.

Tax Optimization

Roth IRAs came along late in our working careers, and we were retired years before the Roth Thrift Savings Plan was extended to military families. All of our retirement accounts were in traditional IRAs with a little traditional TSP.

During our retirement, our annual taxable income dropped down into the 15% (later 12%) personal income-tax brackets. I was pretty sure that by the time we reached Required Minimum Distributions, income taxes would be higher (I’ve been wrong so far) and RMDs would make our income a lot higher. (I got that part right.) In 2003 we started doing small annual Roth IRA conversions (up to the top of those income-tax brackets) and kept at it for 16 years. After 2018 we no longer had to worry about RMDs.

Angel Investing

This was another reason for cashing out my stock picks. A friend invited me to a lunch with Hawaii Angels, and I was fascinated by the concept. I read several books & websites, paid attention to the questions at the due-diligence meetings, and worked on a strategy. More importantly, I learned a tremendous amount about market research, product development, accounting, raising capital, and building a business.

Over the next five years I invested in 10 startups (including the Blue Startups accelerator fund). This total was still limited to 10% of our investments, and part of the small-cap value sector of our asset allocation.

I was mentored by experienced angels, smart entrepreneurs, and retired business execs. I made a lot of new friends. I learned the due-diligence questions and how to properly scale an angel-investing portfolio. I spent a lot of time on the screening committee (for pitches by new co-founders) and at Blue Startups (helping to mentor new co-founders). I deliberately limited myself to making two investments per year for five years. That required patience, because lots of startups look good until you dig into their details.

At first I was motivated by building our wealth. Eventually, though, I realized that some of our investments (medtech and emergency shelters) also saved lives. Angel investing can be just as much philanthropy as wealth: a founder has a good idea, works hard on developing a product or service, and builds a new business. The angel funds keep several people employed while generating revenue and helping more people.

One of our investments built a better cardiac stent (with an exit for an annual compounded return of 13.8%) while another is transforming eldercare (an industry where I might be a client in 20-30 years). The emergency-shelter startup: well, I’m taking a large capital loss on an interesting experiment.

Angel investing also introduced me to a few uncoachable founders, several liars, and three criminals. One of them turned out to be a co-founder of one of my startups. We learned what it’s like to fire a founder and get sued in federal court. (They eventually signed a consent decree, their criminal charges were dropped, and their lawsuit against us was dismissed.) Those learning experiences had far more drama than I expected.

Angel investing was a good distraction (and an opportunity) during the Great Recession. The challenging economy meant that only the best startups survived, and they were all seeking funding. Meanwhile our asset allocation of >90% stocks turned out to be quite volatile, and our net worth plummeted 56% from its 2007 peak to its 2009 trough. We were still on track with my pension and the 4% SWR. However in early 2009 our net worth briefly dropped below $2M again, and it didn’t go back above $3M until 2016.

By 2018 I realized that (once again) that I’d created a part-time job for myself. I was no longer investing in new startups but I was spending 10 hours a week on meetings and research. (I was also spending too much time in rush-hour traffic.) I was getting good at picking winners, yet six of my 10 investments had gone bankrupt (which is common). The other four were making progress but I’d occasionally be asked to invest more money to extend their survival for a few more months.

More importantly, my angel investing journey helped my mindset change from scarcity to abundance.

I’d learned enough to be able to admire successful stocks and startups without feeling compelled to own them. I could enjoy the investing museum without having to buy all the exhibits.

It might still take another decade for my four surviving investments to exit. I’d seen enough, and I was ready to move on to other activities.

Home Improvement

This is turning into a lifetime do-it-yourself activity. During the 1980s-90s we were able to boost our savings rate by buying cheaper homes (and used furniture) and rehabbing them. We had one big win (offset by smaller losses), and over the years we learned how to find the opportunities.

After retiring I had more time to develop my DIY skills, and the entire Internet to help me learn. Our first project was a bathroom rehab. The best part about retirement DIY was taking our time and working on it in the cool mornings while we were fresh. We didn’t even have to push through it during nights & weekends (or take leave).

During the Great Recession we spent more money on home-improvement projects because contractors were eager to work for a discount. They replaced a concrete lanai and upgraded worn-out FuturaStone to stamped concrete. In 2011 we hired other contractors to completely gut and rebuild our familyroom. Over a decade later it’s still my favorite refuge to watch the sunrise, to read, and to write. I’ve written most of this interview in it while enjoying the sunshine and the tropical wildlife around our back lanai.

In 2017 we did it again with a complete overhaul of the kitchen & bathrooms in our rental property. The contractor team spent 68 days (and $68K) upgrading from a Class B to Class A. That rehab quickly paid for itself in higher market rent and less maintenance.

Today we’re very comfortable with tackling almost any home improvement that will improve our lifestyle — especially if it’s a learning opportunity.

Fitness

During the last two decades I’ve worked on other skills, too.

Surfing was a big surprise, and after 21 years I’m still fascinated by riding waves. I didn’t learn until I was 41 years old, but I intend to keep at it for the rest of my life.

In 2004, a couple of our daughter’s friends introduced us to taekwondo. I watched a couple of her classes and I couldn’t just sit on the bleachers. For the next six years, we trained taekwondo three evenings a week plus occasional weekend clinics or tournaments. It was quality time together and it taught us both life lessons from the book “The Double-Goal Coach.”

We both earned our black belts, which boosted her self-defense confidence (and her college applications) while greatly improving my reflexes & coordination. By 2013 my knee injuries (and osteoarthritis) eventually ended that activity. Now I exercise at a lower intensity, but every day I still miss sparring.

As I get older, I’ve gained a new appreciation for walking. It’s turned out to be a sustainable injury-free workout whether it’s on a treadmill (perhaps reading on my tablet), or while we’re traveling.

Slow Travel

During our working and parenting years, we were largely traveling around work or school for only a week or two at a time. When our daughter left for college in 2010, we realized that we could travel the world on our schedule. More freedom!

We started with a month in Bangkok, where my spouse had traveled for Navy Reserve duty. This time we rented an apartment near the Skytrain and spent mornings & evenings exploring the city. In the afternoons we’d stay indoors to avoid the heat, and plan our next outing.

Instead of racing around the country doing all of the things, we prefer to live like locals. We still visit the popular sites, but we do it with public transportation (and a lot of walking) instead of dealing with traffic and parking. We’re not interested in fine dining or big restaurants so we’ll usually eat breakfast at our lodging, and find other meals at local pubs or from street vendors.

When our daughter was stationed in Rota, we returned to my spouse’s old duty station– only this time with more liberty and lots more money. We roamed Spain for 90 days (the Schengen visa limit) and repeated that several times over the years. During another trip we cruised the Mediterranean for 12 days with friends and then spent six more weeks exploring Italy.

Our most ambitious itinerary (so far!) was two months in the fall of 2019. We flew nonstop from Oahu to Washington DC for two financial conferences followed by a military Space A flight from Dover Air Force Base to Spangdahlem, Germany. We used a combination of trains and commercial flights through Frankfurt and Luxembourg to Lisbon, where we spent two weeks exploring the city. (We plan to do Lisbon again sometime for 90 days.)

We took an express train to Porto for a week-long FI Chautauqua event (hosted by personal-finance author JL Collins) and then spent another month exploring small towns down the coast of Portugal. Near the end of October we took a bus across the border for a few days in Sevilla (my spouse’s favorite place in the world, so far!) and the train to Rota.

The next Space A flight out of Rota (a day later) went to Fairchild AFB in Washington state, and we were the only passengers. We expected to return to Oahu on a commercial flight out of Tacoma (the nearest airport) but instead found that several days later we could fly nonstop Space A from Fairchild to Hickam AFB.

In early 2020 we visited our newborn granddaughter in California, and then our slow travel screeched to a halt for 18 months of the pandemic. We made up for that in 2021-22 with several grandparenting trips to San Diego.

We even experimented with an eight-week housesit of a luxury home (and a dog) in Santa Barbara. (We had fun with the experiment — and the town, and the surf — but we don’t plan to do more housesits.) Among those trips, we were on the Mainland for a total of five months.

Next we’re trying to decide whether we want to revisit our favorite places in Europe and Asia…or find new favorites in Australia & New Zealand.

Writing

This was almost as big a surprise as my love of surfing.

It started in 2005 when Bob Clyatt wrote “Work Less, Live More” with the help of dozens of posters on the Early-Retirement.org forum. About 50 of us military servicemembers & veterans realized that we could write a similar book about military financial independence, and eventually I volunteered to turn their crowdsourced input into a manuscript. (We decided to send all of the royalties to military-friendly charities, and the people who contributed to the book would have a vote on the charities.) We worked on that draft for over four years, and then I sold the manuscript to a traditional publisher.

In late 2010 I started a blog to market the book, and since then I’ve written over a thousand posts. (Most of them are still on the Internet…even if half of them are only in the Wayback Machine.) I’m still very active on financial-independence forums and social media for several hours a day.

In 2018 I found another trend: raising your family for financial independence. After fielding a bunch of questions from families at conferences, I asked my daughter what she remembered learning about FI from us parents. She lit up like a bonfire, and after our dinner chat we drafted an outline. The next day she wrote most of three chapters and I spent the next year scrambling to keep up with her. We published our money-savvy family book in late 2020.

Today I’m in the middle of (very slowly) revising my first book after a decade of changes in military personal finance. (Most of the content is evergreen, but the military has created several new programs.) When that’s finished I’m going to write about living your life after financial independence. By now you might have noticed how the last 12,000 words could be turned into several chapters.

What is your social life like?

I’m an introvert. I can barely socialize during personal-finance presentations and podcasts, let alone at meetups and conferences. I’ve learned to carefully manage my energy for those events, and to give myself plenty of recovery time to recharge.

My spouse and I spend our daily routine being alone together. We tremendously enjoy hanging out with our daughter and son-in-law, and it’s even more fulfilling now that we can help our toddler granddaughter boot up her brain. After nearly two decades of making stuff up while parenting, grandparenting is more fun with less stress.

I know a dozen surfers casually at Oahu breaks. I’ve met dozens of friends at financial conferences, and we stay in touch online. I’ve met literally hundreds more people online and eventually in person.

Other than family and financial conferences, the vast majority of my socializing is done online. I joke that I’m smarter on a keyboard than in person.

Looking back, what would you have done differently?

I’ve had that question many times, and my reflex response is “Alcohol is overrated.”

Looking back on my drinking days, it’s hard to tell whether I wasted more time, money, or calories on the activity.

In the 1980s, the tools for reaching financial independence were mostly clay tablets with wooden styluses and an abacus. Only a handful of people appreciated Jack Bogle’s enthusiasm for index funds (let alone the future of Vanguard), and everyone worried what early retirees would do all day.

If today’s financial tools (and the Web) had been available 40 years ago, we would have reached financial independence even faster. More importantly, I would have left active duty as soon as we started our family. I would have had no problem finding a bridge career to get us to FI on our terms– and with a great quality of life.

I would have discovered writing, blogging, and publishing much earlier. I would never have gutted it out to 20 for the military pension.

Was there any emotional impact from leaving the workforce?

Yes! And those impacts were all positive.

After years of chronic work-related stress, the euphoria of freedom was unbelievable. Today I still feel that “Life is good!” emotion after a significant life event (like the birth of our granddaughter) but those first couple months of retirement were even more powerful.

Researchers claim that the anticipation of reaching a goal is more powerful than accomplishing the goal, and with financial independence I’d also regained control over choosing the next goal. I’d prepared for years to start a new life, and I was finally able to put those plans into action.

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

First I’ll summarize the bad surprises.

In 2009, seven years after I’d retired, my father (age 75) was showing clear signs of dementia. My brother and I went through the usual flurry of action that families go through when this happens, and that started an eight-year journey of Alzheimer’s caregiving.

By 2011 our father was in a full-care facility and we were dealing with caregiver stress. Although he had a will and all of the medical paperwork, he’d never prepared a financial power of attorney or shared any account information in an emergency binder.

It cost Dad over $10K in legal expenses to have me appointed as his conservator, and then it cost me weeks of effort to work through a full four-drawer file cabinet clogged with 50 years of investment records. Even after we found what we needed, I still spent 10-20 hours per month — for over six more years — managing his money under the benevolent oversight of the probate court.

I dealt with medical bills (especially prescriptions), insurance companies (long-term care plus Medicare supplemental policies), and even collections agencies. Almost every month my brother and I had to handle a care crisis or a major medical issue. (We worked together well enough, which was a pleasant surprise.) Dad passed away in late 2017.

During those years I’d remind myself how our financial independence gave me the time to tackle the conservator work, and I couldn’t imagine handling this if I’d still been on active duty. The workplace stress combined with caregiver stress would have been off the charts.

In 2015 (at age 54!) I had an emergency appendectomy. It was less than 24 hours from “Ouch” to the operating room, and the biopsy was a carcinoid. Everything came out all right (so to speak) and there have been no further cancer signs.

I can’t imagine dealing with appendicitis if I was working a full-time job. I would’ve gone into the office that morning “to check on a few things before I report to sick call” and ended up getting a free ambulance ride. Although the military’s healthcare bureaucracy has annoyed us mightily over the years, when crunch time came the surgeons performed flawlessly. Better still, I never even saw an invoice.

The very good retirement surprise has been that an asset allocation high in equities will handily beat inflation over the long term. By the end of our first decade of financial independence (even after the Great Recession) our investments had grown faster than inflation (and faster than our spending). Our actual withdrawal rate had dropped to less than 4%, which has been shown to be sustainable for up to 60 years.

The most pleasant surprise of all (both financial and non-financial) has been shifting from a scarcity mindset to one of abundance. It took us a few years, but it’s also led us to the best years of our lives.

What are your future plans?

I plan to keep showing up!

I used to think that I was aging out of writing about personal finance, but a couple years ago Paul Merriman published his latest money book at age 77. Now I have a new life goal, and I suspect that it’ll occupy me until they find me slumped over my keyboard.

Our daughter and son-in-law expect to transfer back to Oahu by 2024. They’ll live 10 minutes up the street from us, and our granddaughter will attend the same schools as her mother. (We wonder whether we should alert our daughter’s old teachers about her daughter’s arrival in their Class of ‘38.) My spouse and I are greatly anticipating more quality grandparenting, and it’ll be a pleasure to watch her find her way in the world.

We’ll keep traveling as long as we’re mobile. I check the surf wherever we go, but Hawaii is still my favorite.

I’d like to catch waves for the rest of my life, although I should probably stop charging into 15-footers when I’m in my 70s. I might not use a longboard if my knee injuries make it too hard to pop up, but I’ll paddle something out onto the water for as long as I can remember how to paddle it back in.

RETIREMENT FINANCES

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

By 2021, nearly 20 years after I retired, our investments had soared to three times the amount that we need to support our 4% Safe Withdrawal Rate. This was despite three nasty recessions.

I’ve written before about overshooting the goal of financial independence by staying in the military to earn a pension. Today it’s clear that I traded over a million dollars of life energy for money that I never needed.

When people approach their FI goals, everyone worries that it won’t be enough and that their 4% SWR might actually stop working. “We’ll need an additional safety margin”, or maybe they’ll work for Just One More Year. A few years after FI, though, those same people regret staying in the workforce for so long and wish they’d made the leap at least a couple years sooner.

Money problems can be quantified and fixed, but unfortunately it’s not so easy to fix the time problem. As another blogger wrote, “You Never Know Your Last Day of Anything.”

Now that my spouse has started her Reserve pension, our financial focus is on gifting and philanthropy.

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?

In 2003, our first full year of retirement, our spending was $64K. In today’s dollars that’s nearly $105K/year.

Back then we had a lot more faith than experience with the 4% Safe Withdrawal Rate. However our worst-case scenario was still spending all of our money by our early 60s and then living off my pension, our Social Security, and part-time work.

Our spending over the last two decades has been lumpy. Back in 2020 when I wrote my Millionaire Interview, it was all over the place from $90K-$150K/year. Most of that variance came from slow travel, gifting our family, and philanthropy. Some of it was parenting and launching a teen, and more of it was loosening our budget as we began our empty-nester slow-travel days. (That $150K in 2019 was boosted by four months of slow travel.) Our long-term spending has slightly lagged inflation.

Today our core spending (housing, utilities, insurance, food) is $55K/year. (Our mortgage is $34K of that total.) We can play a very strong defense if we have to, although it wouldn’t be fun. Better yet, we’ve relaxed our frugality enough to be open to opportunities instead of waiting for a bargain.

I’ll write more about our long-term spending, but first I’ll review two decades of retirement income.

In 2002 my military pension started at $32K/year. The Internet Recession had nearly eliminated the dividends & capital gains of our mutual funds, and our rental property had no cash flow. We were also carrying that hefty 8.50% mortgage on our home, although interest rates were declining and we were about to become serial refinancers.

U.S. military pensions use the same cost-of-living adjustment as Social Security. Over the last two decades that COLA has boosted my pension by a compounded total of 67%, including three years of zeroes.

In 2020 (our Millionaire Interview) our annual income was roughly $81K/year from my military pension, a little VA disability compensation, our investments dividends, and our net revenue from our rental property. By that point, as I hit my 60th birthday, we knew that we’d have more than enough money for the rest of our lives.

Nearly three years later my spouse has started her Reserve pension. In 2023 we’ll have over $165K of income.

Humans tend to extrapolate trends linearly, but I can do math. When your income exceeds your core spending by a factor of three, and when you already have three times the assets you expect to need for the rest of your life, then the exponential compounding turns the corner and goes hyperbolic.

This financial #FirstWorldProblem segues into our answer for the next question.

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

Humans are also whipsawed by the emotions of behavioral financial psychology. Even though my spouse and I couldn’t seem to spend our income or assets fast enough over the last two decades, we still feel as if we might possibly need the money someday.

The only rational solution is… more math and spreadsheets.

Last year I created a spend-down plan until we’re both in our 70s (in 2031) and begin drawing Social Security. (It’s tab #58 on my spreadsheet that I started in 1997.) Our assumptions are so conservative that they’re economically apocalyptic, but the math still works. In this scenario, “failure” means that our heirs might have to pay estate taxes from the assets that my spouse and I leave behind.

We assume that each year through 2030 we’ll:

• gift our progeny,
• donate 1% of our net worth,
• grow our personal discretionary spending at 5%,
• delay Social Security until age 70,
• never raise the rent on our tenants,
• never gain more equity on our Oahu real estate,
• only receive the 1.6% dividend rate of the U.S. total stock market, and
• never get another dollar back from my angel investments.

As we carry out this plan, by 2026 we’ll donate the remainder of our taxable account to charity. My Roth IRA will go to zero a year later. My spouse’s Roth IRA will survive, even though we’ll donate some of it to charity for the final years of the decade.

In 2031 my spouse and I will start drawing $60K year from Social Security. When that happens, our Medicare premiums will rise to the next IRMAA tier.

The good news is that we won’t be subject to RMDs, but we’ll be in at least the 24% income-tax bracket for the rest of our lives.

The other news is that if either of us needs assisted living or long-term care, we’ll have enough pension and Social Security income to pay our monthly fees for a care facility. (Personally I’m thinking of Ilima At Leihano, with shuttle service to White Plains Beach.) Long-term care expenses will cut into our gifting and philanthropy, but I’ll revisit that part of the spreadsheet in 2032.

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

I haven’t seen a reason to earn more money.

However the Internet Retirement Police would point out that in 2018 my Social Security earnings record logged $758 of earned income. I wrote a retirement column for a military officer magazine, and they paid their freelancers a dollar per word.

I wasn’t looking for that job but their editor approached me with their offer. I accepted the challenge of writing a 250-word quarterly column. After three submissions I’d had enough of deadlines and the bureaucracy of invoicing. At least they paid for my eight extra words.

In 2020 I also added another $400 of Social Security earnings. I’d had a big year in book royalties but I couldn’t deduct my usual travel expenses during the pandemic. I guess that helps me avoid IRS queries about running a self-employed business as a hobby.

On a more serious note, I can find challenge and fulfillment in paid work. However the last two decades of financial freedom have made me absolutely intolerant of bureaucracy, and I’m also allergic to deadlines. As much fun as work (and a team) can be, the dissatisfiers quickly add up. I’m not even interested in monetizing my blog, and I feel that we’re already donating plenty of money to charity.

I write thousands of words for forums, blog posts, and books, and I’m at my happiest when I can do it on my terms.

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

Yes! One of the members of the Millionaire Money Mentors forum wrote it best: “Spending without regret is a hard habit to develop later in life.”

My spouse and I spent our first decade of financial independence at shifting our mindset from scarcity (the self-inflicted desire to grow our assets) to abundance (we have enough).

Let me be clear: it’s easy to feel entitled about our wealth, but my spouse and I have paid the price for our pension income. America has very few dual-military retirees, and it took me over a decade to appreciate that.

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

Well, again, I wish I’d spent less time & money on alcohol. But if Older Me traveled back in time to drop in on Younger Me with that advice (over a cup of coffee, of course), YM would have laughed it off– and maybe called for security to escort me off the premises.

I wish I’d grown up with more financial literacy, let alone an understanding of financial independence. (In a typical act of revenge parenting, our daughter has had to live with our FI preaching for her entire life.) I knew how to live a frugal life (thanks to the Navy) and I did a stellar job of saving, but I didn’t discover index funds until very late in our careers.

I also wish that I’d understood more of the financial aspects of my career choices, particularly leaving military active duty for the Reserves or National Guard. I did the best I could while dealing with fear, ignorance, and chronic fatigue. The conventional wisdom of gutting it out to 20 for the pension meant that we overshot the financial independence goal by at least a million dollars.

A part-time career in the Reserves or Guard, perhaps with part-time civilian employment, would have achieved the same FI goal at about the same time. However we would have had a better work/life balance and a higher quality of life.

What advice do you have for those wanting to retire?

Surf whenever you can.

That’s a life metaphor.

Save and invest for financial independence.

Cut out the waste in your life (you get to decide what’s wasted) but spend the money on the activities & things which are important to you. A high savings rate makes up for a lot of dumb mistakes (and life surprises).

Keep working as long as it’s challenging & fulfilling, but create your financial freedom to choose your lifestyle.