Retirement Interview 49

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.

This is a MASSIVE interview (the longest I’ve ever had at ESI Money), full of great stories, amazing times, and many laughs.

It’s also from a good friend, an awesome mentor in the Millionaire Money Mentor forums, and someone who has lived and succeeded at retirement for over two decades!

I’ll be posting this in three parts, so there will be plenty to enjoy in the days to come.

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 62 years old and my spouse is 61.

We started our dual-military U.S. Navy active-duty careers in 1982/83.

I retired from active duty in 2002 while my spouse downshifted to the Navy Reserve in 2001 and retired in 2008.

We joke that we’ve known each other for 44 years, been married for 37, and been together for 35. That punchline’s a lot funnier after 21 years of retirement.

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

Our daughter and son-in-law are in their early 30s. She’s a Navy vet (now a part-time financial paraplanner) while he’s still on active duty. They’re raising our three-year-old granddaughter.

Our daughter was nicknamed “Hurricane Carol” (after the notorious East Coast natural disaster), and our granddaughter shows the same tendency. (At least this toddler sleeps through the night, but by her bedtime we’re all still exhausted.) I’ve written below how starting your family can completely realign your priorities, and it appears that having grandchildren realigns your priorities all over again.

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

We live on Oahu in Hawaii. Our bedroom community is 30 minutes from south shore surfing and 30 minutes from North Shore surfing, but we pretend that we chose the neighborhood for its highly-rated public school system.

We were originally sent here on Navy assignments in 1989. We’ve lived on Oahu for 31 of the last 34 years, and we’ve lived at the same address for the last 23 years. My spouse and I have been in these islands for half of our lives, and it’s the longest we’ve ever had the same address.

Is there anything else we should know about you?

I’m also Millionaire Interview 248 from three years ago, a few months after I joined the Millionaire Money Mentors forum.

RETIREMENT OVERVIEW

How do you define retirement?

Military retirees are awarded an actual physical official government certificate to announce that milestone to the entire world. (If we go back to work in a bridge career, that’s on us.) It’s possible to reach financial independence in the military (and never work again) if you start early, but it’s challenging to reach FI if you haven’t learned the basics of personal finance.

The words “retire early” and “retirement” have aged badly. Over 20 years ago, military retirees were expected to leap enthusiastically into a bridge career and climb the corporate ladder until (at least) age 65. That wasn’t for us.

In the first decade of my Navy career, I was perpetually saving and investing for a transition fund to support my possible departure from active duty. As time went by, my spouse and I kept up our high savings rate for our financial independence. We simply wanted to have more control over our time and enjoy our freedom of choice. Nearly three years before I retired, we reached our FI at the 4% Safe Withdrawal Rate.

By then I was burned out and chronically fatigued, and I knew I needed the recovery time. To avoid the retirement pushback I was receiving from all levels of Navy leadership, I quietly spread the word that I planned to relax for a few months of family time while we considered our next phase of life. In reality I never even drafted a resume — we focused on executing our FI plan and we jumped right into our new lifestyle.

Although we never needed to earn another dollar, it still happened. I love writing books and doing public speaking. My spouse has volunteered her time and even been paid by a couple of nonprofits. We’ve avoided tempting ourselves into bridge careers, but we might be a little competitive. We’re paying it forward by donating that unexpected revenue to charity, and it’s helped us shift our retirement mindset from scarcity to abundance.

These days our retirement lifestyle optimizes our control over our time while pursuing our interests at our pace. I still occasionally suck at managing my calendar, and there are days when we feel that we’re working way harder than necessary, but we’re done with working for other people. We’ve stopped trading our life energy (which is slowly dwindling) for more money (that we definitely will not need).

Today we value our time even more highly than our money. We’re free to pursue our interests & activities while we still can. Spending our time with family is even sweeter with a granddaughter!

How long have you been retired?

It’ll be 21 years in June 2023.

I’ve already collected more pension deposits than paychecks. One of my other life goals is to live long enough to collect more pension dollars than pay dollars, although the pension is less than half of my active-duty compensation. That tab on my FI spreadsheet needs another 2-3 decades.

Is your spouse also retired?

My spouse moved from active duty to the Navy Reserve in 2001 and retired from there in 2008. She started her Reserve pension in late 2021 at age 60.

Speaking of life goals, in about four decades my spouse and I want to be added to the Navy retiree newsletter’s roster of “Centenarian Sailors.” For you service academy grads reading this interview, we also want to join USNA’s list of the Ten Oldest Living Alumni. Looking at the current members, that distinction might need nearly five decades of longevity stamina.

What was your career and income before retirement?

I served in the Navy’s nuclear submarine force and my spouse was in the Navy’s Meteorology/Oceanography community.

Our military pay was a combination of taxable base pay plus specialty pay and a few retention bonuses. We also collected tax-free housing & food allowances, and occasional tax-free cost-of-living allowances for homeports in expensive locations.

Military pay is designed to be roughly equivalent to the civilian occupations, but it’s strictly a retention tool. Congress tries to raise base pay each year by the Bureau of Labor Statistics’ Employer Cost Index, while the services use specialty pay & bonuses to shape their desired mix of personnel and skills across the ranks.

Upon commissioning in 1982 and 1983, I and my spouse earned pay & allowances starting at $20K/year. That’s roughly $60K apiece in today’s dollars.

I spent 15 months in the nuclear training pipeline and then joined the Blue crew of USS JAMES MONROE (SSBN 622) for nearly three years. This 1960s boat was stationed in Holy Loch, Scotland and carried 1970s POSEIDON nuclear missiles on 90-day deterrent patrols in the North Atlantic. I qualified as an engineering watch officer and Officer Of the Deck, then finally earned my gold dolphins. (Dolphins are the submarine crew’s warfare qualification insignia in several navies.) When the Gold crew had the boat, we spent our offcrew time in Charleston, SC for training and leave.

My living expenses ranged from nearly zero (at sea) to the typical submariner hard-partying lifestyle (ashore). That routine boosted my savings rate to an average of at least 50%.

My spouse spent these years stationed at Navy weather commands in Rota (Spain) and on the Azores islands. She forecast meteorology for military tactical flights as well as oceanography conditions and sonar settings (for finding submarines). Her pay was a little lower (no submarine pay) while the dollar’s 1980s exchange rate was very high in Western Europe. Her overseas living expenses were lower than my Charleston lifestyle and she also had a high savings rate.

After those tours, we spent nearly three years on shore duty at the Naval Postgraduate School in Monterey CA. I was awarded my graduate degree in Weapons Engineering and she earned dual masters degrees in…meteorology and oceanography. We partied hearty on the Monterey Peninsula but we still managed to save 40% of our gross pay.

My second sea tour was on board the 1970s boat USS NEW YORK CITY (SSN 696) for nearly three years. NYC was homeported in Pearl Harbor and roamed the Pacific for various surveillance and intelligence missions that we don’t discuss. I was the Weapons Officer for 1990s sonars & computer systems along with torpedoes and TOMAHAWK missiles.

My spouse started her Pearl Harbor years by creating more forecasts at yet another weather command, and as a staff METOC officer at an undersea surveillance command that we don’t discuss.

By the early 1990s, a little over a decade into our careers, we’d each had three promotions and we were each earning roughly $95K/year. (The Hawaii housing allowance is a lot higher than Charleston or even Monterey.) That’s about $200K apiece in today’s dollars, and we’d kept up our 40% savings rate.

I spent the rest of my career at shore staffs and training commands in San Diego and Pearl Harbor. We coordinated submarine operations and exercises with Pacific allied nations, which looks a lot like herding cats. Along with my instructor duties, I also supervised departments that trained tens of thousands of sailors & officers in weapons tactics and engineering.

My spouse served at a training command in San Diego and later ran operations at a Pearl Harbor weather center. In 2001, shortly after earning her fourth promotion, she moved to the Navy Reserve for part-time military service of “one weekend a month, two weeks a year.”

My military pay and allowances rose to $111K/year by 2002, still roughly $200K in today’s dollars. I’d topped out in rank and I’d lost some of that sweet hard-earned nuclear bonus pay, while I’d happily given up sea pay.

Our savings rate dropped lower, but the compounding of our years of earlier investments was already far more significant than additional contributions.

My spouse’s Reserve drill pay was much less (and much less frequent) than active-duty pay. Even with the happy surprise of a hard-earned fifth promotion near the end of her career, between 2001-08 she earned more pension points than paychecks. She finished her Reserve obligations in 2008 and “retired awaiting pay”, the military term for starting her Reserve pension at age 60.

Despite my 10 years at my terminal rank and her loss of active-duty pay, our wealth continued to grow. We reached financial independence in late 1999 and belatedly realized that we had more control over our career choices.

Despite our pay differences during our careers, our total earnings are nearly the same because she earned more promotions than me. Although I started my active-duty pension at age 41 and her Reserve pension began at age 60, her promotions boosted her pension nearly 70% higher than mine.

Why did you retire?

I was forced to retire as a lieutenant commander (O-4) because I didn’t promote to the next rank. A retention board continued me on active duty for a mandatory retirement at 20 years.

In retrospect, I created my contentious career. I was more likely to challenge the chain of command than to be a good biddable team member. I spent time taking care of my troops instead of improving my professional skills or working harder for the higher promotion rankings.

More critically, my spouse and I prioritized being stationed together over career-enhancing types of duty or homeports. This forced the Navy’s personnel bureau to (grudgingly) compromise on assignments that (by their policies) eventually adversely impacted our advancement potential.

Also in retrospect (not by coincidence), I regret gutting it out to 20 years for the active-duty pension. When my career derailed at 12 years I was too burned out, chronically fatigued, and sadly ignorant of my options in the Reserves or National Guard. I could have shifted to a part-time military career along with a possible corporate career or part-time contracting. Our finances would have worked out about the same but our quality of life would’ve been much better.

These days I spend a meaningful portion of my time helping military families understand all of their career options, especially for better work/life balance.

PREPARATION FOR RETIREMENT

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

I’m going to share the financial and lifestyle lessons that we learned during the retirement process, and I’m also going to pass on some experience that’s only relevant to military families. Feel free to ask me questions about any of this.

We read “Your Money Or Your Life” in early 1993, shortly after it showed up at our public library. We were in our early 30s, and it was the first time we’d considered retiring before our 60s. Until then we were saving and investing for any possible abrupt transition out of the military to a civilian career.

We’d also just started our family, and my career priorities were completely realigned by the even more challenging & fulfilling responsibility for a baby. She woke me up at night more often during her first decade than I was ever awakened on midwatches during sea duty, but we still wanted to spend more time watching her grow up.

We did the math on our savings rate (and the stock market’s historical returns) to discover that we were less than a decade away from financial independence. By the time we reached FI in 1999 I was at a training command (in a billet which did not suck) and we decided that I’d stay until my military 20-year retirement date.

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

We were always planning to retire… someday. In the 1980s-90s, it seemed more important to save up a transition fund to help us live on one income for a while if the other of us left active duty.

After starting our family in 1992, however, we moved up that retirement goal to “as soon as it makes sense.”

When the Cold War ended in 1991, the U.S. military started the largest force drawdown since WWII. Part of that was the Temporary Early Retirement Authorization, which offered (greatly reduced) pensions at 15 years of service instead of 20. The most important parts of that smaller pension were still its annual inflation-fighting cost-of-living adjustment (the same COLA as Social Security) plus cheap Tricare health insurance.

Even though I was technically competitive for another promotion, I applied for early retirement — and was turned down in all three rounds. Submarine force retention could not compete with the rise of the Web and the exploding tech industry, and more military families were resigning than retiring. We’d already lost too many nuke officers to those resignations. Submarine commands had a lot of vacant billets, so TERA was off our table.

By the time I was finally turned down for my last chance at promotion to O-5, we’d found an opportunity to move back to Hawaii. One of my old bosses (Rob Dunn) was now running the submarine training command in Pearl Harbor and told BUPERS that he needed all the help he could get. (Thank you again, sir!) Our assignment officers sent us both back to The Gathering Isle, the place that we knew we wanted to call home. In late 1997 I was continued on active duty and told that I would retire in June 2002.

That jumpstarted our planning. We scrubbed our Oahu budget once again, and verified that our savings rate (plus the Internet bull market) would get us to financial independence by 2002. Initially, our FI would come from my pension plus maybe spending our investments at the 4% Safe Withdrawal Rate.

We kept doing the math. Bill Bengen’s SAFEMAX study was published in 1994 and gained some media attention, but we were still stuck with old-school age-65 retirement calculators. By 1998 I was an early client of the bleeding-edge FinancialEngines retirement website, which used a primitive version of Monte Carlo simulations. In late 1999 I also learned about the Trinity Study, which confirmed everything else. With the annuity income of my pension and our (someday) Social Security, the Trinity researchers claimed that our asset allocation of 100% equities would be 100% successful.

From those references it was just a matter of tracking our spending and refining our estimated expenses. If this new-fangled FI thing didn’t work out then I knew I’d be able to find a civilian job.

What did your pre-retirement financials look like?

In 1982 had no idea how to invest, and like most new college graduates I was too busy with work to spend my precious liberty time learning about it. A friendly & helpful advisor suggested a Paine-Webber bond fund. I no longer have any records from that fund but I’m sure I was paying a sales charge with each check I mailed in, as well as a hefty expense ratio. (I’d never heard of a total market bond fund.) The good news is that bond funds were rising as inflation subsided and interest rates peaked.

During four years of intense submarine training and 90-day patrols, I had a savings rate of at least 50% going into the bond fund. At the end of that time the account grew to $22K ($60K in today’s dollars).

When my spouse and I married in 1986, the other news was that we expected to stay employed by the Navy during the Cold War. Our dual-military income could tolerate more volatility risk in the stock market, and we chose an asset allocation of 100% equities. We started investing nearly half of our paychecks, and we only kept enough cash on hand to pay the bills.

She already owned shares in a Twentieth Century stock fund which her father helped her choose in high school. I thought Dad Advice was a great shortcut to investing wisdom, and I phoned my father to ask how he learned to invest. He said that he bought the annual mutual-funds issue of Business Week magazine and “picked from the ones with two or three up-arrows.” Well then, I would too. He also suggested that we invest our assets at Fidelity so that they’d give us a family asset-consolidation discount on their fees.

I sold my bond fund and opened our Fidelity account, just like my father (and his father). My spouse and I spent the next 15 years buying Fidelity’s actively-managed equity mutual funds with sales charges of 2% and expense ratios of 0.80%-1.5%. We also bought more of her Twentieth Century fund shares and probably paid similar expense ratios.

In defense of our blissful ignorance of index investing, during the 1980s-90s it was not uncommon to pay a 5% load or 2% annual fees for popular funds.

Back then Vanguard Investments had a reputation of poor customer service and even charged ridiculous penalties to discourage frequent trading. Also back then, everyone already knew that passive investing only gave you the same results as the rest of the market. I didn’t want to be one of those indexing losers. Active funds and hot managers (like Peter Lynch at Fidelity Magellan) were the guaranteed way to beat the markets.

Around 1988 we overheard friends talking about IRAs (which have existed since the 1970s). That seemed like a good idea so we opened ours with more shares of the Fidelity funds which we’d already chosen.

Our self-inflicted high fees, performance chasing, frequent trading, and late start on IRAs are what happens when you grow up in a family who doesn’t discuss money or investing. With my spouse’s tutoring (and patience), I started reading about personal finance and eventually outgrew Dad’s advice.

Despite our chronic investment mistakes, we kept up our high savings rate and bought more shares of Fidelity and Twentieth Century funds. In the 1990s we added hot funds like Heartland Value (which seemed pretty excited about Web tech) and Tweedy, Browne Global Value. Tweedy’s nerdy managers quoted Warren Buffet & Ben Graham while hedging their capital gains against volatile foreign currencies, although they charged a 1.4% expense ratio.

We also started the college fund. (We used a taxable account because it was four years before 529 accounts were created.) We planned to hold enough bonds to pay for two years at a community college (in 2010) and to put the rest of our college contributions in equity mutual funds. My spreadsheet began with $100/week in a mix of EE bonds (tax-free for education) and more of Heartland’s aggressive equity mutual funds. When I bonds began (in 1998) we added some of those to the equity funds and stopped buying EE bonds.

Although the U.S. federal government’s traditional Thrift Savings Plan had begun in 1986, the Dept of Defense didn’t add that option to military pay until January 2002. We maximized our contributions as soon as we could open our TSP accounts, but by the time I retired in June I only had a few thousand dollars in mine. I was promptly kicked out by the TSP for a low balance and I deposited their check in my IRA. My spouse continued her contributions of Reserve drill pay for a few more years, and that steady trickle was enough to keep her in the TSP.

We couldn’t tap our retirement accounts until age 59.5, but the vast majority of our assets were in taxable accounts. We had plenty to cover our 18 years before penalty-free withdrawals. Later, we realized that Required Minimum Distributions in our 70s might even shove us into higher income-tax brackets.

What was your overall financial plan for retirement? Please go into detail here.

“Detail”? Sure! I’ve never shared some of these stories before.

1982-92: Starting our careers.

For the first decade of our careers, we tracked every penny of spending. We built our budgets and investments on a combination of handwritten summaries (on tablet paper in three-hole binders) and shareware (tractor-feed paper from a dot-matrix printer).

At first we tried to live on one paycheck, in case one of us decided to leave active duty for a bridge career. As we earned promotions and bonuses, we’d throw ourselves a party (or a nice vacation weekend) and then save & invest the rest. To us, living below our means meant that we kept our spending one rank below our actual pay scale and grew our savings rate.

We didn’t have a goal of financial independence yet, but we lived frugally by optimizing our spending. (We knew all about deprivation from our shift work and sea duty, and we avoided crossing that line in the rest of our lifestyle.) We paid for quality on the activities & things we valued but we also enjoyed hobbies like DIY home improvement. We knew how it felt to have things break (or run out) in the middle of a patrol, and we did a lot of maintenance & recycling. We were green before it was cool.

When we started our family and finally accepted that we had to be financially responsible adults, we also spent the big bucks for Quicken 5.0 running on a PC with MS-DOS. (Microsoft Money was even more expensive, and Quicken had better reviews in Business Week.) By the time our daughter graduated from college we were running Quicken 16 on Windows 7 with a creaky database of over 150,000 financial transactions.

1993-99: Raising our family.

Shortly after our daughter was born, we read “Your Money Or Your Life” and learned a path to financial independence. Quicken let us drill down to the penny on our budgets and spending. (People thought I was joking about updating our account balances, checking my pocket change, and then realizing that we’d lost a quarter in the sofa cushions.) My spouse and I used our monthly summaries to discuss our next budget. We’d plan for big expenses like a family vacation or replacing an old car with a new-to-us used car.

As dual-military parents (with a very busy child) our life revolved around work, the local public library, and all of the parks & playgrounds. Our biggest expenses were housing, daycare, and (later) after-school programs. Eating out was usually a McDonald’s (preferably with a PlayPlace to help tire out our kid) and an occasional spouse lunch during our crazy-busy workweeks. Family vacations were Disney pilgrimages or neighbor islands.

By the mid-1990s our years of investing had accelerated our net worth. (A high savings rate makes up for a lot of ignorance and dumb mistakes.) We projected our budgets and estimated our retirement expenses, and we had a detailed idea of what our spending would look like if one of us left active duty. We still needed a few more years of saving, investing, and growth to reach our financial independence, but in 1997 our net worth crossed over one million dollars.

In 1999 we reached financial independence at the 4% Safe Withdrawal Rate with assets of 25x our annual expenses– even without a military pension. Yet at the peak of the Internet bull market, we felt like one of the last families in America to get rich.

1999: Leaving active duty.

That year our retirement planning got another gut check when my spouse reluctantly decided to move to the Reserves. Her fourth promotion had caused her METOC community to decree that she’d prepare for her next decade of active duty by transferring to a different homeport with more career-enhancing billets. (She’d already privately planned to retire in 2003 at 20 years of service.) Even worse, she’d have to report to her next assignment in 2001. This meant that she’d be overseas for a year on her own while our daughter and I stayed on Oahu until I retired from active duty in 2002.

We didn’t want to be separated for a year, especially when there were plenty of military jobs in Pearl Harbor and she expected to retire only two years later. We had family concerns about leaving our island home yet again, although we were tempted to take orders to Japan. There might have been a few tears shed by one of us during our talks — and she wasn’t very happy either.

One day our seven-year-old daughter suddenly melted down because she thought she’d have to learn Japanese before she could attend third grade. Even after we reassured her that she’d attend an English-speaking school, she didn’t want to leave her friends (like every military kid ever).

We did the spreadsheet math.

If my spouse stayed on active duty through 2003, she’d vest in her 20 years and could retire to an immediate pension. We’d be multimillionaires with two active-duty pensions and no need to touch our assets.

If she resigned from active duty for the Reserves then we could stay on Oahu, but Navy rules required her to drill (“One weekend a month, two weeks a year”) for a service obligation of at least six more years. Her compensation would drop to 20% of her current income if she was able to find a drill billet, but there weren’t many paid drill billets available at her rank. She’d end up volunteering for retirement points (without pay) for two of those years.

She could also resign from active duty without joining the Reserves, but that felt like giving up. She could still try a Reserve career and quit if it didn’t work out.

Our spreadsheet concluded that if she left the Navy, she’d walk away from well over a million dollars of lifetime pension and other benefits. If she left active duty for the Reserves then she was still abandoning $750K-$1M of active-duty pension in hopes of qualifying for a Reserve pension at age 60.

But we were already financially independent without either of us ever earning another dollar. We didn’t even need the Reserve pension.

As our family discussions approached the Navy’s deadline, one of us might have mentioned the Lifestyle Philosophy Of Financial Independence: “Welp, it’s only money.”

2000: “Let’s buy another house?!”

In mid-2000, while my spouse’s resignation and Reserves requests were routed through the Navy bureaucracy, life threw us another self-inflicted financial curve ball.

We were living in a perfectly acceptable house in a nice neighborhood with good schools, but we’re perpetually interested in home improvement. Hawaii had a severe 1990s real-estate recession, and by 2000 our home had lost 25% of the price we’d paid in 1989. (It turns out that real estate does not always go up.) In June my spouse found a house for sale in Central Oahu, in a great neighborhood with the state’s top-ranked school district.

(Spoiler: we’ve now lived there for 23 years.)

Everything was awesome, except for the actual condition of the house. Despite the schools, the neighborhood, the yard, and the floorplan…the finishes had been ridden hard. We knew we could eventually fix everything, but we were reluctant to liquidate our assets to buy the place with cash. Some of the repairs would need contractors, let alone the parts for our sweat equity.

Back to the spreadsheets.

We ended up putting down 10% and getting a 30-year fixed-rate mortgage at 8.50%. (This was a screamin’ good loan during 2000’s interest rates & inflation.) Over the long term we could handle the mortgage payments and the rest of our living expenses from my active-duty pension, but now we’d also have to spend down our investments at the 4% SWR.

We moved in August 2000. The real-estate market was still horrible, so we rented out our first house. We weren’t focused on cash flow, let alone capitalization rates– we were just happy to sign a lease.

We were still both on active duty, fixing up our first house for tenants, unpacking boxes in our second house, and helping our daughter settle into her new school. I’m not sure how our family got through the rest of 2000 (sleep deprivation and persistence?), but we were still financially independent.

You economic historians might recall that the NASDAQ stock exchange peaked in March 2000, just five months before our move. By the time we unpacked in our new home, everyone was buying the stock-market dip and expecting even bigger growth.

2001: The Internet Recession and the 9/11 attacks

By 2001 it looked like the party was over for Web businesses, and the Internet Recession began ripping holes in our investments. (I’ve written this section from our Quicken database of share prices.) The financial media had (finally) begun questioning the revenues of Internet startups who’d seemed successful despite big losses and incredibly high valuations. Established companies were getting pointed queries about their accounting.

The headlines went straight into the stock market. Our volatile Heartland Value fund had peaked in late 1999, dipped 15% by December 2000, then shot up 28% by June 2001. Our Fidelity and Tweedy, Browne funds were a little less volatile, but there was a torrent of bad news from tech companies.

“Buy the dip!” had worked well in the 1990s and we were sitting on a lot of unrealized capital gains, but we’d already given up my spouse’s paycheck and soon I’d give up mine. In the months since first reaching FI in late 1999, we’d added a second house and a mortgage to our balance sheet. Suddenly those moves (for all the right lifestyle reasons) looked financially risky.

We decided to set aside two years’ expenses in a money market to give us time for the markets to settle out. We still maximized our retirement contributions for 2001 but stopped adding to our taxable account. We sold some shares in June 2001 and planned to sell more shares at the end of the year.

My spouse moved to the Reserves in early 2001. (After all of the resignation drama, the Navy had trouble finding a qualified officer to take her old job.) For you military families keeping track of the timeline: she left active duty at 17 years, 11 months, and 10 days. If you’re facing this decision too, feel free to contact me to discuss your options. We have strong opinions on how to make it work.

As my spouse settled into her Reserve unit (drilling for points instead of pay), and I began my final months of active duty, the 9/11 attacks threw our retirement life plans into chaos.

Nobody knew what our future held. Active-duty servicemembers were being extended involuntarily (even a few who already had approved retirements) and Reservists were being mobilized to active duty. Our daughter wondered whether both of her parents would be sent to combat zones for months while she’d have to live with other relatives. We just didn’t have the answers.

When the stock markets re-opened a week after 9/11, the S&P500 index dropped over 14% in one day.

While we waited for the Navy to decide our future, I obsessively updated our Quicken data and our financial spreadsheets. I ran several retirement calculators. To my surprise, our new numbers still worked– barely. My pension would cover the mortgage and we still had enough investments to handle our other expenses at the 4% SWR.

At the beginning of 2002 we maximized our contributions to our retirement accounts, including our new Thrift Savings Plan benefit. We added the rest of our paycheck savings to our cash account. We gritted our teeth and sold a few more shares to raise the last bit of our second year of cash for expenses. We still kept the rest of our investments in equities: 92% stocks and 8% cash.

By early 2002, the U.S. military was executing its mobilization plan without us. My spouse was not mobilized but got a paid billet and began earning a few dollars for drills. I was still cleared to retire in June.

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To read the next portion of this story, check out Retirement Interview 49, Part 2.