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 July.
My questions are in bold italics and their responses follow in black.
FYI, this interviewee has already written a post here about redesigning your financial life. She also writes regularly (with some great insights!) on her own site.
This one is a bit long (which I LOVE) so I’ll be breaking it into two days.
Let’s get started…
GENERAL OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I’m a 42-year-old woman.
I was married for 10 years but divorced at 40.
Do you have kids/family (if so, how old are they)?
I don’t have children.
At this point I don’t anticipate having them.
What area of the country do you live in (and urban or rural)?
I live in an urban area in a large city in the Southwest.
Is there anything else we should know about you?
I got a big financial head start in life. My grandfather sold a successful business and funded an account for me as a child that paid for college; I found out I could keep what was left and switched to a much less expensive school than I’d enrolled at initially.
I had enough left to put 20% down on my first condo and five rental properties (all under $250K) in my 20s.
My parents also bought my first car, gave me the money they had saved for college, and wrote a check for my wedding (which I used to elope and put toward a new home).
My mom started giving the maximum annual exclusion gift around a decade ago, and I anticipate an inheritance from both her and my dad (now divorced). I don’t count on it and hope they live for many decades to come.
My family’s wealth did more than jump-start my financial journey. It established a mental safety net that enabled me to take risks and endure setbacks as I learned to build my own.
Growing up with a sense of stability, safety and optimism were huge gifts as well.
RETIREMENT OVERVIEW
How do you define retirement?
There are two definitions of retirement in my mind. In a general sense it can refer to closing the door on a particular industry or profession regardless of your financial situation (e.g. “I retired from the military.”).
When it comes to financial discussions or identity though (e.g. “I’m retired”), to me it means that you can afford to live indefinitely without any additional earned income AND that you are no longer employed.
You can be retired and have some part time self-employment or 1099 income, but if you have an employer or work full time — even just “for fun” — you can no longer say you’re retired in my opinion (you may be FI, but you’re not RE if you have a job/boss).
These are my personal rules as a member of the internet retirement police. That said, the lines between labor and leisure continue to blur.
Many employed people live flexible lifestyles that look like retirement, and some retired people work themselves to the bone doing unpaid work as volunteers or caregivers.
Personally, I prioritize freedom above whatever your definition of retirement is.
How long have you been retired?
Just over two years.
I turned 40, got divorced, and retired from my banking career in a span of 6 months (I also lost my first dog to old age for good measure).
What was your career and income before retirement?
I was a private banker for eighteen years. In the first six years I went from $50K to just over $100K.
Over the next four years I averaged $150K.
The following five years I averaged $200K, and in the final three years I made just over $300K annually.
Why did you retire?
It was a combination of factors. I was burned out at work; I’d taken a job at a bigger, more stressful firm and knew going in I would probably only last 3-5 years there.
There was a management change and compensation shift at the 3-year mark right around the time my annual bonus was paid and my divorce was being finalized.
I knew I either needed to double down on building a client book (and stay for years) or go ahead and leave. I didn’t want the schedule and pressure a promotion would have required, and moving teams or firms again would just kick the can on the same problem.
I appreciated the balanced marriage power dynamic of us earning around the same amount, but I’d never really planned for a 20+ year banking career. I assumed I’d take a step back to raise kids at some point and manage a business or investments part time.
When the divorce dust settled and I started a new solo balance sheet and budget, I realized I no longer needed a high income or savings rate even in theory. My needs were covered, and the expensive theoretical future wants – 529 plans, a McMansion in a good school district, decades of kids’ activities – dissolved with my marriage.
Also, total calendar freedom became a tantalizing possibility. I had toyed with the idea of quitting while married, but I’d still have been subject to my spouse’s corporate schedule.
Soon after he was gone though, setting an alarm to wake up – much less commute to a stressful job – started to seem pointless.
I decided the nebulous “future” I’d been saving for had arrived.
PREPARATION FOR RETIREMENT
When did you first start thinking seriously about retirement and when did that turn into a decision to do it?
I prioritized building wealth as a teenager and began maxing out a Roth IRA at 18. But it wasn’t about retirement so much as getting rich and having options that compelled me.
I came from a traditional Southern background, and my mom, aunts, grandmothers, and most neighbors all stayed home with kids. I embraced the Millennial girlboss ethos and loved my fancy corporate job (and outfits), but I assumed I would marry and that at some point (well before traditional retirement age) my primary role would shift to unpaid household laborer.
That’s a lifelong job many women never retire from. So while I never consciously planned for a traditional decades long corporate career, I wasn’t really planning for early retirement either.
Part of my desire to build wealth early was so I could feel like I was contributing financially when I inevitably quit and not be totally dependent on a spouse’s earnings. I consciously bought rental properties in my 20s with the vision that someday I’d be married with a baby on my hip managing my properties while my husband went to work.
I got the marriage but kept the career by default. We stayed in our starter townhome since we hadn’t had kids, and within 5 years of marriage we were investing around half our gross income and still spending freely.
During the COVID pandemic I couldn’t do many of things that dominated my budget — travel, dining out, spa treatments, etc. Not only did I realize how little I actually needed to live on, I thrived.
Working from home for the first time, I lost weight, slept better, and was surprised how little I missed an overstimulating office environment.
At that point I started thinking seriously about leaving the workforce, especially since it was becoming clear that my spouse had no desire to retire early – or have children.
What were the major steps you took from deciding to retire to developing a plan to do so?
I bought into the rental real estate game early after reading Robert G Allen and Robert Kiyosaki in college. I bought roughly one unit per year in my 20s and invested 10-25% of my salary in retirement accounts.
My target asset allocation has always been half stocks half real estate.
I wanted to be a millionaire by 30 and to have enough money to always have options, but this was before the “FIRE” movement took off and my goal wasn’t explicitly to retire early.
After marriage, we could eventually afford to maxing out retirement, make double mortgage payments (until we refi’d into a 15 year 2.75% loan) and also shovel excess cash flow into index funds in brokerage. We also started investing in alternative funds, mostly RE syndications; we contributed to 1-2 deals a year for 7 years.
In hindsight, I was in a planning limbo for years due to my stagnant marriage. I couldn’t plan for kids that didn’t exist or for any specific retirement vision that wasn’t shared.
I wasn’t planning for divorce either, but I knew deep down it was a possibility. After seeing so many women caught flat-footed, I was never going to leave my lucrative career until I knew I’d be FI even after dividing the balance sheet.
So I just kept working and saving without any specific goal or timeline.
What did your pre-retirement financials look like?
Post-divorce and pre-retirement, my individual net worth was just over $4.3 million.
- $275K note receivable (loan to a family member)
- $300K Alternatives (a handful of RE syndications and private equity funds)
- $1.2M cash and brokerage
- $1.3M three rental duplexes
- $1M retirement (58% Trad, 37% Roth, 5% HSA)
- $850K homestead and auto
- $5M total assets
I had four mortgages left, one on each property, which totaled $678K.
What was your overall financial plan for retirement?
Here’s the funny thing. I’ve been a spreadsheet junkie my entire life and spent years running retirement projections for fun (or to stave off boredom at work).
But when it came time for the retirement decision, I really did not overthink it.
Maybe it’s because I’d rehearsed it in my spreadsheets for so long that I knew I could make it work. Maybe the burnout pushed me over the edge and gave me an attitude of “f it.”
The divorce also made me feel invincible. The “worst” had happened – and I was still OK. Figuring out early retirement seemed like a comparable cakewalk.
Financially though, hitting 7 figures in fully accessible liquid brokerage made me feel truly wealthy for the first time. Real estate equity and even retirement accounts tend to feel somewhat imaginary no matter how big the balances get.
Those big round numbers though, including $5M in assets, objectively sounded like enough no matter how you slice it. Plus I was single and childless, so my financial plan required few contingencies.
In fact, most future variables lent themselves to the upside.
“What if I get divorced?” became “What if I find another partner one day?”
“What if I lose my job?” became “I could always earn some money.”
Disability would just slash my spending – and potentially add SSDI.
Home equity could be fully allocated to my future long-term care without the moving pieces of other family members’ needs to take into account.
I will probably receive some inheritance.
I listed my assets above in the order I plan to draw them down. The note payments were set to begin the Summer of 2024 and last two years.
The payment amount happened to fall within a few hundred bucks of my net pay which felt like a sign. It was enough of a runway to make the decision to quit feel predestined.
The plan was (and remains) as follows:
- 40s – Live off the note receivable payments (done), let the alternatives ladder unwind (in progress), and sell an underperforming duplex (targeting next Spring). Between that and some rental income and gifts, my expenses should be covered for around a decade while brokerage and retirement keep growing.
- 50s – I will tap brokerage and probably sell the other two rentals.
- 60s – At this point I can access the retirement accounts. If all goes well, I might need to increase spending/giving so the pile doesn’t keep growing.
- 70s+ – I’ll claim social security and start spending whatever is left. I’m envisioning bribing my 9 nieces and nephews in increasingly eccentric ways to accompany me around the world and protect me from elder abuse.
My projected annual expenses total $165K, including taxes and accruals for periodic large expenses. I’ve tracked my spending forever, but of course I have no idea what my future budget will really look like.
Owning cars may become passe, but AI companion robots may become a basic necessity. Taxes could rise, but maybe we’ll get Medicare for all.
In any event, I should be able to live well unless/until Civil War II or the apocalypse are upon us (in which case I’ll probably be glad I retired early and had a little fun before society crumbled).
$165K represents 4.5% of my investible assets + rental equity at the time of retirement (or 4.0% exactly if you reduce my expenses by the $19K annual exclusion gift I receive).
That may seem like an aggressive withdrawal rate for a 40-year-old, but $75K of my budget is discretionary and another $29K is a mortgage that will be gone in a few years. Plus it doesn’t factor in any future earnings, social security, or inheritance.
Did you make any specific moves to prepare your finances for retirement?
No.
Who helped you develop this plan?
I am a financial planner, so I have a big advantage here.
I also read books and articles about finance and participate in financial forums as a compulsive hobby.
What plans did you make in advance to leave your job?
I quit prospecting and showing up to non-mandatory meetings about 9 months before I left. This quiet quitting was generally sanctioned as I was navigating a divorce, but I was surprised that my production numbers didn’t fall and no one seemed to care when I left early and arrived late.
I think a lot of mid-career professionals, especially women, fall into the trap of over-functioning at work because that is what fueled our performance in the first decade. But ironically, those same actions can backfire as you move up the ladder.
Executive presence is not compatible with eager over-responsiveness. Perfectionism can get us partway up the ladder, but it doesn’t work forever – and it can really burn you out in the meantime.
What were your pre-retirement concerns (financial or non-financial)?
Because of the timing, I was worried people might assume I couldn’t cope emotionally with work because of the divorce. I also didn’t want people to assume that I was financially able to retire because of it.
I worried less about coming out as financially independent. I have never really cared about practicing “stealth wealth,” and I worked in wealth management after all.
People “knew” I made good money, and shouldn’t I have built some wealth after two decades if I was any good at my job?
It can be awkward in some circles, but as my affluent urban peer group aged it became normal, or at least unremarkable, to have enough money to be work-optional. Plenty of people I know have sold businesses, live in multi-million-dollar homes, earn way more than I ever did, or inherited wealth.
Also, plenty of women my age stay home with kids or work remotely, so the lifestyle element did not concern me either.
How did you handle deciding on and paying for healthcare?
This was way less of a big deal than I expected. I simply pay for an ACA plan on the exchange.
There are dozens of options in my state, and I have a Blue Cross Blue Shield plan that covers all the same docs my employer BCBS plan did and allows me to keep contributing to an HSA.
Even without a subsidy the premium was just $420 a month in year one (with a larger deductible than I had before though). It’s more like $500 now.
I have decided I’m not going to try to optimize my income to get a subsidy. I’m not poor, and I can’t control a lot of my income anyway between the rentals and the K1 distributions.
People are so afraid of the exchanges because they’ve been so politicized, but a friend who is a health insurance broker rolled her eyes when I asked her how worried I should be. She explained that self-employed people and early retirees have been paying for private healthcare coverage for decades.
It’s not going away – it’s just the subsidies and other rules that politicians like to argue about.
How did you tell your family and friends of your plans?
I’ve always been a pretty open book and did not want to pretend I was “taking time off” or “figuring out what’s next.” Probably because a) I was proud of finally reaching my long-sought FI goal and b) I didn’t want it to look like a mental health leave due to divorce.
My parents fostered independence in their kids almost to the point of seeming indifferent. As I recall, they and my siblings reacted to my announcement with some muted version of “that’s nice; can’t wait to see what you do next!”
My friends were more enthusiastic. I think many of them probably felt sorry for me for getting divorced and being childless, so that could mute any jealousy that might otherwise arise.
I listed “early retirement” on my company exit forms and “retired” on my updated paperwork at the doctors and dentist. It gives me a little thrill and sometimes sparks interesting discussions.
Colleagues connected the dots because I wasn’t ushered out so clearly wasn’t going to a competitor.
Did you have/make any plans for how you’d spend your time in retirement?
Not really. I had plenty of aspirations and to do lists (a chronic condition since childhood).
I assumed I’d get to lots of DIY house projects, finally read all the books I’ve ignored, book a ton of travel. (Spoiler: none of that really happened.)
I didn’t make any commitments and didn’t want to – no new clubs, volunteer gigs, or other obligations. I just wanted to rest and see what it felt like at first.
THE ACT OF RETIRING
How did you ultimately retire?
My new boss started having monthly meetings with everyone when she started. I found myself incapable of feigning anything – enthusiasm about new product initiatives, optimism about the pipeline I’d been ignoring, desire to move up in the company.
I was increasingly honest over 3-6 months and eventually broached the issue directly by suggesting she put me on a layoff list so she could put a real hustler in my spot.
After trying to talk me into staying or transferring to another team, she said she couldn’t lay me off but would let me give a 90-day notice. She was very helpful and grateful that I wasn’t going to just sit around and underperform until she fired me.
She even extended my quit date when my mortgage assumption process trailed on so I wouldn’t have problems with the Verification of Employment at closing.
What went well?
During those months I got to say goodbye to clients and hand them off to new bankers – a rarity in my industry. I was surprised by how enthusiastic and congratulatory everyone was.
Several managers, people I thought sincerely relished the corporate Kool Aid, confessed their early retirement dreams behind closed doors and expressed friendly jealousy.
One 20-something colleague asked me point blank if could afford not to work anymore. When I couldn’t help but smile broadly, she wanted to know how.
Of course, I gladly shared.
What didn’t go so well?
Honestly it went great.
A little anticlimactic by the end, but I had no complaints.
How did you ultimately find the courage to do it?
OMY syndrome has a reliable cure. Most people pull the trigger in the wake of a personal transition or crisis – a health scare, family issue, restructuring or layoff.
Then they figure out how to make the money work.
I didn’t wake up one day and decide I’d finally hit My Number or run one more Monte Carlo simulation that convinced me I’d be fine. I reached a breaking point and finally had a reason to use my FU money accordingly.
Lots of people have called me brave and told me they admired my courage. Quitting didn’t feel brave though.
Not because I’m fearless; I can spiral anxiously with the best of them. But I’d spent my life overpreparing, probably like everyone who has bothered to read this far, and I was just suddenly done living under a cloud of “what if.”
Going to work every day began to feel like dressing in a costume and putting on a performance. It took so much effort.
And I just had no desire – or real reason – to do it anymore.
The universe had knocked me so firmly off course, in every way simultaneously, that I was forced to become a new person. Retiring simply felt like the next right step.
——————–
It’s a pretty compelling story so far, huh?
Stay tuned as part 2 will be released soon!
Leave a Reply