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Retirement Interview 24 - ESI Money 2Here’s our latest interview with a retiree as we seek to learn from those who have actually taken the retirement plunge.

If you’d like to be considered for an interview, drop me a note and we can chat about specifics.

This interview was conducted at the end of May.

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

Let’s get started…

GENERAL OVERVIEW

How old are you (and spouse if applicable, plus how long you’ve been married)?

I am 53 and my spouse is 52.

We have been married for 14 years.

I’m a widower, I lost my first wife to leukemia in my mid-30s.

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

One daughter who is 21 and just graduated from college with her degree in Biology/Chemistry.

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

We live in a small bedroom community (2,500) outside a larger city in the Pacific NW.

Is there anything else we should know about you?

Crazy times for sure. My wife no longer works and after considering early retirement scenarios, I finally pulled the plug on 9/12/19 but because of accrued vacation, etc., I was paid into early January, 2020.

But talk about retiring into the mother of all Monte Carlo simulation iterations…

I was also Millionaire Interview 96.

RETIREMENT OVERVIEW

How do you define retirement?

The age old question.

For me, it’s simply as “choice.” Choice to do whatever I want to do, when I choose to do it and if I get bored or wish a change, I can choose to do something else.

I still feel I am retired even though I have a small business which I still consider much more of a hobby than anything else. But that hobby has turned into material income.

But there will come a time when I “choose” to do something else altogether.

How long have you been retired?

My last day in the office was Sept. 12, 2019. My last day of pay (accrued vacation and sick leave conversion) was early Jan. 2020.

Normally payout of everything would have occurred upon separation but because I was leading a very large corporate project, when I knew I would be retiring, I agreed to take on Phase II of the project as long as the company was willing to work with me on some separation variables, including a “stay” bonus, letting me use vacation through the remainder of the year which then netted me my full 2019 bonus, extend my health care and get paid for almost 4 months while being ‘retired’.

Is your spouse also retired?

My wife worked in early-childhood education and was simply burned out. Because she wasn’t making much money in relation to me, we decided she could ‘retire’ and focus on the maintaining the household.

It worked out great and she’s a rock-star around the house. It made my life SO much easier since my level of stress was rising quickly over the last few years.

What was your career and income before retirement?

I was a Chief Information Officer (CIO) for a financial institution.

I have been in the financial business from the age of 19. I received my first executive job in 1997 due to a right-time and right-place scenario.

As far as income prior to retirement, it depends on how you look at it. In my formal career, I was making $203,000/yr. not including an annual bonus which could be as little as 0% or as much as 15%. In recent years, it had been about 12%.

Then I have my small business I run with a few friends. It started out with just three of us but we have added two additional partners over the past few years. I’m a 25% owner in the company and 2019 saw $70,000 in income for me.

We also have a cabin outside a national park we purchased shortly after the housing crisis. It was a short-sale and we happened to have stayed in it twice before finding out it was for sale. It nets about $15,000 year as a vacation rental.

Why did you retire?

Last day in the office was 9/12/19 but accrued vacation, etc. kept me on the books until early January, 2020.

It was VERY voluntary and I was leading a VERY large project which had two parts. I only agreed to take on the first part but when the time came for me to do volleyball set (metaphor) to one of my fellow executives to spike it home, everyone took a step back and the CEO had the “what would it take” discussion with me which ended up extending my time by nearly 18 months.

Even as my second date got close, there was another round of “what would it take” discussions but everyone knew where my mind was.

PREPARATION FOR RETIREMENT

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

Probably sometime around the age of 35. Of course not “seriously” at that time but those who know me know that I had been planning retirement from my 20s through execution of wealth creation methods, savings, investments, etc. I’ve always been somewhat of a financial nerd and financial risk-taker, within limits.

But I didn’t really start seriously considering it until near the age of 47 when much of the ‘fun’ aspect of my job was largely gone, financial regulation was at an all-time high, management of employees was getting more challenging and I was ready to begin focusing on myself and my second-act.

More than anything, I started noticing that the stress from my job, which is always high in the I.T. world, starting manifesting itself more materially in my body, sleep patterns, general anxiety, etc. I had always been an individual who shouldered stress well, could remain optimistic and empowering through it and get a job done. But over the years, the stress started building up and taking its toll.

When I turned 49, I felt the finish line was within reach. I was closing in on my financial goals, my side business was doing well, the vacation rental was performing and I planned on exiting at age 50 or 51. But just prior to that, a HUGE project came up at work which would require two separate phases, each about one year long.

In the end the first phase took about 15 months and Phase II would take 16 months before we went “live.” My expectation was for leading phase I only.

As already explained, that turned into also leading Phase II but and it added 18 months to my timeline. But in that time, I was able to focus on our income/expense sheets, reducing any/all expenses, putting away even more money and started a formal process of preparation.

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

From the age of 45 I had already started maximizing everything I could in the way of putting money into the market to capitalize on growth.

At the same time, we were streamlining our expenses and getting rid of all debt we could. All cars were paid off, I had already refinanced the house down to a 15 year mortgage but the plan was that I would pay off the house before retiring.

The hardest part, as I reached 50, was a systematic unwinding of over-weighting of growth tech stocks and poor diversification. It wasn’t “poor” based on performance and I’ve always been a VERY hands-on manager of my money via trading and investing to maximize return. But it was poor in the area of risk and I wasn’t going to create my own reality (I’m famous for saying “don’t create your own reality”) that the risk would be okay in retirement.

After the lost decade from 2000-2010, we had been riding a huge bull market and I knew the music would eventually stop playing. To that end, I started unwinding the risk, increasing my fixed income and dividend holdings and making sure my favorite stocks wouldn’t make an unwise percentage of my overall portfolio. It was SO difficult for me to do having been an aggressive trader and investor from 1990.

The initial plan/goal was to amass $1.4M in my bridge account and $1M in my tax-sheltered accounts.

My “bridge” account is a term I use to label those funds that will be my bridge from early-retirement to retirement. When I perform wealth planning for others, the “bridge account” is a term I make them familiar with and I’ve been happy to hear the term spreading.

Between the $1.4M bridge account and the $1M retirement accounts, I figured my simple net worth would be no less than $2.9M which should provide enough cushion to retire with sufficient income replacement.

Given that my side business was doing well, all my calculations were that we could retire and maintain the same level of discretionary income we had become accustomed to prior to retiring.

I should mention that part of my plan had always been to maximize my contributions to 401k to the max allowable by the government and, in addition, schedule an auto-transfer into out investment account EVERY month on the same day without fail. I always treated it as an expense just like a car payment and increased it every time I received an increase in compensation or I increased discretionary income by cutting expense. When I started it, it was $500/month, toward the end it was up to $3,500/month.

Above all else, this is one of the most powerful things you can do to fast track wealth building.

What did your pre-retirement financials look like?

Enter the bridge account related to age 59.5. Many people I speak with want to retire at age 55 but when I ask them what they will do about income during that time, they mention retirement accounts, unaware of the rules for accessing them.

In my year 49 of age, our bridge account was approximately $1.25M and retirement accounts were $775,000. I was trending well and knew that between my income over the next couple of years, side business and vacation rental, we should be able to save upwards of $140,000+ year. Around this time, I lump summed the house to pay it off as well.

Accounts were as follows:

2016

  • Bridge: $1.25M
  • Retirement: $775,000
  • House/Rental: $700,000
  • Net Worth: $2.70M

Funny thing happened in 2017, 2018 and 2019. A combination of greater focus on maximizing savings, huge bull market, some spot-on trading, house and vacation rental price appreciation and side business income increase, my balances increased sharply like I couldn’t have expected.

When I reached my separation date on 9/12/19, our accounts looked like this:

2019

  • Bridge: $2.24M
  • Retirement: $1.1M
  • House/Rental: $700,000
  • Business: $350,000
  • Net Worth: $4.39M

*Note: This amount reflects a new addition to my net worth calculation – The inclusion of $350,000 which represents our calculated assessment of value for my ownership % of the side-business.

For reference, my current balances look like this:

May 25, 2020

  • Bridge: $2.15M
  • Retirement: $1.23M
  • House/Rental: $700,000
  • Business: $350,000
  • Net Worth: $4.39M

So interesting to note that from year end 2019 to our current COVID situation, our net worth remains at the same $4.39M. See below under “What surprises…” for how our retirement balance managed to increase $120,000 from EOY 2019 to current day despite the broader market declines.

What was your overall financial plan for retirement?

We’ve always kept a detailed monthly income sheet so we know how much our monthly expenses are. Of course, retirement can change that but we still kept an expected expense sheet that estimated.

We estimated our retirement expenses through expansion of what we already budget for on an ongoing basis plus extrapolation into new expenses unique to retirement. I have always budgeted with a fully-loaded (maintenance, gifts, entertainment, hobbies, misc., etc.) monthly/annual income-expense sheet including not just ongoing monthly expenses but also annual expenses that are paid once per year. Once you do this, extending it into a retirement is much easier.

The one new expense we had to plan for was health insurance for the three of us. There’s no getting away from this huge item. Currently, we are utilizing a COBRA plan at a cost of $1,650/mo. The good news is that I was fully prepared for it and when we paid off the house, I simply loaded in the expected health insurance increase as a similar mortgage payment.

In our budgeting, I always use discretionary income as the measuring stick for our budgetary health.

To that end, my desire was for a full-loaded expense sheet which still yielded no less than $3,000/month in discretionary spending which would be used to fund retirement discretionary activities. So that would mean all income minus all expenses yielding a minimum $36,000/yr. in spendable dollars without further drawdown of our bridge account.

The plan further included one year of ‘laying low’ without significant expense to see the plan work, discretionary income generate and to build the discretionary income account which could then be combined with next year’s discretionary income as a bit of a slush fund or emergency discretionary account of sorts.

Without corporate income, that would mean I would have to make up our income via three different sources as followed, with the following plan:

  • Investment Drawdown: $60,000
  • Side-business Income: $80,000
  • Vacation Rental: $15,000

Again, the important aspect of the budget is to ensure you provide an accurate assessment of annual expense and apply an accurate taxation percentage to the equation. While I’m hoping to achieve 15%, I’m using 17.5% as my first-year taxation goal and will do whatever I can to lower it after I get a full year of experience in 2020.

Based on my math and projections, we should experience no less than $4,000/month in discretionary income allowance.

Based on invested balances within my bridge account, dividends alone should make up about 80% of the $60,000 drawdown with the hope of making up the additional $10,000/year in portfolio appreciation, which should be extremely easy…unless we see some sort of pandemic scenario or the like (joke intended and more on this later).

The longer term plan has me exiting the side business between the age of 60 or 61, selling my % and living strictly out of the remaining balance of the bridge account until I reach RMD age for the retirement accounts which should be 72 by that time.

With a factor of inflation and 4% total projected return, I estimate our bridge account balance to be approximately $1.7M as I reach age 70 and we begin taking Social Security (final age to be determined much later). At that time, my expectation is for the retirement accounts to be valued at approximately $2.5M for a total portfolio value of $4.2M at age 70.

Of course, there are a lot of variables in the equation. Unexpected expenses, Monte Carlo drawdown events, side-business income reduction, etc. The key to all of this is in our initial balances combined with a discretionary income which we will not be spending completely each month/year.

Key to all our financial planning was the setup of our account structure which I developed leading up my exit. I created a structure involving three separate accounts for our bridge (non-retirement) funds, based on years of funding at $60,000/yr., as follows:

  • Year 1: Bank – $60,000 – All Cash
  • Years 2-8: Charles Schwab – $420,000 – 40/60 (equity/fixed income + cash)
  • Years 9+: Charles Schwab – All remaining funds (currently $1.65M) – 65/35 (equity/fixed income + cash)

Each of those accounts carries an investment mix designed for proper risk tolerance. Additionally each of the brokerage accounts has a $60,000 cash holding to fund the next year of retirement spending.

The goal from these accounts is to create at least $60,000 of drawdown and, hopefully, income in a waterfall fashion such that the “2-8” account will always have at least $420,000 to fund the next 7 years of $60,000 drawdown, at least until the side business is sold, that income goes away and our drawdown requirements will increase. The goal is to leave the retirement accounts untouched and invested until RMDs are required in approximately 20 years.

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

The plans I/we made were primarily:

  • Tracking all expected and desired expenses to ascertain a “what is” expectation of our lifestyle in retirement
  • Elimination of all debt servicing
  • Rebalance portfolio for adjusted acceptable risk/income tolerance
  • Minimize expense where possible while maximizing savings/investment

All debt has been eliminated save $110,000 remaining on the vacation rental which has a value of approximately $325,000 as a turn-key property.

Who helped you develop this plan?

It’s all my own creation and I love creating models to help determine need and satisfy requirements.

When I work with individuals to help them prepare for retirement, I start by having them envision their retirement, ages, variables and then help to establish an expectation. While many are frustrated or intimidated by the markets and don’t know where to start, I keep it fun by focusing on envisioning their dream and then help them to understand how to implement a plan to fulfill that dream, which often includes the creation of a bridge account in addition to retirement planning.

It’s no different from the process and sheets I’ve created for myself. Taking control of your money and planning your future can be a “fun” process when you are willing to commit to it.

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

Most of the planning was financial as nothing was possible without that. My goal had always been to have more than needed when I was ready instead of being ready and potentially not having enough.

By setting minimum calculated thresholds for money, expenses and income, I wouldn’t allow myself to consider retirement until those thresholds were met. If not for that, it would be too easy to “create your own reality” of something far less due to your desire to exit the workplace.

Considering today’s FIRE movement, my belief is that too many are making that mistake based on flawed assumptions.

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

Money was my chief concern obviously. Being that I was the main bread-winner, I didn’t want to put our family in a situation where my desire to exit the workplace created a hardship if something unexpected should occur.

Furthermore, as a career financial executive, exiting my career at 52 could be very dangerous if I need to reengage or reenter the workforce. The chances of doing so at a similar wage would decline each year from retirement in my estimation. I did work to maintain a high standing in the industry and create what I considered to be long-term relationships in and out of my company to provide options should something occur, but my goal was to do it right the first time and not have it come to that.

My second concern was engagement. The “R” word doesn’t really exist in my vocabulary and most didn’t expect me to “stay retired.” But I still have the small business which is doing well and it allows me to engage as much or as little as I like.

Beyond that, I do miss some of the engagement with my professional peers, solving problems and leading teams but not enough to go back. My body was talking loudly to me about the stress and I chose to listen. I have no desire to go back to that at this point. That may change in time or I may be willing to do a little consulting if asked to stay connected and utilize my talents of leading projects and developing people, but that isn’t a focus.

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I did have some concern, more awareness, about the move from my risk-taking, wealth-building and aggressive money tactics to more of an income producing stance and how I would handle that. I found that it was just a maturation process and once I was preparing for and entering retirement, I have just as much passion for it, but with a different focus.

Beyond those few items, I really had very little concern. Just the unknown of it all generally.

How did you handle deciding on and paying for healthcare?

To me, there was little way out of it and I wasn’t willing to risk our family or finances on having no health insurance, cut rate plan or ministry/sharing plan. I’ve read a lot about all the choices and I simply decided that the health insurance variable was going to be primary for us for the next 13 years until Medicare is an option. Until that time, I allocate $1,650/mo. to insurance cost.

Thankfully, our daughter graduated in 2020 and hopefully will be entering the job market and getting her own benefits. There’s a chance she’ll first enter a PhD program which means we may need to continue paying for health care. Either way, there’s no real alternative for us other than paying it monthly.

When COBRA nears expiration in mid-2021, I will have already determined our new coverage options which will likely be a HSA based high-deductible plan.

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

I’m very vocal about financial preparation, envisioning and planning for retirement and life stage planning.

All my family and friends new it was coming and while some were surprised it was so soon, there was no shock involved.

THE ACT OF RETIRING

How did you ultimately retire?

Because of my large project, the time flew by. There were long days, a lot of meetings and employee management.

To fulfill my part of the contract agreement that I had in place, I had to stay until at least August, 2019. But because I wanted to ensure I got my full annual bonus, I negotiated a plan to use all my vacation time to get me to 2020.

Counting backwards from the end of the year utilizing my number of vacation days (89 I believe I it was), the retirement day was set as Sept. 12, 2019. I asked that there be no money or parting gifts as I didn’t need them and I didn’t want my retirement to set others back financially. Instead, we just had a get-together at a local tavern and management was invited. My direct reports had a lunch and an after-work get-together in the banquet room of another establishment the week of my retirement.

Strange thing was that what I was fearing most was the ‘walk’ to my car with my boxes. So starting two weeks before my last day, I started taking things out little by little so that when the time came to leave, I only had a very small box of items, a few small gifts, etc.

I wasn’t sure what the emotions would be at the time and, surprisingly, it was as if I was fully prepared and it was just another day. The funny thing was that there was that my get-together was planned for the night of my last day so I had to stay at work all day rather than leaving early, which seems to be customary.

One of the great parts about my retirement was getting to help interview and suggest individuals for my replacement. The gentleman who eventually took my job was someone I have been friendly with for 15 years so the transition was super smooth and relaxed.

I don’t remember the drive home, but I do remember walking to my car. I read somewhere else here that everyone talks about missing the people and the friendships you made while working and one of your respondents mentioned she ended up not missing any of them. I won’t go that far necessarily but largely agree that after 20 years at a single company, I didn’t know what to expect.

I thought I may have had more friends there but that doesn’t seem to be the case. Sure I was an executive and that may color the relationships a bit but I get the distinct impression that if I wasn’t reaching out to some of them, they would not be reaching out to me. This isn’t a regret as much as it an understanding about the nature of corporate relationships. There are a couple that I’m surprised that seems to be the relationship we have as I didn’t expect it. But that’s okay. I didn’t retire to stay friends with those who I work(ed) with.

What went well?

The last three years of market gains and our ability to not only realize some large profits in our portfolio but also put significant amounts of money savings away to prepare was far above expectations.

In the last three years, we’ve added more than $1M in net worth and the bridge account alone was up more than $500,000. Where I thought I was comfortable with our generated amount over the threshold, the last three years added a lot of cushion.

What didn’t go so well?

Aside from the Corona virus, everything has gone really well. I’ll talk about the virus below.

Other than struggling a bit with my daily routine time again and some neck/back issues (I expected the reverse to be true) as a result of the environmental change, everything has gone really well.

As it turns out, my belief is that I had adjusted my new standing desk such that the monitors were too high and it has impacted my neck adversely. In tracking back when I started having problems, it was toward the end of the year, right around the time I got my new desk. In mid-May I have readjusted and I think that may be the long term fix. *fingers crossed*

Because of the COVID virus, our daughter had to graduate at home in front of the TV. She lost her grant she had been awarded for her biology project for the university lab, lost her opportunity to present the findings at two industry conferences, including one that also doubles as a job fair and now has to enter a very uncertain job market.

We had a long and expensive Alaskan Cruise-Tour booked and that has been a nightmare trying to cancel, get refunds and decide what to do from here. I’ve been able to recapture some $4,000 in refunds but still have over $9,000 outstanding.

How did you ultimately find the courage to do it?

Planning, running the numbers, planning, preparing, running the numbers, rinse and repeat.

My body was telling me not to do one more year. Even my wife noticed the shift in my emotional well being and stress level. For the first time in my life, I had one or two middle of the night panic attacks where I woke up and couldn’t breathe.

It was a culmination of a lot of little things that helped me to prepare and the planning along with the combination of the large project provided the perfect dismount. It didn’t involve a lot of courage as I “knew”, to the best of my ability, that I was prepared.

RETIREMENT LIFE

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

It’s been awesome, purely! A few realizations that I will list below.

I’ve always been an early riser 4:30 – 5:30 AM and I keep with that routine. I can get everything done in the first few hours of the day and then I do whatever I want.

I often can lose track of time for all the things I’m doing and I have at times struggled with balance/routine. More on that later.

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

It feels much like it did in the first couple of weeks. My mind is still fully engaged in a million different things, I’m still busy, I’m still on the computer way too much.

I’m in my “man’s room” usually from 5:00 AM to 5:00 PM doing some of the side business, working out, stretching, watching the markets, trading/investing, having phone conversations with a couple of friends about the markets and trading, watching my investments, listening to music, etc.

I often go for walks with my wife but usually in the afternoon.

My wife and I watch TV at night while sipping our favorite wines. We both enjoy our own activities but we are very good together as well. There have been no issues in co-mingling our lives.

I even took a part time job in a wine tasting room for my favorite winery just for fun and it’s been great. Funny thing though, I NEVER look forward to going to work, but I always have fun when there.

There’s not much I dislike because I can change whatever I want but I have so much free time, I sometimes allow myself to get out of the established routine that works best for me.

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

  • Up at 4:30-5:30 each morning – I survey the markets to determine the direction of the day and the noteworthy news items. I perform two daily routines for the side business which takes me about 15-30 minutes.
  • 6:30-7:00 – Watch the markets open, survey trade possibilities, evaluate opportunities
  • 7:00-8:00 – Morning stretching, workout, yoga, weights, etc.
  • 8:00-11:00 – Mix of side business, stock market research, investment review
  • 11:00-1:00 – This is my free time when I have stock market chats with friends about investment mix, research, fundamentals, etc. Reading, wasting time doing things I like.
  • 1:00-3:00 – I like watching CNBC during this time for market recaps, Closing Bell, Fast Money, Options Action. Sometimes a nap fits in here nicely.
  • 2:00-4:00 – More side business stuff, chats, side work, research, etc. Sometimes the walks or sitting outside occurs here.
  • 4:00-5:30 – Me time. This is where I may game (PS4 or PC), play guitar, etc.
  • 5:30 -6:30 – Migrate downstairs to spend time with wife before dinner, maybe sit outside, have a drink.
  • 6:30-7:30 – Dinner with family/wife, discussion.
  • 7:30-10:00 – Wine and music eventually leading to some TV time.
  • 10:30 – Bed

I use Saturday and Sundays to get my inside-tasks/projects done and typically don’t leave the house as this is when everyone else is out. Weekdays are our ‘play’ days when desired.

Tuesday is a day my wife and I call “TuesDate.” We usually spend time together after about noon for the rest of the day. Could involve a hike, adventure, going out to eat, playing pool at the house, drinks on the patio, wine and cheese at night etc. – Or all of the above!

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

Two primary things I’m planning and one third item I’m considering:

  • Writing a book or books
  • Learning a language (probably French to start)
  • Starting a Dungeons & Dragon campaign. I used to play back in the 70s after it first came out and was really deep into it. My daughter plays now and wants me to start a campaign. I may even consider one for early-retirees that used to play.

What is your social life like?

This is really sad to say but the social distancing movement has played right into what my wife and I really like: no commitments, few social gatherings and having quiet time.

We like to get out to hike, go for walks, we’ve started mushroom foraging and we will go out at least once a week on our TuesDates but other than that, we just like doing what WE want to do when WE want to do it.

Looking back, what would you have done differently?

I can honestly say I don’t think I would have done anything differently.

My first thought was that I was going to regret waiting the extra 18 months, but it worked out so well in that I was ready monetarily, emotionally and physically. Since I was prepared in advance, it allowed us to really focus on the months leading up to it and have greater focus on what was to come.

Was there any emotional impact from leaving the workforce?

Nothing negative at all. I was obviously ready and well prepared emotionally and physically. I haven’t looked back once, regretted the decision or missed that engagement.

It’s still only been 8 months but I don’t see it changing. I could see myself doing some side consulting if someone were to call but outside of wealth planning, I don’t have a desire to return to work.

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

The COVID crisis has been the only real surprise. And what a doozy. When I talk of retiring into the mother of all Monte Carlo simulation iterations, this is what I’m talking about…and I’ve used as an example when I talk to others about financial planning topics, especially portfolio diversification/mix. No one saw this coming, it wasn’t in any of the economic indicators, it couldn’t have been planned for and there were no present-day models for how to invest in/around it.

EVERY fiber of my being heading into retirement didn’t want to rebalance my portfolio to remove my favorite growth stocks, lower my exposure and invest in fixed income. But casting aside my desire to create my own reality about the safety of my current diversification, I took some monster capital gains to reduce exposure and risk in my portfolio, purchase fixed income beta-smoothing issues and get greater access to income-producing vehicles.

Had I not done that at the beginning of 2019 and 2020, I would have been in a world of pain when the impact of the virus was realized in the markets. It HAS to be done and this is the perfect example of what can happen if you don’t have a well-balanced portfolio taking into consideration your time horizon and risk tolerance.

However, there was an enormous stroke of luck that occurred as well. Upon leaving my employer, I had a 401k with $987,000 in it. I needed to roll that over to my brokerage account as a rollover IRA but didn’t want to do so in the middle of a market rally.

Following the end of the year (2019) I was waiting for a time to roll this account over. I had become more and more uncomfortable with the froth in the market and was trying to time it such that I could go all-cash for the roll over. As it turns out, I picked early February and went all cash during the week of February 10, nine days before the S&P an all-time intraday high.

In fact, $987,000 was deposited into my new IRA account on 2/19, the day of that high. Uncomfortable with investing the money so quickly into what I was concerned was an over-bought market, I started planning on how I would be investing the funds.

Instead, the COVID virus hit with enormous force, sending markets reeling. I didn’t trade/invest the funds until we had already dropped 25% from highs and I continued slowly purchasing good balance sheet companies with sustainable dividends and strength into the bottom, but at a very slow rate.

At this time, I’m still only 51% invested and holding out the remaining 50% for purchase of some fixed income, growth and additional income producing names as the market heals over time. Since 2/19, this money is now up 10% to $1,083,000.

Sometimes luck is a viable strategy.

What are your future plans?

No immediate changes though we are going to lay low for the rest of the year. I may need a knee replacement unfortunately and I’d rather do that while on our existing insurance due to favorable limits.

We will start taking some little trips here and there this summer but nothing large. We are in no hurry being that we’re still young. Primarily, however, we plan on doing two large things annually:

  • Spend a month at our cabin during the shoulder season (so as to retain as much peak season income as possible)
  • Vacation for 4-6 weeks in a new location each year. We will either drive or fly/rent in a selected location within the US or outside for at least a month at a time and immerse ourselves in the surrounding area.

Aside from that, little trips to see our favorite sports teams play and weekend beach get aways will keep us busy with something to look forward to.

RETIREMENT FINANCES

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

All things considered, very well. Like everyone else, I had gotten spoiled with all the great returns for the past decade. Much as changed now and the near-term is very uncertain.

But I’ve always been one to capitalize on fear, greed and risk. My all time recorded high for my bridge and retirement account was $3.476M (excluding real estate). As of 5/25/20, my total is $3.39M. My bridge account is down $120,000 from the all-time high but my retirement accounts are up. So total portfolio balance is down -2.4%. Not bad considering the markets are down approximately 13%.

Can you give us some insights into your post-retirement spending and income? How much do you spend annually and on what? And where does the income to pay for your spending come from?

As we haven’t ramped up vacation spending, our annual expense remains about $78,000, but that is fully loaded including $20,000 for health insurance, $15,000 for food, $3,600 for dining out and $3,600 for gifts. Once our daughter secures her full time job and exits the home, expenses should drop dramatically.

Income is currently projected at $155,000 as explained above. Note that the COVID crisis has also impacted our vacation rental income for 2020 but all indications are for a quick rebound as it’s just outside one of the western national parks.

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

Plan is for me to wait as long as possible (70) and to potentially plan for my wife to start taking ½ of mine at 67 but nothing in stone at this point.

RMDs won’t happen until they have to, currently pegged at 72.

My goal for 2019 is to get our taxation figured out and then put in a plan to become more tax efficient through use of IRA contributions, HSA contributions and a move to qualified dividends for the lower tax rate. I’m working with a CPA this year.

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

I did pick up a wine tasting gig one day a week for engagement and fun. My favorite winery was opening up a new tasting room and I contacted them before it opened and was able to be hired on.

As I said before, I don’t look forward to getting ready and driving into work but I always have fun once there.

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

We have such regimen and routine for spending and savings, we haven’t had any difficulty as of yet.

But, we are still within the first year and are slow-playing it so being in ultra-safe mode means we haven’t experienced our ‘real’ retirement just yet. We’ll see.

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

I wish I would have known the COVID crisis was coming and how deep the market impact would be. Given my quick trading fingers from past experience, I could have been up seven figures if I hadn’t been in full retirement mode but this is not a sound retirement practice so I’m not looking back.

I can’t think of anything I would have done differently or that has truly surprised me such that it changes my perspective on my process.

What advice do you have for those wanting to retire?

I’ve thought a lot about the FIRE movement — about how many 30-40 year olds have been profiled as retiring early on “their own terms.”

Meanwhile, most/many of them have created their own reality aside from what is really going on in the world and, thus, they have taken significant risks they don’t recognize. We have just come out of the longest bull market in history, putting those FIRE individuals in their 20s when they graduated from college, secured their first high paying careers and started investing/creating wealth.

Their experienced reality is that the market rises double-digit percentage points annually and growth of investment accounts does nothing but go through the roof. Hey, I’ve benefitted too but with no expectation that I was retiring with as little as $1M-$1.5M and 100% invested, with a child or two and thinking I will make it a lifetime with $3,000/month of expenses.

Meanwhile, their skills may be diminishing, they are no longer contributing to their profit-sharing and 401k plans and are losing their prime earning years which also sets up social security earnings.

For the rest of the individuals, a number of things come to mind:

  • Live below your means please. Think minimal debt servicing.
  • 15 year mortgage.
  • Develop and learn to use a detailed monthly/annual budget.
  • Pay yourself first. I always made my monthly Schwab investment an expense just like my water bill.
  • Consistent and increasing automatic investing.
  • Every time you pay off a bill or receive a raise/promotion, increase your saving/investment allocation.
  • Find the courage to take calculated risks.
  • Envision your retirement and plan for that vision.
  • Work with someone, anyone, to help you take these steps if you aren’t able to make them yourself.
  • Have fun on the journey. Once you realize you CAN do it, and take control, it’s fun and empowering.

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