Here's the latest in my series of retiree interviews, discussions with everyday people who have retired and share their wisdom with the rest of us.
My questions are in bold italics and their responses follow in black.
Let's get started...
Tell us a bit about yourself (age, marital status, kids, where you live, etc.)
I'm 62 and have been married to the same man for 35 years. We have two homes: an apartment we rent in Eureka, California and a home we own in Guanajuato, Mexico, in the Central Highlands. We have twin daughters (my stepdaughters), who are 43 and who live in the Vancouver, BC area, where we met.
How long have you been retired?
My husband and I have each been self-employed for years, in different businesses, so for us retirement is a process, not an event. We still don’t consider ourselves retired, though we could be. We started retiring in 1999, when he was 57 and I was 48. That year, we rented out our home where we then lived, in Palo Alto, CA, and went traveling, using our rental income to live on. Over the next 20 months, we visited ten countries, staying anywhere from one to twelve weeks in each.
When we returned to California, our house was still rented—plus we were spoiled rotten by the rental income! We couldn't see moving back to Palo Alto--but neither did we want to live too far away, since we still had clients in the Bay Area. We ended up moving six hours north to Eureka. We weren't sure how long we'd stay, but 12 years later, we're still here, in the same town and even in the same apartment!
How long did it take you to save for retirement?
First, a brief career itinerary. From ages 21 to 36, I was always able to pay my way and avoid debt, but I never earned enough to save. I’ve never had a day job. My first field was teaching English as a second language, a career which paid well on an hourly basis ($18-$20/hour in the 70s), but involved working part-time. Then I started a business helping people (mostly women) lose weight. I offered workshops and wrote free-lance articles for national magazines on the subject. Once again, I covered my expenses but didn't save. This wasn't a big problem at the time because we were living in Bellingham, WA, where during the 80s you could get by without earning much.
But in 1987, my husband and I decided we wanted to challenge ourselves more than was possible there, and we moved to Silicon Valley. It was an exciting but very intimidating change. Our expenses soared: our rent in Bellingham, for example, had been $265/month, whereas in Palo Alto, it was $1200/month, and a year later, rose to $1400.
Six months before we left Bellingham, a client had asked me to give a communication seminar for her workplace. It went well, so I shopped it around to various county agencies, offering slightly different versions. There was a word for what I was doing, I soon learned: "training.” When I moved to Silicon Valley, I joined ASTD (American Society of Training and Development), and a new career was born. I began seeding my training business there, on much more fertile ground. My first gig was at Apple Computer. 26 years later, I still train, facilitate, speak, and coach on leadership and management.
Around the time we moved to California, my father, in a rare moment of unsolicited advice, recommended that we open IRAs. I barely knew what an IRA was, but both of us took his advice. Our Bellingham tax accountant went on to recommend that we put the maximum allowable into our IRAs each year, advice we have followed faithfully, to our benefit. A couple of years later at the accountant's suggestion we also opened SEPs (self-employment pensions).
So how long did it take me to save for retirement? I started saving at 36, and began retiring at 48. I could have completely retired then, had I chosen, at our modest standard of living. So, twelve years. I’m astonished, looking at the numbers.
How did you accumulate enough (savings, investing, side business, etc.)?
1. I married someone who, like me, doesn’t fit the American model of consumption. He isn’t impulsive when it comes to money, and is happy with little. Although he worked as a civil engineer for 22 years, that field was too narrow for him, and he ultimately went into business for himself too.
2. In Silicon Valley I sought out colleagues and mentors more experienced than I. This was frankly difficult for me, because I like to look like someone who has the answers. But the more I was willing to shut up, admit ignorance, ask questions and take advice, the more I benefited hugely from those who had already been there, and was able to grow my business.
3. I took numerous workshops and retreats exploring my relationship with money and the attitudes and practices which kept me from earning what I was capable of. Gradually I began to let go of self-limiting beliefs that reduced my profitability. I developed more confidence in myself and my services, and the ability to convey that to prospects.
4. I also took advantage of workshops on marketing, negotiation skills, building client relationships, self-promotion, and anything that would help me grow my business—not realizing that I would soon be giving presentations on these same topics!
5. Relocating to a higher risk/ growth area paid off for us in the long run. After living in Palo Alto for seven years, during a short-lived dip in the market, we bought a 1200 sq ft house for $292,000, directly from the owner. We put as much down on the mortgage as we could, and whenever I had a good month, I would pay off more. Every month we would stare at the numbers on our mortgage statement and thrill to see the interest payments dropping!
We owned the house free and clear in six years and sold it three years later for about $600K net. The rest, as they say, is history. We did not rush out and buy another house. We stayed put in our modest but comfortable apartment (where we still are) and two years later bought an old house in a beautiful, popular, safe World Heritage town in Mexico for $107,000 which we remodeled for another $75K and which has increased in value. Other than giving my stepdaughters each a couple of healthy chunks of money, we have not spent much more of our savings.
The Palo Alto house would have netted us much more if we had hung onto it, of course, but we would have had to find a different property management company, not to mention redo the roof. We were living 6 hours away when we sold, and it was a huge relief.
I should add that though the house in Palo Alto did turn out to be our ticket to financial freedom, every other piece of property that we acquired before that one gave us, at best, our investment back, but more often, lost us money. Some of those losses were my husband’s, not mine, because for many years, he and I maintained separate finances, by mutual agreement.
What action during your working years do you think had the largest impact on your ability to retire?
A combination of earning good (but not huge) incomes, and careful spending. Neither one of ever made more than $75,000 in any year, but because we are not big spenders, we made more than enough to live on and we saved. For example, for four years before buying the house in Palo Alto, we lived with seven other people in a large, rambling house. We didn’t do this to save money, but it did reduce our rent in a high-cost area. When we finally sold the modular house we had bought on Orcas Island, WA (one of those real estate failures), after three slow and sleepy years on the market, we considered celebrating with a trip to Hawaii. We didn’t. We plowed the money into paying down the Palo Alto house mortgage. (Island property, we learned too late, is notoriously hard to sell!)
We recently gave up our TV because we weren't using it. We own older vehicles--a 1990 Mazda Miata and a 2003 Eurovan. I didn’t have a car of my own until I was 36. We do errands on foot or by bicycle whenever possible. Our 800 sq ft. apartment in Eureka rents for $699; our landlord values us and has raised it only once in 12 years.
Our biggest expense was and is probably airfares, both for pleasure travel and to see our families. My husband is British, so we are in England about once a year. We like to bicycle-tour independently, and have gone cycling in Europe every other year since the mid 80s. We also do a lot of long-distance walking and hiking, both in the U.S. and abroad.
Nowadays there are hundreds of blogs on the web espousing the “new” minimalism. We never made a religion out of living simply; it's just the choices we made intuitively. We certainly don’t feel deprived.
What was your net worth at retirement and what were your major assets?
I prefer not being precise, because relations with my stepdaughters are difficult at the moment, but over $500K.
What non-financial issues did you consider prior to retirement?
We moved to Eureka for lifestyle reasons, partly but not entirely financial. We wanted to live by water. In Palo Alto, I felt anxious living in a community where everyone seemed to make more money than me and was so ambitious. I often felt poor there, relative to my peers, even though I knew that was absurd.
Ironically, I now find it stressful to live in a community where there is a high degree of unemployment and poverty. But Eureka is definitely a simpler and less expensive area, and more bike- and pedestrian-friendly than the Bay Area.
How did you make the transition to retirement (over time, all at once, etc.)?
What specific financial moves did you make as you transitioned to retirement?
The biggest was putting about half our house money into a high-yield bond fund that pays between $1200-$1800/month, covering our Eureka living expenses.
Did you find the transition to retirement difficult at all?
No, but that may be partly because my life isn’t that different now than it was before.
What funds your retirement and where does it come from (savings, income, annuities, Social Security)? How much do you make a year and how much from each major source?
My earnings—between $20,000- $30,000 a year.
My husband’s earnings-- he writes a weekly science column for a local newspaper, and also teaches classes on a range of subjects—approximately $5,000.
Our junk bond fund—between $1,200-$1,800/ month before tax.
Our IRA and SEP accounts; mine come to about $215,000 together; his much less.
His Social Security, plus he gets pensions from the UK and Canada, where he worked before moving to the U.S. (I plan to approach Canada too, since I worked there for four years)
Rent from our Mexico house, listed on VRBO, which covers our house expenses there.
If you are withdrawing from savings, what is your strategy? Do you use the 4% rule or something else? Why are you doing it this way?
It’s not something we think about!
What is your annual retirement spending?
Between $20-$40K, probably. We don’t think about it.
Is Social Security part of your plan? Did you take it early? Why or why not?
As I said, my husband draws SS; he started at 62 1/2. I’m eligible next February. I doubt I’ll take it early.
Have your expenses increased or decreased in retirement? Are they higher or lower than what you expected? If different, please give a percentage estimate of how different.
Because of our lifestyle changes, our expenses are probably less, but because we’ve known for more than 12 years that we have enough, we don’t think in these terms.
Are you eligible for Medicare? If not, how are you dealing with health expenses and how much does it cost you?
I’ll be eligible for Medicare in 2 1/2 years. I currently have catastrophic health insurance ($256/month) that includes an annual mammogram. My husband has Medicare. For routine issues, we see our physician’s assistant at the local clinic who has known us as patients for ten years. We have a great dentist in Mexico, one of the most thorough we’ve ever had, who is very affordable.
Are you concerned in any way with the level of your savings/income? Are you worried about outliving your savings?
I’m not worried. Not because I’ve done the math and figured it all out, but because we both have the skills to be creative and flexible if our income drops. We’re comfortable in third world countries, we could easily live in Mexico or anywhere in South America and make friends. We’re comfortable living modestly, in fact, we prefer it.
Have you made any long-term care plans? Why or why not?
I have not. I assume my husband will die before me because he's a) male and b) nine years older, although I’ve had more than my share of premature losses in my life so I know anything can happen.
At this point in my life I think I’ll probably enjoy old age in our house in Mexico and pay a Mexican friend to check in on me or live-in. Our home in Mexico is closer to most of our family members than our home in California is.
Do you miss work?
Sometimes I wish we lived in a larger urban area with more opportunities to do a variety of training and facilitation in different industries. But that might just be me making excuses!
What do you do with your time?
- Working: either training itself, developing material, or running the business.
- Speaking/ teaching on other topics: we co-teach a class called “Beyond Tours: Independent Travel for All Ages,” and I teach workshops on “Born to Move! Rediscovering Your Inner Exerciser” and “The Way of Wellness.”
- Physical activity—walking, bicycling, hiking, yoga, kettlebells, kayaking.
- Seeing friends.
- Working on writing essays and articles. I recently wrote articles on “Simplifying Your Life” and “How to Help Someone Suffering from Depression or Anxiety.”
- Traveling (just returned from 7 weeks in Cambodia, Laos, Vietnam, and Borneo--of all places!--where a couple whom we first met bicycling in France invited us to visit.)
- Visiting family.
- Cooking. I’m very interested in nutrition, dietary trends and eating mindfully. I enjoy trying new recipes.
- Meditation. We’re involved in a meditation group that we help facilitate.
- Going away in our Eurovan for overnights or longer road trips in areas of natural beauty on the West Coast.
- In Mexico, I’m always working on my Spanish, which is very good but can always get better. I have also given some trainings in Mexico, though not currently. Plus, everyday life activities in Mexico take more time.
- Volunteering. I’ve worked with agricultural cooperatives in Kazakhstan, Paraguay, and Ghana, where I taught leadership and conflict resolution for three weeks each, through a DC-based nonprofit.
What advice do you have for FMF readers when it comes to planning for and living in retirement?
Live lightly. Don’t go into debt. It’s easier to live on less than to make more.
Explore your issues with money, especially with your partner. Everyone has them. Find out what yours are so they don’t come back to bite you.
Prioritize your health. Fitness alone doesn’t guarantee reduced health care costs, but it sure increases the odds. In my case, although I grew up overweight and out of shape, around the age of twenty I started becoming active, and now, in my 60s, I’m finding that years of accumulated fitness are — literally — money in the bank. My husband and I are unusual in this respect: we rarely meet people our age when we travel, because our peers simply aren’t fit enough to enjoy activities like backpacking every summer, hiking down to the bottom of the Grand Canyon, or bicycling through Sicily—typical adventures we’ve had in the last few years. We recently climbed a 14,000’ mountain in Borneo, the highest in SE Asia, and the only person on the trail in our age group was carried down on a stretcher. Our friends end up being 20 years younger than us, because people our age are simply not around.
Question the paradigm. I know a number of people who are as free financially as we are, or more so--but don't seem to realize it. (And some of these people are younger than I am!) They're living in homes that are worth a lot, but are not willing to leverage the value towards more flexibility in their lives. Other people we know own property free and clear, but still don’t see themselves as adequately protected. They don’t want to take the risk of letting go of their work, or even reducing their hours. A huge part of retirement is about trusting yourself and your ability to adapt to a changing world.
Note: This interviewee is available to speak and coach on financial freedom, retirement, simplicity and travel. If you're interested in talking to her, email me (FMF) and I'll put you in touch.