A couple weeks ago a reader made a comment here on a post saying he had retired early several years ago. Since I love stories of how people are actually making and working through financial decisions, I emailed him and asked if he'd be willing to tell us how he did it. He was and here's his story:
I retired when I was 55 years, 11 months and one week old. (I retired just before my 56th birthday so I could say “I retired at 55.”) My wife retired a year later, by her choice. To us “normal” retirement age was always 65; we expected to work until then or even later. But when I was in my late 40’s I read “Your Money or Your Life” by Joe Dominguez and Vicki Robin. It changed my thinking and in the long run, my life. The key for me was understanding their concept of “enough.” I then read the book to my wife as we were traveling to see children and grandchildren about 2 hours away - I read, she drove. Sometimes I would read for the full 2 hours, sometimes for 10 minutes and we spent the rest of the time discussing how it related to us and our situation and making plans. When she got the vision (“you mean I could retire before I’m 65??!!!"), she was on board.
We were both participants in a governmental defined benefit retirement system. We attended retirement system classes on their rules and programs. One of their options was called buy-back, wherein if a person had service time with another governmental agency but was not eligible for retirement benefits; they could buy time in our retirement system. The cost was a little over 10% of current salary for each year of service time purchased. Once the time was fully purchased, it was treated as any other work time for the purpose of calculating retirement income. I did not have much time I could buy back, about 1 ½ years, but my wife could buy back about 15 years. We started small, buying back a year or two at a time but after a while we decided to “sprint” and my wife bought back 8+ years in one lump sum. That meant that almost her entire salary went to buy back (we lived on one salary for a year and a half.) It was a good trial too to see if we could we live on less (I did have some savings we could fall back on if we had to, but mostly we didn’t.)
We never had lots of debt, just a house and sometimes a car (I am not a good automobile negotiator so I get even; I buy a car and keep it often for 10 or 15 years). We had some savings in addition to our retirement programs and 403Bs and we had a rental house (our first home, when we moved up, we kept it and rented it for about 15 years). We sold the rental house right after retirement – being a landlord is not for me. The sale netted us a nice lump sum, even after paying capital gains. It is now in CDs. After retirement we rolled our (relatively small) 403B’s into IRAs and later converted some IRAs into Roth IRAs. We are letting them grow. We will worry about the IRA when we reach 70 or perhaps roll the rest of it into a Roth. Shortly after retirement we finished paying off our mortgage.
In the end, we retired with about 65 to 70% of our income while employed. We were able to retain health insurance from my employer, although it is not subsidized and therefore is substantially more expensive. The discipline of living on one salary has stood us in good stead, and we have lived comfortably. We have relatively simple tastes; we only travel to see children and grandchildren or other family members. Our primary activities are volunteer work for church or community services. We own our home free and clear with no other outstanding debts.
My wife has always known what she wanted to do in retirement: engage in her hobby of quilting full time. I spent the last year before retirement exploring volunteer opportunities for causes I am interested in (again, thanks to Joe and Vickie’s discussion on what to do after you reach FI).
So far, everything has gone great. After 7 ½ years of retirement, we recently moved. We now have a new home in another state (kept the other one) with a mortgage and are starting a new kind of life in a retirement community.
Come back to FMF in 10 years and I’ll do a new report. :)
I retired at 58 back in 1992 and both my wife and I are somewhat older. I'm 77 and my wife is now 79.
Some points I would make after 20 years of retirement are as follows.
Money sounds like it's the least of your concerns, as it is with us. In our case we ramped up our foreign travel considerably and the company we have gone with the most of all is Grand Circle Travel and in particular we have thoroughly enjoyed a great many of their river cruises in Europe and one in Russia.
The other concerns are always health and safety. You need to be a member of a great clinic with all of your providers under one roof, access to a great hospital, and in an organization where all of your medical records are on one computer system. That makes it so easy for any specialist to be able to pull up your complete history, including MRIs, CAT scans, X-Rays, blood tests, prescriptions etc.
Next, as you get older it's nice to live in a very safe and low crime rate area where all of the major services that you will need are in close proximity eg, supermarkets, drugstore, post office, restaurants, and emergency services. The other vital attribute of where your retire is, I believe, CLIMATE. Maybe that's why you moved 7 1/2 years ago to a retirement community in another state.
Along with old age come inevitable health issues. I have been very fortunate, all I have needed have been two cataract surgeries and one arthroscopic cleanout of my knee joint, all three were outpatient procedures. My wife hasn't been so fortunate, she now has two artificial hips and had a small piece of her colon removed but other than that her life is completely normal, thank goodness.
Posted by: Old Limey | April 19, 2012 at 12:38 PM
Your Money or Your Life is the most important personal finance book I've ever read. It may be the best ever written.
I have to concur with his statement: " It changed my thinking and in the long run, my life. The key for me was understanding their concept of “enough.” "
Posted by: Catherine | April 19, 2012 at 02:43 PM
Interesting to read this posting, and the older one "Five Retirement Surprises".
I am 50, eligible for a good pension (which will increase significantly if I continue working) and have a healthy investment portfolio. I can also get health insurance through my current employer. Hence, I don't think I would have any financial issues if I stopped bringing in a salary.
I have had the good fortune to vacation all over the world while still employed, and have also traveled extensively with my job. As a result, my perfect vacation is a week at the beach or in the mountains - which is not extravagant, difficult to organize or very time-consuming.
I am not religious nor do I have any hobbies I am anxious to expand into all-day activities. I don't hate my job, but I also don't have the driving passion for it that I had in the past.
The other people who pursue the activities I AM interested in are all my age or younger and working. So I would only do them when those people were available - weekends and evenings.
Hence, one of the main things that is holding me back is that I can't see how I would fill my day if I stopped work. I have read several books on retirement - they were more about life structure than money.
I would be interested to hear from other people who have retired under similar circumstances
Posted by: Mark | April 19, 2012 at 03:11 PM
Great update as I plan my pre-retirement / retirement and it is very agonizing. The golden shackles are holding firm, and I can't find the key. Maybe the key is in that book that you are referring and I will get it and read it.
Also, health care from age 50 to 65 is the BIGGEST challenge why there aren't 1000's of BBoomers not retiring today. Otherwise, there are plenty of folks who have a good life, good amount of savings / investments, and do NOT need all of the BS associated with todays' corporate world to say 'bye-bye'.
Kenny
Posted by: Kenny | April 20, 2012 at 02:11 AM
Your Money or Your Life, is the best book ever. I have read it and lent it out many times. Should be required reading prior to taking out any college loans or long term financing. Definately puts money and working in perspective.
Posted by: Maria | April 20, 2012 at 06:00 AM