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 September.
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 have you been married)?
I’m 66 years old and my spouse is 68.
We have been married 44 years. It’s hard to believe it’s been that long!
Do you have kids/family (if so, how old are they)?
We do not have any children. We currently have 2 cats that keep us entertained.
One is very smart, the other not so much.
What area of the country do you live in (and urban or rural)?
We live in the California Bay Area.
This is the heart of Silicon Valley.
Is there anything else we should know about you?
We moved from the US East Coast to California 36 years ago for the nice weather and job prospects and have never looked back.
We’ve considered moving to a lower cost area, or to a mountain community, but are staying put for now.
RETIREMENT OVERVIEW
How do you define retirement?
For me, retirement means having control over my own time.
I can do whatever I want during the day and that gives me great satisfaction.
How long have you been retired?
I officially retired from full-time work in January, 2020.
Is your spouse also retired?
Yes, my spouse also retired early 2020.
She has an Engineering degree and finished her career as a project manager with a large technology company.
What was your career and income before retirement?
I worked almost 40 years as a hardware design engineer, primarily as an individual contributor. I have a bachelor’s degree in Engineering and became very skilled at computer-aided design.
I leveraged this skill set during my career and worked for a total of 8 different companies. Basically, I designed products with computer software, then fabricated and tested the prototypes, and finally transitioned the products to full-scale manufacturing.
I helped design some of the electronic products that we all personally know and use. I traveled quite often, mostly to Asia factories.
Early in my career, I worked for a few larger companies. I was laid off once after the 2001 internet bubble.
I worked for a few venture-capital funded startups, but never realized any equity gains. I did some consulting work for a while, and finally finished my career at a large, well-known technology company.
My last role was by far the most enjoyable and financially lucrative. There were times I enjoyed it so much, I thought I would gladly work there for free.
That’s when you know things are good!
Why did you retire?
Even though I loved what I was doing, and was highly compensated for it, I wanted to retire and have control over my life. My job was usually enjoyable, but could be highly stressful and all-consuming at certain times.
For example, any technical hiccups during product launches would require long hours late into the night. This could go on for many weeks.
My job required a 24/7 commitment, and I was done with that.
International travel became extremely difficult with long days at the factory, late-night dinners, and little sleep. When you’re younger, this is all very exciting.
When you reach a certain age, it becomes mentally and physically exhausting. I was 60 and had reached that age!
When asked by work colleagues why I was retiring, and what I was going to do with my time, my reply was I had to figure it out eventually, so I might as well do it while still relatively young and healthy.
PREPARATION FOR RETIREMENT
When did you first start thinking seriously about retirement and when did that turn into a decision to do it?
Ha, it was so long ago, it’s hard to remember! When I first joined my last company, my plan was to stick it out 4 years maximum.
That got pushed back until a full 7 years had passed. I had originally hoped to retire by 55, but stayed fully employed until 60.
What were the major steps you took from deciding to retire to developing a plan to do so?
Financially, I did the typical Monte Carlo retirement planning, mostly using Fidelity’s software. We didn’t plan to move from our current home, so I just modelled our current spending levels.
I put in our forecasted social security payments and felt comfortable from a financial standpoint.
I think our spending level is higher than most, but my plan showed me that with our assets, we could make it work. I also knew that if the markets took a significant downturn, with some creative budgeting, we could still make things work.
It was more about what to do with my time. Again, my philosophy was that I would have to figure this out eventually, so why not make it happen now?
What did your pre-retirement financials look like?
Our total net worth when I retired in January, 2020 was $7.6 million. IRA investments were then $3.4M, taxable account value was $1.8M, and our primary home equity was $2.3M.
We live in a very average home in an extremely high-cost area. Our primary home, purchased in 2013, is our only real estate holding.
Previous to this one, we owned and sold 5 homes total, continuously paying a mortgage and usually making some profit on the sale.
Both my wife and I fully funded our workplace 401k’s, and took advantage of the full company match, since they were first available.
In 2020, we still had a mortgage balance of $950K. We paid down and refinanced around $700K @2.375% for a 15-year term during the early phase of our retirement when interest rates bottomed out.
Even with our assets at the time, and a credit rating in the low 800s, it was extremely hard getting a mortgage without any W2 income. I eventually set up a regular distribution schedule from our investments and they used this to qualify us.
Only one of the many institutions I contacted allowed us to qualify with retirement assets. I think it was a first for the mortgage representative I worked with.
During our working years, we were 100% invested in SP500 index funds. In the year prior to retirement, I moved about 5 years’ worth of expenses into a bond ladder.
My philosophy was to be able to ride out any significant stock market correction with guaranteed income for 5 years at least.
What was your overall financial plan for retirement?
I had been tracking our spending in detail for a few years prior to retirement. My plan was to use a combination of fixed income interest, IRA account withdrawals, and company stock sales to meet our expenses.
I knew the RMDs would eventually kick in, and wanted to reduce retirement account balances as much as practicable.
I also had a significant position in a company stock and planned to trim that. It has remained a great income source for special needs, such as home projects.
Did you make any specific moves to prepare your finances for retirement?
We do not plan to leave the area or downsize our home at the current time. Should we decide to sell at some point, we have significant capital gains on our home to deal with.
From a pure financial standpoint, it would be best to wait until one of us passes, and then the cost basis will adjust.
Who helped you develop this plan?
I’ve done all the planning myself. We use Fidelity for most of our investments, and I occasionally use them when I have questions or need help with anything in our portfolio.
I manage all accounts myself and keep things very simple. I enjoy reading about and watching anything investment-related.
There are some amazing individuals providing valuable lessons about investing and money matters. Rob Berger and ESI are two of my favorites.
What plans did you make in advance to leave your job?
Nothing significant except for creating a fixed income buffer.
What were your pre-retirement concerns (financial or non-financial)?
We had some concerns with health care costs. Our health care costs ballooned to between $20 and $30K for a few years, but we planned ahead.
Unfortunately, I know many friends that seem to be paralyzed by the belief that health care costs are unmanageable prior to Medicare kicking in. It’s something to be aware of and can be mitigated with a little planning.
Once Medicare happens, health coverage is excellent and costs are very manageable in my opinion.
How did you handle deciding on and paying for healthcare?
My wife was able to purchase insurance from her previous employer before taking Medicare. I used COBRA for the maximum 18 months with a CA insurer and then purchased a high-deductible plan for a few years.
I gladly transitioned to Medicare at age 65.
Currently, our 2025 cost for all health and dental coverages, including IRRMA charges and Plan G Medigap plans, is around $13k per year. For the level of care we get, this seems like a bargain!
Did you tell your family and friends of your plans?
It was not an issue.
I don’t think anyone was surprised, maybe a little envious.
THE ACT OF RETIRING
How did you ultimately retire?
In 2019, I had decided the time for retirement was very close. Bonus payouts were typically in early fall, so I waited until this was announced before letting anyone at work know of my plan.
I had a very good working relationship with all my co-workers and managers.
I think they were a little shocked when I first told them my plan. They wanted to know my reason, and I explained my intention to have more of my time for myself.
After some consideration, they asked if I would stay on for another 3 months while they found a replacement for me. They even offered a very flexible schedule arrangement that gave me more free time. I accepted and stayed until the beginning of 2020.
My company is very low-key when employees leave, so there were no big parties or celebrations when the final day came. I had a nice lunch with my co-workers and another with my suppliers, and that was it. I packed my little box and said my goodbyes.
What went well?
As I mentioned, my team was very supportive of my decision and reasoning.
This was very gratifying, and the offer to have me stay another 3 months was a win-win.
What didn’t go so well?
We’ll, except for COVID-19 in 2020, nothing comes to mind.
How did you ultimately find the courage to do it?
I was already well past my initial retirement age goal. I had experienced many “one more year”.
I just kept telling myself I need to figure this out eventually, so now was the best time. I knew our investments would cover our needs.
I also had experience with the last two major stock downturns in 2001 and 2017. You need to have a cautious but optimistic outlook on the financial markets.
You also need to tell yourself to be flexible in case the unexpected happens.
RETIREMENT LIFE
How was the adjustment, especially the first few months after retirement?
I’m an avid skier, and I retired in January for a reason. I joined a ski cabin up in the mountains to be able to spend time during the week skiing.
We took another couple of weeks in February and travelled to Utah and Colorado to ski. There were no issues adjusting to the retired life for me.
I’ve never felt my career defined me. As I look back on it, it was just another phase of my life.
I’ve moved on very quickly and easily.
How is retirement life now? What do you like about it and what do you dislike?
Retirement is still great. Much of our time has been managing home renovations.
I love the freedom from anyone asking for my time.
What do you do with your time? What does an average day look like?
I’ve settled into a fairly active routine. Four days a week, I’m up by 6 am and join a Master’s club for an hour-long swim workout.
Our local city pool is fully outdoors and is one of the best parts of moving to CA for me. I just love swimming outdoors year-round.
Swimming is also easy on the body, and one sport you can continue until a very old age.
On the other weekdays, I will ride my bike on the local trails for a few hours. I’ll have a relaxed lunch, then catch up on the previous late-night shows.
Afternoons are often spent with home projects or relaxing. An occasional short nap helps recharge my batteries in the afternoons.
My wife and I will usually start making dinner around 5pm. She typically does the recipe planning, and I execute the plan. We seldom go out to eat except when travelling.
Evenings are often spent catching up on the financial news and then watching a Netflix show or other streaming series.
What are the major activities that fill up your time in retirement? Are there any new ones you’re planning to try?
I swim, cycle, hike, and ski regularly. Our weather and geography are a perfect fit for anyone with an active lifestyle.
Where we are, the temperatures are moderate year-round, and the availability of nearby open space is amazing.
In my remaining spare time, I take care of the house and yard, do major home projects or manage contractors doing the work.
Prior to retirement, I attended training and got certified as a volunteer IRS tax preparer. I enjoyed giving back to others that needed tax guidance, but unfortunately, COVID derailed the entire local volunteer program.
I may reach out in the future and investigate this again.
We only make a couple of significant vacation trips a year. To be honest, after all my work travelling, it doesn’t hold much appeal for me anymore.
While working, and full of youth and energy, we travelled extensively for vacations, all around the world. Most all trips involved some type of athletic activity.
My recommendation is to travel early and often, if that’s your thing. Later in life, even if the mind is willing, the body may not be.
What is your social life like?
Good, but unfortunately, most of my good friends are still working full-time. I look forward to them eventually joining me for activities during the week.
Some are able to flex their work schedule to get out for a few hours to cycle together during the week. We will often get together and ride on weekends, by ourselves or with local clubs.
We will occasionally go out together for dinner at local restaurants.
Was there any emotional impact from leaving the workforce?
I definitely missed the social interactions at work. I enjoyed my co-workers and did miss them initially.
I was invited to a recent co-worker’s retirement lunch and was able to reconnect with everyone.
What surprises (financial or non-financial, good or bad) have you had since retiring and how have you handled them?
The big surprise to me is that my friends, who all have the financial means, do not retire, even though they are in their mid to late 60s. Some complain to no end about their situation.
I hold my breath and try to be supportive, most of the time that is. My realization is that retirement is a very personal and individual decision. So much goes into it.
Mostly, I think that my social peer group, like myself, grew up with very little extras in life, and a very strong individual work ethic. The decision to say no to a paycheck is incredibly difficult for many.
For me personally, it really wasn’t that hard. I left a lot of RSUs on the table, unvested, but I knew when to say “enough is enough.”
What are your future plans?
More of the same. We are staying in our home for the foreseeable future.
I hope to remain active and injury-free for years to come
As far as travel goes, we enjoy taking a few weeks to go skiing with family. A few more extended activity-based trips are possible, but there are no plans yet.
My siblings have requested a yearly get-together, so that will be something new to try. We all get along, so we’ll see how well that goes.
My wife and I have been saving the cruises and more sedentary trips for the future. The future will be here soon!
RETIREMENT FINANCES
How has your financial plan performed compared to what you had estimated before retirement?
Our net worth continues to increase since retirement, thanks to strong stock and real estate gains. The figures below include a conservative value for home equity.
Real estate in our area is highly valued, to say the least. This net worth was fully gained from investing our employment incomes, starting with a negative net worth after graduation from college.
We did not inherit any assets. I calculated the CAGR for this period to be 9.4%, although I’m not under any illusion that this will continue indefinitely.
The stock market will eventually cool off, or potentially something much worse. But history is on our side if we are patient and let the markets do their thing.
That’s how we got to this point.
We currently have $191k yearly income from fixed income interest, dividends, and my wife’s social security.
Our asset allocation is currently 75% stock/25% fixed income. We keep about a year’s worth of expenses in short-term money market accounts.
I just transitioned our cash management to Fidelity and love it for the ease of transfers and highly competitive interest rates.
All the other fixed income is in IRA accounts. I have laddered the maturities to fund our lifestyle for at least 8 years.
Stock holdings are primarily SP500 and one large position in company stock.
Once RMDs kick in, our income, including SS, is currently projected to be north of $300k. I consider that “guaranteed” income.
It seems way more than secure, given our lifestyle, but inflation, stock corrections, and potentially world events could all affect this. Worst-case scenarios have been considered, and should the apocalypse occur, our fixed income and SS will keep the lights on.
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?
Below is a summary of our income and taxes since retirement.
2019 was our final year of true W2 income, with an AGI of $483K. 2020 was a year of income transition since my wife received a retirement payout. For me, about a third of my last company income each year was RSUs.
While we were working, our income was typically allocated to three main areas: 1/3 living expenses, 1/3 investments, 1/3 taxes.
Our current income level is almost fully self-controlled. My wife receives Social Security.
The rest of our income is realized from interest/dividends, stock sales, and IRA withdrawals.
We have substantial itemized deductions that help reduce our tax bills. Green energy credits, mortgage interest, SALT, and charitable giving have its perks.
Keeping our total effective tax rate to under 15% is pretty amazing in my opinion. There are no complaints from me about high CA income taxes.
I keep a detailed spreadsheet of our spending, past and projected. This gives me a good idea if we’re staying within the recommended safe withdrawal rate window of 4-5%.
According to my math, we are staying under a 4% withdrawal rate, without any yearly inflation adjustment.
I also use this spreadsheet to model the budget for the upcoming year, allowing me to know how much needs to be set aside and, more importantly, how much to pay in estimated taxes. I will run a series of distribution scenarios toward the end of each year for the upcoming year with TurboTax.
Our spending summary is as follows:
Since retirement, our basic fixed living expenses (food, utilities, some travel, etc.) have increased slightly and are forecasted to be $68K in 2025. Our mortgage is still the same, but hopefully will be zero in a year or so.
Our property taxes have remained fairly stable due to CA Prop 19.
As you can see, home renovation spending has been significant as we have prioritized this. We have basically upgraded the entire house and yard, including the addition of PV solar panels.
The advantage of spending all this is both financial and psychological. I have done some of the work myself and find that very rewarding.
We now have a warm house in the winter and air conditioning in the summer, with very minimal energy bills. Our home is older, but single-story and can accommodate an age-in-place scenario if necessary.
All the major capital improvements that we made have increased the cost basis if we decide to sell at some point. We enjoy spending time at home, cooking for ourselves, and entertaining friends and family.
We take great satisfaction from all the home improvements.
I should also mention the absolutely wonderful neighbors we have all around us. Even though some of the homes on our block have changed ownership recently, everyone is sincerely friendly, helpful, and available for any issue that may arise.
It’s a very unique environment that we have never experienced in any previous home.
Our mortgage balance is now $180K at a 2.375% interest rate. I’ve considered paying it off, but have difficulty justifying it financially.
Since 2020, I have made a few major payments to reduce the principal. It will take a few more principal payments to reach my goal to be mortgage free in a year or two.
This will then free up more cash flow for other uses while keeping our tax situation under reasonable control. We also decided to take advantage of the soon-to-expire $7500 tax credit for EVs.
We purchased two new EVs during the last year, which explains the discretionary spending bump in 2025. Going forward, we no longer have the expense of high CA gas prices.
And the new vehicles have all the latest and greatest safety features, including supervised self-driving. With our solar panels, the cars are charged at home for little to no cost.
How are you handling Social Security, required minimum distributions, tax issues and the like?
My wife decided to take her SS at her full retirement age. She gets approximately $3700/month currently.
I’m waiting until 70, when mine is projected to be around $5k/month. SS is our only true inflation-adjusted “guaranteed” income.
We decided against any Roth conversions. Our RMDs and SS will provide more than enough income to keep us happy.
Our tax bill will certainly increase significantly once RMDs kick in, but that’s a good problem to have. CA does not tax SS income.
What about estate plans?
Our estate plans and health directives are fully in place and were updated this year. I feel strongly about funding education for family and others in need, so that is the main charitable focus once we leave this earth.
A professional fiduciary has been assigned to manage assets and distribution per our wishes. We were providing financial support for a relative until early this year, but that has now ended.
We have decided to self-fund long-term care if needed. A fiduciary will be in charge if we are no longer able to make rational decisions on our own.
Did you return to paid work? Why or why not?
Yes, during COVID, my former manager asked if I was willing to return remotely as a contractor and help out with ongoing projects. I agreed and worked remotely 10-20 hours/week for 18 months.
Eventually, it was hard to split my time and be available when needed for an half hour afternoon conference call.
The money was good and there wasn’t much else to do during COVID. But I was glad when it was over.
Did you find it hard going from being a saver to a spender?
Sure, this is difficult. The hardest part is seeing the taxes taken from your income.
I keep trying to tell myself to think of distributions like getting a work bonus. It’s essentially the same, but now I control when I get the bonus.
The taxes have to be taken upfront, and the bonus value drops by 20% or so. Just like a bonus at work.
What advice do you have for those wanting to retire?
As I mentioned previously, retirement is a very personal decision. It’s so much more than a financial decision.
But once you do retire, your mood will improve, and you will sleep much better! I’d suggest that health care costs should not be a constraint and can be managed if planned for.
I read the book, Your Money Or Your Life, very long ago, and much of the book’s philosophy has remained with me. Some of life’s simplest things give the most pleasure.
Take control of your own financial situation. Don’t let someone else manage it.
We worked hard, saved extensively, and invested well during our careers. I’m grateful for our health, ability to remain active, and the financial position we are in to fully enjoy retirement.
Thank you for allowing me to share my story.
