How we did it

[grumpy]

For the young dreamers out there I offer the following description of how my wife and I did the early retirement thing:

Background - tomorrow is my last day of work. I am 57 and my wife is 56. She retired from teaching in July. I have worked two days a week as a consultant to NASA for the last two and a half years. Prior to that I worked as a civil servant for 32 years. We have zero debt. My wife stayed home for 10 years to raise two children. We sent both kids to college and helped our daughter financially through graduate school. We own our current home free and clear and will pay cash for a new (smaller) house we are having built in a "55 or better" community with every amenity you can think of. We have a net worth of over $1M. We should be able to live the lifestyle we desire with a SWR of around 3%.

How did we do this? The number one factor was to always live below our means. Along with this we avoided ALL debt except the mortgage. That meant paying cash for cars (or just not buying a car if we didn't have the money), paying off credit cards each month and paying off the mortgage early. This allowed us to save and invest. We contributed the maximum to IRA's/403(b)'s. I maxed out contribution to the Thrift Saving Plan. I used DRIPs to build a portfolio of dividend paying stocks and used automatic monthly investments into low cost, no load mutual funds.

Now obviously, this meant living a somewhat more austere lifestyle than our friends and neighbors, especially during the years when my wife stayed home with the kids. But we still enjoyed our lives and our friends and neighbors are now deep in debt and facing the prospect of many more years of work. Also, having gotten used to living frugally, when my wife went back to work and I hit my peak earning years we were able to enhance our lifestyle and still sock away a large percentage of our income. Even with the market downturn in 2000 our net worth has more than doubled since 2000.

Perhaps all of this was easier for us since our parents l grew up during the Great Depression. We were raised without the sense of entitlement that some younger people seem to have. I have to shake my head when I see a young couple who are mortgaged to the hilt to buy a huge house, who have luxury cars they can't really afford with large loan or lease payments and no money being saved for kids education or retirement. I guess they are entitled to make those choices but I wonder if they realize what they are going to be giving up later.

We recently returned from a glorious 10 day cruise to Alaska celebrating our 35th anniversary. We are taking a cruise to the Panama Canal in November. We are going to enjoy ourselves as long as our health permits. With the time and energy I used to spend at work I intend to swim or walk every day. I look forward to developing new interests and new friends.

So, the message is: it can be done. You don't need to be a dot.com millionaire. You don't need to take big investment risks. You do need to be clear about your goals, be disciplined in you spending, and live below your means and save, save, save.

I hope this story helps to encourage those of you who are starting down this path. Good luck.


Grumpy

 

[azanon]

Congradulations Grumpy, is all i can say!  I know you're excited to be there.

My only comment though is one i've made a few times in the past here.  I know this is the early retirement board and I have been, and always will be fascinated with this goal.  

Back to my comment, i think its important to realize that those that may be living that slightly better lifestyle and but saving less might be those that actually enjoy their jobs and feel a sense of need/purpose to spend a good chunk of their day doing what they're good at and contributing to society.

That being said, I think the default goal of life is to maximize your experience.  So, if one actually doesnt mind working, it might not necessarily be logical to save excessively if one is going to wind up reaching your age and says, .... you know the kids are gone, what the hell else am I going to do with my time?  I can put in 35-40hrs a week and still do the hobbies I love.   You know, that can sound pretty appealing if the alternative is Phil Donahue, CNN, and soap operas every day.

Also, for me, by the time i'm 59, i'll be a "stepped out" federal employee bringing in a rather large amount of money for only 36 hrs a week, (taking into account maximum benefits of the tenure, and not even counting federal holidays).  I imagine when i get there, it'd be aweful hard to walk out the door when that money is so high, for so little effort.

I'm still in the decision phase as to how aggressive i want to be.  I'm currently saving 12% of gross (of our family's gross, not just mine) and saving for my childs college, but just not sure I have good enough reason yet to be more aggressive.  I have about 60K in retirement vehicles already. I'm 32 btw.

Azanon

 

[grumpy]

Azanon,

You make a good point. One thing I didn't mention in my original post is that I have some health issues (cancer survivor) that have reduced my energy and stamina. I just don't have the energy to be productive in a full time (or even part time) job and still do the other things in my life that I enjoy. After getting through cancer treatments at age 36 I began to seriously plan to retire as early as possible.

I agree that for those who enjoy working and enjoy the more affluent lifestyle that working on into their later years will allow, my approach might not make sense. The only caution I would offer is that you never know when you might get hit with a situation (illness, injury, etc.) which would make it hard to keep working. It might be prudent to plan for that possibility by foregoing some current consumption.

Grumpy

 

[newellcr]

Grumpy,

Great story. Thanks for sharing. Just curious, are you going to change your name to Happy tomorrow at punch out time?

Cheers,

Chris

 

[grumpy]

Newellcr,

No, my screen name refers to my basic personality and is not the result of work experiences. Maybe I will change it to Lessgrumpy

Grumpy

 

[mickeyd]

Hey Grumpy,

Thanks for sharing your story. My saving/investing/debt philosophy is quite simular to yours and my plan is working well and I am sure that it will provide me and Mrs. mickeyd with more that enough income to provide us with whatever we need forever!

I casually developed my "Plan" over a number of years by just using simple common sense and reading occasional financial publications that seemed to indicate that plan was what worked over the long term. When I read, and continue to read, that most of my fellow citizens were not saving enough for retirement I knew I was OK for the long run.

There are now numerous books and other publications that taut index fund investing, dollar-cost-averaging, proper credit use, tax-managed investing etc and they still advise folks to follow "my plan". 8)

 

[bow-tie]

A hearty congratulations to you and your gal, Grumpy.

I read your background and heed the philosophy of LBYM.   I hope to be independent much sooner than 57, but you never know what the future holds.  What I DO know is, for the time being, I will sell my time until I have the luxury of using it how I see fit, not how someone else sees fit.

 

[KB]

Congratulations Grumpy, or Less Grumpty. I'm not there yet, but do admire those who are. I'm on a mission to ER as soon as possible.

 

[sgeeeee]

Congratulations Grumpy,

You can smile and celebrate a little now. Hope you enjoy a long and successful retirement.

 

[retire@40]

I think the default goal of life is to maximize your experience.  So, if one actually doesnt mind working, it might not necessarily be logical to save excessively if one is going to wind up reaching your age and says, .... you know the kids are gone, what the hell else am I going to do with my time?  I can put in 35-40hrs a week and still do the hobbies I love.   You know, that can sound pretty appealing if the alternative is Phil Donahue, CNN, and soap operas every day.

My thinking is different, so I respectfully disagree. I define the default goal of life as having fun 24 hours a day doing the things you want to do when you want to do them. I guess if you have fun at work ALL the time and NEVER complain about being there during those 35-40hrs a week, then you are accomplishing that goal. If this is the case why would anyone ever look forward to retirement at any age? If work is fun, then work till you die....and many people do.

Also, if the alternative to work is watching TV all day, then either that type of person doesn't have much interest in life, or working 35-40 of the best hours of life sucked the life interests from them causing them to think they enjoy working because they haven't had the joy of experiencing much else. The "parable of the cave" is a good philosophical example of this.

 

[carol]

The "parable of the cave" is a good philosophical example of this.

What is the parable of the cave?



Congratulations Grumpy! Which NASA campus?

 

[grumpy]

Carol,

I worked at the Goddard Space Flight Center in Greenbelt, Maryland. An excellent place to work. I had exciting projects to work on. For example, I spent 4 years as financial manager of the Hubble Space Telescope Flight Systems and Servicing Project (the team that plans and carries out the repair missions). However, the stress level was pretty high and retirement was looking better and better.

After working part time for a few years I can't imagine how I got up at 5:30 am five days a week. I suppose after a while I won't be able to imagine how I got up early twice a week either!!

One of the nicest things about the part time work was that on those three weekdays that I didn't work I could wake up without an alarm clock and roll back over for some extra sleep if I felt like it. Now I will have that pleasure every day.

I don't know what the "parable of the cave" is either.

Grumpy

 

[sgeeeee]

Does this parable of the cave involve a Norwegian widow? or dryer sheets? or nasal milk?

 

[retire@40]

What is the parable of the cave?

Here is something I found online that explains the "parable of the cave" in a easy to understand way:

In Book VII of his work The Republic, the ancient Greek philosopher Plato told a parable of a cave. This well known parable evokes deep thoughts in all who hear it. It tells of a group of prisoners shackled to seats in a subterranean cave, unable to turn their heads. They have been tricked into thinking of their environment as "all there is." Behind the prisoners is a fire which casts shadows on the cave wall in front of them. The shadows are from a group of puppeteers performing a show on a parapet behind the prisoners. The puppets' shadows are all that the prisoners have ever seen. The echoes of the puppeteers' voices are all that they have ever heard. These same shadows and echoes have become the reality of the prisoners.

It is often offered that one of the prisoners escapes from the cave into the world outside. When he breaks free from his shackles, and escapes from the cave into the daylight of the real world, he sees sunlight for the first time. It is startling in its brightness, blinding him for the first few minutes. The sun warms his body, which thus far had only known the cave's clammy air. He fills his lungs with the fragrant air. He laughs with delight at the sight of tall trees, and he is amazed by the snow capped mountains off in the distance. He feels a strong gust of wind for the first time, and shouts for joy. While these things are new and strange to the escapee, their beauty and majesty are not lost on him. From these startling experiences he snaps to the sudden realization that the shadows cast on the cave's wall, previously accepted as reality, were never reality at all. He understands that the prisoners in the cave have fallen for a ruse, that they have been tricked into accepting apparitions for actuality. He bravely returns back to the cave where he urgently tells the still-shackled prisoners that there is a world outside, that they are captives, and that they can escape if they will only break free and follow his lead. They laugh and scoff, thinking his words to be the ravings of a madman. They ignore him and choose to remain in the cave, shackled to their seats - choosing to watch the shadows and hear the echoes of the puppeteers the remainder of their days.

 

[carol]

Grumpy,

I live near Goddard and know others who really enjoy working there. I work for the Navy (engineer) and like working on interesting science but am getting tired of the bureaucracy and commute.

Are you building in a 55-and-over community in the DC area, or moving to where there's less traffic and taxes?


Salaryguru,

Thanks for the parable. It sounds familiar. I have friends ask "what are you going to do all day if you quit working." I would leave today if I could afford it. I have no problem doing nothing all day.

 

[John Galt]

Here is some good advice for everyone on this site.
When you were a kid, doing "nothing" was considered
a totally acceptable way to pass the time. We should all
attempt to return to that state of mind. I confess that I am still working on it. However, I am convinced it is
the best way to spend your "twilight years".

Also, here is something for you to look forward to. I am
planning to respond to all 10 "most recent posts" in the near future. Assuming I get it done, you will have a
plethora of useful information as well as humorous observations and witty anecdotes. Stay tuned.........

John Galt

 

[Cut-Throat]

I am
planning to respond to all 10 "most recent posts" in the near future.

This does not sound like doing nothing.

 

[John Galt]

Hi Cut-throat! Sorry about your friend. I have lost
many now. Kind of puts things in perspective.

Re. my plan to respond to all 10 "most recent posts"
I suppose you are correct. It's not really doing
"nothing". I only make it appear effortless.

John Galt

 

[azanon]

I think the default goal of life is to maximize your experience. So, if one actually doesnt mind working, it might not necessarily be logical to save excessively if one is going to wind up reaching your age and says, .... you know the kids are gone, what the hell else am I going to do with my time? I can put in 35-40hrs a week and still do the hobbies I love. You know, that can sound pretty appealing if the alternative is Phil Donahue, CNN, and soap operas every day.

My thinking is different, so I respectfully disagree. I define the default goal of life as having fun 24 hours a day doing the things you want to do when you want to do them. I guess if you have fun at work ALL the time and NEVER complain about being there during those 35-40hrs a week, then you are accomplishing that goal. If this is the case why would anyone ever look forward to retirement at any age? If work is fun, then work till you die....and many people do.

The most critical part to notice in that paragraph of mine was this: "I can put in 35-40hrs a week and still do the hobbies i love". Let me explain that and the TV comment. My personal hobbies include tennis, weightlifting, tae bo, hiking, watching college football games, and playing mmorpg's on the pc. What i meant by that comment was I have enough time now working 40 hrs a week to do all of those. Really..... I do. If i was free during the workweek in the daytime, to be frank, i'd probably need even more hobbies than those because I'd clearly have a surplus of time. I guess my knee-jerk thought is i'd probably just resort to grabbing the remote a lot more often.

I bet eventually sitting on that couch, i'd probably think "I know..... i need to think of something i can do that's real easy and makes me a lot of money." Then, know what'd happen next? I'd probably make a DOP! sound like homer, as it dawned on me that was the job I just quit from.

Azanon

 

[Skylark]

What are mmorpg's?

 

[ESRBob]

Grumpy,
Welcome to ER and congrats on an inspiring story.

Curious as to whether, in rough numbers, you could tell us:
a) what % of your savings came from divs/capital appreciation vs
b) what % from the actual initial dollars put in. Would you guess 50-50 or in fact has the appreciation been more than half. It might be instructive for young people to see how much those hard-won savings dollars can grow into over a 30-year career -- ease the pain a bit of foregoing consumption.

also, does this include appreciation in home equity, too, or are you counting that separately in another 'column'?

Did you get the 'Grumpy" part from telling your kids they couldn't have every toy all the other kids had? ;-) I am learning how to growl and do that and find I really enjoy it!

thx,
ESRBob

 

[John Galt]

While we are waiting for Grumpy to respond,
I have some thoughts on hobbies and filling your ER
time. There is an old rule about work exxpanding to fill the time available. I am not sure that I experienced that
but I have surely experienced the filling up of all my hours in ER. I have even dropped a couple of hobbies
and still each day is full, my calendar loaded. This is why
I say, although I would like to spend time just "doing
nothing" it rarely happens.

John Galt

 

[azanon]

What are mmorpg's?

It stands for massively-multiplayed online roleplaying games.   Two incredible ones are about to be released by mid November;  Everquest 2 and World of warcraft.  In short, its a virtual world where you become a fantasy character and kill goblins, dragons, etc, and get to fight with other real people all over the world.   These games are incredibly fun and addictive and tend to appeal to adults.

for more info:
http://everquest2.station.sony.com/
http://www.blizzard.com/wow/

 

[grumpy]

Carol,

The over 55 community is in a distant suburb of D.C. in Virginia. It is closer to Fredricksburg than Washington. We have many friends in the D.C. area and are not ready to move too far away. Also my father-in-law lives in Philadelphia and we need to stay within reasonable travel distance.

I would eventually like to move somewhere warmer and less congested (e.g Tucson Ariz.) but that will have to wait. In the meantime, we hope to spend the winter months renting elsewhere. This will let us try out a few different warm weather locations before considering permanent relocation.


Grumpy

 

[grumpy]

Grumpy,
Welcome to ER and congrats on an inspiring story.

Curious as to whether, in rough numbers, you could tell us:
a) what % of your savings came from divs/capital appreciation vs
b) what % from the actual initial dollars put in.  Would you guess 50-50 or in fact has the appreciation been more than half. It might be instructive for young people to see how much those hard-won savings dollars can grow into over a 30-year career -- ease the pain a bit of foregoing consumption.

also, does this include appreciation in home equity, too, or are you counting that separately in another 'column'?

Did you get the 'Grumpy" part from telling your kids they couldn't have every toy all the other kids had?  ;-)  I am learning how to growl and do that and find I really enjoy it!

thx,
ESRBob

ESRBob,

In 1986, when I got serious about ER and investing I had a net worth of approx $150K (excluding home equity). My portfolio tracker shows that over the ensuing 18 years my average annual return has been about 8%. That includes bank acccounts, money market accounts, bond funds, as well as stocks and stock mutual funds. Not that impressive a result but I have always been a pretty conservative investor. A quick spreadsheet shows that, if I hadn't added any new savings I would have had about $600k by now. This means I have added something over $400k net of new money. So, it looks like it is about 50/50 appreciation vs. savings.

I am not including about $320K of home equity in the figures above.

While I did tell my kids that I wouldn't buy them every toy that the other kids had (their grandparents were another story altogether), that's not where the "Grumpy" part comes from.


Grumpy