Yesterday was my last day at the office. I've retired, in my forties. I can now say, "I did it." Although this was a monumental milestone, it has been surprisingly uneventful. Other than a couple of retirement parties, transfer of work projects, and multiple meetings with my financial advisor, everything has been mostly normal. Mainly, because we aren't planning any major changes (e.g. moving to a new retirement home) other than not working.
For now, I plan to spend more time with family and friends, especially my wife and child, and my mother and sister. Past that I don't have any specific plans, other than enjoying my time. However, in the next week, I will start planning my "third phase." :-)
Here's what I do know:
Financial status. My company's retirement plan is a defined contribution plan - i.e. it is not a pension. According to my financial advisor, our retirement and saving accounts will easily last another 50 years into our nineties. The calculation was done at 100% of current after tax salary and includes covering 100% of our daughter's college education. The Monte Carlo analysis shows a 92% probability of our next egg being sufficient, to provide 100% of our current after-tax income. For reference, over 75% probability is acceptable in most cases. The 8% of failures happen primarily because of low or negative investment returns in the first few years of retirement. So I will find out very quickly, in the next couple years, whether I need to return to work:-(
We will keep our home mortgage. We still have a mortgage on our home for about 45% of the estimated market value. In the past, I had written that we wanted to pay off our home mortgage before retiring. Our goal was to be debt free at retirement. Being debt free would reduce our monthly expenses by 20%. However, in the short term it makes more sense to keep the mortgage instead of using 2.5 times our after-tax income to eliminate it. Not paying off the mortgage gives us an additional buffer against a downturn in our investments in the next couple years. In addition, I will still be able to use the mortgage tax deduction, since our non-retirement account investments will be generating taxable income.
Consider a dream job. With salary income no longer being a key driver, both my spouse and I can consider looking for and applying to do our dream jobs. We can now work at what we love without worrying about compensation. However, at this time, volunteer work is not one of the options, since we have already done significant amounts of volunteer work in our younger days.
How did I do it? If it was an easy get rich plan that any one can do, I could sell it to millions for $19.95 plus shipping and handling :-) The reality is that it was a combination of preparation, planning, lots of hard work, perseverance, some sacrifice and little luck. Over the next ten Fridays, I'll publish a retrospective on how I got here. I hope it will provide some insights that others will find useful.
Here's the series:
- Our Childhood Preparation
- The Value Of Higher Education
- Making The Most Of My Job
- Lifestyle and Spending Choices
- Setting Goals, Developing Plans and Tracking Process
- Staying The Course
- How Luck Played A Role
- My Personal Finance Mind Tricks
- The Professionals We Used
- When Preparation Met Opportunity
For more on The Practice of Personal Finance, check back every Wednesday for a new segment.
Photo Credit: morgueFile.com, Kenn Kiser
This is not financial advice. Please consult a professional advisor.
Copyright © 2007 Achievement Catalyst, LLC