Enjoying Early Retirement Travel in Switzerland – photo by Bob
{GCC – Since publication 6 years ago of the widely popular financial review for ‘The Bobs’ , people have inquired on social media, email, blog comments, and even in person, “Where are they now? Please tell us how it turned out!” Not wanting to let you all down, I asked (often) if they might share an update of what they have experienced and learned. Alas, they were much too busy enjoying retirement. Until now…}
Happy New Year GCC readers. Bob here from our now infamous financial review, Scared to Death of Early Retirement. I just had my 5-year retirement anniversary, so I thought we would give you and Jeremy has been pestering me for an update on how things have been going.
First off…
…there is nothing like early retirement, though it may not be for all. We both enjoyed our jobs but realized there had to be more to life while in our healthier years.
As we thought about it, apprehension and nervousness made it difficult to make the big decision. We had all the popular questions and concerns:
What would we do with all of the extra time?
Would we end up needing to get part time jobs later after giving up two good jobs?
To a lesser extent, what would our family and friends say?
Do we have enough saved?
How long will the money last before Social Security starts?
I was 58 and Bob2 was 56. I had tracked our monthly expenditures for over a year so we could understand how much it cost us to live. All of this was rolling around in our heads.
Then early in 2015, we discovered the FIRE movement and started having some interaction with a few of the FIRE bloggers including the guy that runs this site. We also attended the 2015 Chautauqua in Ecuador where we had the opportunity to hang out and talk to fellow like-minded FIRE enthusiasts and a few of our favorite bloggers. It was during this time that it all became clear and what we had been thinking could actually be our reality.
To be honest, it took me about 4-6 months after retiring on 12/31/2015 for the job stress to go away. For example, being in an IT manager, one of my responsibilities required me to be on-call 24x7x365. I felt like my pager would go off in the middle of the night and I’d be up for hours. It took that long before the feeling went away. To keep busy post retirement, I had the project of preparing and selling our rental property before Bob2 retired on 12/31/2016. We were both tired of the rental experiment and we weren’t cut out for it. This goal helped the transition and was one thing less that Bob2 worried about.
Bob2 is more Type A’ish than I am and was kind of “lost” for a while not knowing what to do with the time. We both had structured jobs and it was a huge change moving to retirement mode. It was easier once we stopped trying to micromanage and overanalyze what was “the right thing we should be doing”. Today, he’s going to the gym 5-6 days a week and I’m walking about 6-7 miles every morning. To that end, we don’t feel guilty about what we do or don’t do the rest of the day.
Would we go back, hell no! Are we sorry or do we regret the decision? Absolutely not. Like Jeremy wrote in the original post, maybe we could have retired sooner but hindsight is always 20/20.
On the financial side post retirement, we rolled our Traditional 401k, Roth 401k, and TSP funds from our old coal mines into our retirement accounts at Vanguard and promptly bought VTSAX. During the time in 2016 before Bob2 retired and after speaking to a fellow FIRE retiree, we opened new retirement accounts at Fidelity and rolled over our entire portfolio from Vanguard to Fidelity. The reason being was “all in one management” along with a Debit Card with a Cash Management Account that would refund all bank ATM fees charged for withdrawing cash at ANY ATM. This made any ATM, our ATM.
The majority of our portfolio is the S&P Index ETF, ITOT, at Fidelity. ITOT, has similar performance to Vanguard VTSAX. To this day, we don’t have any bond exposure in our portfolios. Are we crazy? To some folks, yes and maybe, but we have a high risk/volatility tolerance. At some point, we may add some bond exposure, not sure. This past Covid March, our portfolio fell a little over 28% but came back stronger. We don’t consider losing until we have to sell and we’re long haulers, not market timers. In the years since retiring, our resulting annual withdrawal rate has only been 1-2% of the overall worth of the portfolio.
We only have one individual stock an it’s a little company called Apple. We purchased our first shares of Apple in 2005. The stock is still in my old coal mine account for the historical cost basis data. Will be selling some shares to pay the taxes for the Traditional to Roth conversions. After all of the consolidation, our total portfolio has grown 110% in the five years since I retirement on 12/31/15.
Our plan is to hold off taking our Social Security, hopefully until 70.5. I look at each of our Social Security accounts as “annuities in waiting” that grow every year until we reach our max withdrawal age. This should allow us the opportunity to convert as much of our Traditional IRA money as we can into our Roth IRA’s before we each turn 72. As a gay couple without children, at some point, we will have to think about charitable giving options.
On the subject of income, after turning 62, I became eligible for a small pension from the Carpenters trade I was part of in a prior career. I also have some guaranteed retirement income from the old coal mine that has a guaranteed return of 7.5% of funds invested, though the last few years, the return has averaged 20.5%. Along with that, Bob2 turned 60 in October and we’ve now applied for his Federal Annuity pension.
Receiving his annuity will also allow us to get back on the Federal Employee Health Benefits (FEHB) plan in 2021. We will no longer be restricted to use Affordable Care for health insurance. We’ve always kept our income below the ACA cliff to qualify for the subsidy until he could get at his pension and get back on his FEHB health plan. Now, we can start the Traditional IRA to Roth conversions as we will no longer be income restricted as on the ACA. Also, to reduce our tax exposure, two years ago we moved our residency to Florida from Missouri as there is no state income tax and saving us approx. 6.5% on state taxes. We had purchased our Florida condo as a short sale in 2012.
Both of us kept our Long-Term Care Insurance policies from our employers as the premiums are still reasonable and we’ve had the policies for some time. At some point, we will re-evaluate to decide if we want to self-insure.
We had agreed we would stay close as long as our dog was with us. While in Florida, she passed in April 2019. Last summer was the first year of being able to travel and we took our first trips to Europe. These trips whet our appetites for more. This year we had more travel on the books but Covid had a different idea. We’re discussing a longer term stay in Italy and some other opportunities when the world heals and moves on. We love to travel and found it expands the mind and shows us the experiences of different locations and cultures.
Life is good at Burg Eltz – photo by Bob
We have always been on the same page with life and money and have never done without anything we wanted. We’ve always saved, worked hard and never lived beyond our means. It’s time now and as a result of our efforts, we plan to travel as much as we can until we aren’t able.
Thanks Jeremy, for your original input, the regular posts and keeping the GCC website going. We still find it useful and informative since leaving the rat race.
Happy New Year and good fortune to all,
The Bobs
What a great post. I love reading about posts like this. Thank you for sharing.
From OPM: If you receive a deferred annuity, you are not eligible to continue any health benefits or life insurance coverage you had while employed.
You can’t get FEHB now. this is what prevents many people from retiring early.
Bob2 had 26 years in and took a postponed annuity, not deferred. He was able to do this under MRA+10 since he had 20+ years and waited until he was 60.
This might be useful for you at some point.
https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c042.pdf
Section Part 42A4 Postponing Retirement Benefits on starting on Page 9
So he had MRA and 26 years but took a postponment rather than take the monthly payments right away to avoid the reduction that comes with not having 30 yrs. If he didn’t have MRA then it would be a deferment. Sounds great! I think for most of us the sticking point is waiting until MRA for the health insurance. Thanks for the info!
Yes, that’s exactly what Bob2 did. His 56th (MRA) was in October 2016 and he waiting until that December before retiring so it would be a postponement. He wasn’t happy that I already left in Dec. the prior year. ;-)
“Whet an appetite…”, I am stealing this phrase for its’ first meaning of “sharpen the blade.”
I enjoyed reading this one. I have a lot of friends who work for the federal government and are in a similar situation. I’m glad you successfully made the transition to retirement, and I hope the two of you get out there and travel when the situation allows. Hats off!
I love the notion of using Social Security to pay the taxes on my IRA required minimum distributions (annuity in waiting).
I receive a widow’s SS benefit, but have been trying to figure out when to change over to taking my own, higher, benefit. This is great food for thought.
Dorothy, I think we’re actually going to sell enough of the Apple stock to pay the taxes on the Roth conversions as we go. This will allow us to start the conversions sooner.
It sounds like you had a very successful early retirement. Congratulations! It shows that even type-A people can enjoy early retirement. You don’t have to work until 65. Nice move with Florida. I’m thinking about establishing our residence there later as well.
Welcome to the neighborhood when you get here. It’s a little crowded but still should be enough tax free room for you. : )
Way to go, Bobs! Living the dream.
Such an amazing story and update! I am personally very touched with the Bob’s as we too are part of the LGBTQ+ community. It’s amazing to see how being “different” and “unique” has pushed through to the personal finance space to be “weird” and “different” when it comes to finances too. Major kudos to you both for your amazing savings over the years.
We reached FI for our family of 3 (hopeful 4) in our 30s and love that we can point others in the LGBTQ+ space to your story as well.
Enjoy your early retirement!
Court, thanks for the kind words. Glad you reached your FI point as well and was able to join the club as well. Good fortune to you and your family. :-)
Not that it matters, but I’m a little confused about how Bob went from having a wife, who is referred to as ‘she’ throughout the first post, to being half of a gay couple whose partner is now Bob2 in this second post.
Back when this was originally posted, we weren’t entirely comfortable in sharing our full life story. At the time, I was working at a conservative employer. We didn’t know who might read it, given the some of the details and disclosing some of our more personal financial details.
At this point, we don’t care any longer, it is what it is, and we might offer some positivity to other LGBT+ readers of the GCC blog at being able to disclose our full life experiences with FIRE.
Full disclosure. The Bob’s aren’t our real names either. ;-)
I’m a long retired Federal employee (CSRS) with a couple off additional tips for you.
If you donate to charity use that appreciated Apple stock rather than cash. It will save you paying capital gains. Fidelity has a Donor Advised Fund that you can use. Transfer the stock to Fidelity and then to the DAF. From there you can give to any 501c3 charity whenever you want. You get the tax write-off but no need to pay cap gains.
Since you have FEHB you don’t have to opt for Medicare if you don’t want to. For example I have Kaiser. My co-pays and limits are exactly the same as if I were an active employee. Kaiser would dearly love me to take Medicare and would give me even lower co-pays but not worth it for me. Warning if you don’t take Medicare when you turn 65 and take it later, it costs extra forever. IIRC the penalty is 10% for each year you’ve delayed.
YES. This is so important. Most every other insurance will require you to take Medicare Part B. FEHB is one of the only ones that doesn’t. Rather than pay for Part B for each person you could just be on a family FEHB plan. the reduction in copays is no where near the amount you save for two premium payments.
Great point Denise. FEHB could also be important in later RMD years as Part B is income means tested and the premiums will most likely go up when Uncle Sam tells you how much money you’re going to take out of the portfolio.
+1 on the Bobs being an inspiration to all, but especially to those of us in the LGBT community. There are so few mentors and role models out there for us on this topic. Finally somebody I could see my own story in when reading these blogs. Thanks to the Bobs and GCC for sharing 👍🏻
Thanks Marco. It wasn’t something we intentionally planned for over the years together. After coming across blogs like this and others, we realized at some point….hey, I think we can do this. At that point, we were off on the journey. Good luck on yours, it’s a fun one.
Love reading these personal stories as I feel that 1 day we will be able travel and retire early as well. Makes me want it more.
Well done Bobs.
Write another guest blog in 1 year to keep us in touch with your story.
Regards
Leonard
Thanks Leonard. I don’t know how exciting it might be but we’ll keep it in mind if GCC will let me.
Great advice on taking distributions from the 401K at 55 but please check with your 401K administrator first. Some companies will only distribute the funds in a lump sum which can lead to enormous tax implications.
Good point Nick. I just has this conversation w/Fidelity on 1 of my 401k’s. Essentially, if you touch any of the money, it all has to go. I confirmed that I could withdraw a portion of it under the 55 rule, and then transfer the rest into an IRA or other 401k. The Chat representative was very helpful, and provided me with a link to the plan document so I could validate the rules.
Hello Friends, Thank you for the excellent update and your willingness to do the original analysis. I have the analysis stored and frequently read and share with others. Your 2015 finance situation was almost the same as ours, except 62 & 59 and power company pension.
We retired in September 2015 and traveled until March 2020. The first month was Grand Cayman (honeymoon 1979) for a month to redo (1970’s) scuba diving certifications and add new advanced diving skills. Each year we rented 3 months FLA, 3 months Big Island, 3 months to our dream destinations and 3 months home eastern shore of Maryland.
Update we are happy, healthy and never missed work. During the 5 years retired portfolio (S 35, B 50, C 15) increased 1 million and we removed 200 k. Update SS wife at 62 and me spousal at 65, then full at 70. Take away plenty of money and retire in 2010 would have added 5 years of travel and relaxation.
Now building garden, walking Oxford, Md and dreaming of Big Island scuba followed by lunch at Lava Lava beach club.
Thank you again for the update and Keep Smiling ! Steve
Hey Bob. I noticed you said when one of the Bob’s reached 60 you were able to start the annuity AND get back into the FEHB. I’m currently starting my 15th yr of federal service but I didn’t know that I could separate early and then re-join FEHB at 60??? Explain if you can! Great article and glad retirement is as awesome as I am envisioning it!
Congrats Nick, you’re on your way. To qualify for his full “postponed retirement”, Bob 2 had to reach his MRA (minimum retirement age) and qualify under the MRA+10 rule (which he did). He reached his age MRA of 56 and retired while having 26 years of service in but he was not yet was 60 years old. In his case, we waited until he turned 60 to claim his full annuity without the 5% per year reduction, it would have been up to 20% forever if he had taken it at 56 instead of 60!! He then also qualified to go back on the Federal Health Care Benefit.
**If you have under 20 years of service at retirement, you must wait until the full retirement age of 62 before starting your postponed full annuity and going back onto FEHB. His was 60 because he had over 20 years in service. You’ll still need to get to your Minimum Retirement Age (MRA) before retiring. You’ll have to decide what works best for you. Read the link below again and again so you thoroughly understand the ramifications and nuances of federal retirement. It’s a game and clear as mud. ;-)
https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c042.pdf
Be sure to work with your HR person so you can get an idea of how much your annuity will be when you are ready so there won’t be any surprises. Good luck.
Let me know if you have more questions.
No, I don’t think you’re crazy to take a pass on bonds. Your Fed pension (plus eventual other Fed “pensions”, aka “Social Security” checks) give you the stability bonds are supposed to offer to a portfolio. Add your high assets and frugal consumption to the mix and maybe bonds are not the way to go after all. You can afford more risk. Congrats on a job well done!