In March of this year, Stephen and I retired in our early forties. Stephen worked as a data scientist and I worked in administration at a private university. We moved to Silicon Valley for Stephen’s job after he finished graduate school in 2001, and we were married in 2003.
Early in our marriage, Stephen and I knew that retiring in our forties was our goal. However, it always seemed very far off. Our investment savings fluctuated quite a bit, and in 2008-09, it went down a lot, as it did for everyone. Although we kept putting money in, it was very discouraging, as we would check our balances and they would be lower than the month before.
In 2010, we started to have the feeling that early retirement was close and perhaps possible within a few years. The stock market had recovered significantly, making our portfolio more robust. This was also the year the Affordable Care Act passed, giving us hope that we wouldn’t have to worry about health care because of the guaranteed issue.
We continued saving and tried not to inflate our lifestyle. As we approached our retirement number (your number is the financial target at which you would feel comfortable retiring), we knew we had to start the long process of purging our belongings and getting ready to sell our house. When we hit, and then exceeded, our financial targets in 2013, we knew we were ready.
It’s important to remember that retirement isn’t solely about saving money. There is so much planning and preparation that needs to be done, that it can seem overwhelming. In addition to continuing to build up our investment portfolio, our preparations for retirement were as follows:
- Track our expenses to help us plan our retirement budget.
- Determine how to meet our health care needs.
- Get rid of years’ worth of accumulation of stuff.
- Sell our house.
- Research possible places to live.
- Figure out what we want to do in retirement.
- Quit our jobs.
I will share additional details of some of these goals in future posts, but this is the broad outline of our story.
Track Our Expenses
The two most important reasons for tracking your expenses are so that you can see where to make cuts in spending, and to show you how large your investment portfolio must be to support your budget (we don’t know anyone our age who has a pension). For normal age retirees, they recommend 25 times your expenses. But we were early and conservative, so we were initially aiming for 33 times our expenses. We started tracking our expenses in September 2010, so that by the time we pulled the plug, we had a good idea of what our budget should be.
Determine How to Meet Our Health Care Needs
The Supreme Court’s ruling upholding the Affordable Care Act, or Obamacare, was a critical piece of the early retirement puzzle for us. In fact, without the ACA, we probably wouldn’t have been able to retire early, unless we moved to Canada (where Stephen is from). Although Stephen’s health has always been very good, I’ve had a number of health problems and injuries and we were concerned about my ability to get private health insurance. I would have had to work nine more years in order to get guaranteed health coverage through my employer.
Get Rid of Our Stuff and Digitize EverythingWe knew we had to downsize because one of our retirement goals was to do a lot more traveling. Plus, other than our computers and cameras, we are not that interested in having a lot of stuff. I don’t know how we ended up with so much stuff, as most of us seem to, but we weren’t terribly sad to see most of it go.
Because we wanted to travel light, we planned to take only what would fit in our car. In addition, we knew that in order to sell the house, we had to get rid of as much clutter as possible so that it would look great to potential buyers. But of course the house couldn’t be totally empty, so most of the furniture had to stay until the end.
While Stephen focused on tracking expenses and balancing our investments, I was in charge of purging paper, including books. I digitized more than 1,000 books. I went through every piece of paper in our house and decided what needed to be digitized and saved, digitized and thrown out, or just thrown out or shredded. Stephen was in charge of scanning all our family pictures, after which I added dates and important information to the photo files.
We worked together to have garage sales, post items for sale on Craig’s List, and photograph and list belongings to sell on eBay. We ended up taking in more than $10,000 from all the stuff we sold. We also made many trips to Goodwill to donate clothing and other belongings.
The one major item we had to get rid of besides our house was our old beat-up 1995 Honda Accord. We ended up donating the car to KQED (local bay area National Public Radio Station), in case we needed a tax write-off for 2014. The car sold for $1,200. Even if we don’t end up using it on our taxes, we were glad to donate to our local NPR station, as we’ve gotten so much enjoyment from them during our years in the bay area.
Sell Our House
We knew we wanted to sell because it would take so long to pay off the mortgage, potentially leading to a 3-5 year delay in our early retirement plans. We could get more affordable housing nearly anywhere in the country, so staying in Silicon Valley didn’t make any sense for us.
We were actually looking forward to selling our house. We had a cute little bungalow built in 1937, and there were always maintenance issues. Although the housing market had bounced back quite a bit, especially where we lived in San Jose, we were still worried about the amount of time it might take to sell it and whether we would get any more than we paid for it. It ended up taking a couple days to sell it and we got $140k more than we paid for it, which was considerably more than we expected.
We had a 21-day escrow with seven days of contingency in case the inspections turned up something awful and unexpected (they didn’t). The buyers also gave us a free rent back for another month after the close of escrow, since they had just sold their house and they didn’t need to be out of it until then.
Research Possible Places to Live
This is the one area where we really didn’t do our due diligence. We kind of kicked the can down the road, because with limited vacation time and plans to see our families, we just didn’t have time to go visit the places on our list. We did a lot of online research, but our visits to different cities are still ahead. Our biggest housing challenge is that we have a pit bull mix. Like many pit bulls, she is a goofball and a people lover. She is especially mellow in her old age, but even in towns that don’t have breed-specific legislation, many landlords don’t want pit bulls, no matter how sweet they are.
Figure Out What We Want to Do in RetirementThis was an easy one for us, because we have lots of interests and hobbies. Stephen spends a lot of time on his photography, and retirement meant he could focus on both improving his skills and improving the income stream from his work. I wanted time to work on a novel, and I’m always coming up with projects I want to do. We still find we could use more hours in the day. This can be extremely problematic for some people, however, especially those who define themselves through their work. If you are considering early retirement, then you’ll want to spend a lot of time on this area and perhaps do a trial run.
Quit Our Jobs
While Stephen wanted to wait until our house sale closed to give his notice at work, I wanted to give my department as much notice as possible. I definitely was the one with the mixed feelings about leaving work. Although I was thrilled to have the opportunity to devote time to my own projects, I was sad to be leaving the best group of people with whom I have had the good fortune to work.
I was dreading telling my boss that I was leaving, as there had been some disappointing employee losses in the preceding year. I only told one person at the office before I told my boss, because I knew he would go straight to her to get HR started on finding my replacement and I didn’t want her to be caught off guard. I finally worked up my nerve to tell him, and although he was bummed, he was very supportive and excited for us. I gave my notice before we had selected our real estate agent, so I told my boss that I thought I’d be around for at least 2-3 months. Obviously that turned out to not be the case.
The worst part was telling my co-workers, who have been there for me in so many ways in the 12 years I spent there. I wish I could say it was easier than I thought, but it sucked. Because they are awesome people, everyone was very supportive, but they were also sad that I was leaving. Saying goodbye to that wonderful group of people is really the only regret I have in relation to retiring.
I think leaving was much less emotional for Stephen, as he hadn’t been at his company for nearly as long. They did try to get him to stay, but he was definitely ready to get out of there.
Get Out of Town
As it neared time for us to be out of our house, it all seemed to go by very fast. Every minute that I wasn’t at work, I was talking to people from Craig’s List about when they could come buy my stuff, making trips to Goodwill, or packing.
When we finally reached moving day, we found there were still things that wouldn’t fit in our car, so we still had to throw some things out. Our poor dog just had a little cave in the back seat, although she seemed to like it.
We finally got on the road and headed to Iowa, where we’ve been for the last few months, spending time with my family. Next month we are heading to Toronto to spend time with Stephen’s family, and after that, maybe Boulder or Santa Fe in October. It’s both exciting and scary to not have a final destination figured out. We want to try out a few places to see where we might want to buy a condo. We don’t know where we’ll end up, but we are having a wonderful adventure, which is exactly what retirement should be.