Today I'd like to present an interview with a friend I met while in college. He retired at the age of 43 and has a net worth of over one million dollars and he did this just by working as a salaried employee for a large corporation. No (successful) business start ups, no side hustles. Just a W2 paycheck.
Although the emphasis of this blog is not really FIRE (Financial Independence, Retire Early), there are many common themes between those who want to take control of their personal finances and those looking to retire early. Passive income, which I am going to use to purchase my Tesla, plays a big role in both cases.
If you or someone you know is either a millionaire or has retired early (or both) and would be interested in being interviewed, please send me a note using the contact form on this site.
Here's the interview:
How old are you, your spouse, and children?
I am 48, my wife is 37 and my children are 12, 10 and 6.
At what age did you retire?
I retired at age 43.
Were you married before you retired? If so, how supportive of your retirement was your spouse?
Yes, she was supportive. It gave her the opportunity to become a full-time student so that she could finish her undergraduate degree from Portland State University.
What is your current net worth?
Approximately $1.2 million
What does your net worth consist of, i.e. how do you hold your wealth?
$260K Primary Residence (paid in full at 4/1/2016 closing, FMV may be higher today)
$769K Retirement Accounts (mostly 401k)
$104K Oregon College Savings Plan (529 accounts for daughters)
$46K Liquid Assets (mostly cash)
$18K Automobiles (all three paid in full, two mostly depreciated by now)
What was your job before retiring?
Senior Product Manager at Intel Corporation
What is your annual income when you decided to retire and what is it now?
$164K then
$57K now
What are your sources of income now that you are retired?
Wife's salary and bonuses as a middle school teacher & investment income
What was your first job and the starting salary?
Graduate Rotation Engineer at Intel Corporation $36,600 base salary (1993)
Was your career the sole source of your income or did you work at other side hustles?
Career was the sole source.
Was it a life-long goal to retire early? If so, why?
Yes, my father retired at age 50 after working 20 years as a social worker. He encouraged me to “get out of the rat race as soon as possible.”
Did you know anyone else who had retired early?
Yes, many males in their 40's and 50's retire from Intel.
Do you participate in / follow the FIRE (financial independence, retire early) community online?
No.
How did you know you reached the point where you could retire early? Did you have a savings goal or a passive income goal?
The house was paid off and I had no outstanding debt. My daughter's college accounts were fully funded for in-state tuition. My retirement accounts had surpassed a half a million and the gains each year were greater than my contributions which I always max out. I was within a year of exiting my money losing retail business that was costing me about $4K a month due to a 5 year lease that my wife and I foolishly signed a personal guarantee for making our LLC protection null and void for Kimco Realty. My father had died and left me his house; although an old ranch house in desperate need of repairs, I still managed to net $130K after selling it. As part of the voluntarily separation plan, I got a severance package from Intel. Last, but not least, my wife wanted to finish her college degree and enter the workforce.
What steps did you take to reach that goal and how difficult where they?
Saved as much as I could when I was single. It became more difficult once I got married because my wife is a spender and not a saver like me; case in point, she will go to the store to buy dental floss, zig zag for hours and buy $100 to $200 worth of stuff, then come home and realize she forgot to buy dental floss. Still, I still managed to max out the 401K and Intel Stock Participation Plans until the very end.
How important are taxes and tax planning for you, both before and after retiring?
Extremely important. Before retiring, there was a silver lining in having a money losing retail business since I was able to offset that with my income when I had no other deductions, except the standard one, because I had paid off my mortgage the year I got married. After retiring, our “earned” income is low enough now where we don't pay any Federal taxes at all (except FICA and DI) since teachers in Arizona are among some of the worst paid in the nation.
Do you feel the need to track your spending in retirement? Did you do so prior to retiring?
Yes. After retiring, we were still in spending mode without any real budget. For instance, we spent $100K just in eating out for the three years post-retirement. Having an earned income again after spending down cash for five years has enabled us to set up a target budget. I realized recently that we were spending over $3K a year eating sushi alone, so there are clearly some places of low hanging fruit to cut. Before retiring, we did not have a budget and were on the “unrestrictive spending” plan. In addition eating out every day before retirement, we would buy a brand new car every three years.
Do you have a budget? If so, how do you implement it?
We are using my wife's monthly income and earnings from my investments as a target. Implementation is still a challenge because going all cash or using credit cards, it does not seem to make a difference with my wife.
Prior to retiring, what percentage of your gross income did you save?
About 15%. When I was single, I was probably savings more than 50%.
What is your investment philosophy? Did it change when you made the switch from working to retired?
I love low cost Index funds since in 25 years of investing, my stock picks have not done as well except in brief periods of irrational exuberance. I also was disciplined in dollar cost averaging and I double downed whenever the markets have tanked (2000 and 2008) by buying more Index funds. In retirement, I pay more attention to diversification now.
What has been your best investment?
Vanguard Institutional Index fund (long term)
Microsoft (do not have a position now, but used capital gains from it to buy a BMW Z3 back in the 1990s)
What has been your worst investment?
Linn Energy
How often do you monitor / review your portfolio?
Every single day.
Do big swings in the stock market worry you excessively?
No, I see them as buying opportunities.
What problems did you face along the way to early retirement and how did you handle them?
Our retail business was actually part of the original retirement plan. Instead we lost $300K over the 5 years we operated the business. There was nothing we could have done to handle the situation since it was caused by the great Recession.
What are you currently doing (if anything) to maintain or grow your net worth?
My net worth now is roughly the same as it was when it peaked last back in 2014. Now that we aren't burning down cash anymore, the net worth should continue to grow organically without any additional savings.
Are you satisfied with your current net worth?
Yes, otherwise I would have stayed at Intel for a few more years.
Are you actively taking any steps to increase it?
No.
How did you learn about finances and at what age? Did your family and friends play any role in your financial education?
My parents did not have a great financial education and did what most Americans do (they got in debt). I was always a good saver since I was a child, but I didn't learn the fundamentals of investing until after college.
If you could go back to when you first start working, what, if anything, would you do differently?
Nothing.
What money mistakes have you made that others can learn from?
Not diversifying out of Intel stock. Most of my net worth prior to the .com crash was in Intel stock. I was on my first sabbatical when Intel stock peaked at around 76. The day after I got back from my first sabbatical, the stock tanked to 48 and then traded as low as the teens. Intel stock did not reach 48 again until very recently which would have essentially made it dead money for almost 18 years if it wasn't for the good dividend.
Is your life in early retirement different from what you thought it would be?
Yes. I had children relatively late in life, so being a Mr. Mom is almost a full-time job in itself. That said, I would rather be a Mr. Mom than sit in boring meetings every day and reading endless emails and crafting Power Point slides. I do miss some of the travel that allowed me to eat on Intel's dime though.
How do you spend your time on a typical day?
The time when the kids are at school is the “me” time where I get a chance to do reading, catching up on the shows that I like to watch and to take online courses occasionally. Most recently, I completed an Astronomy course from the University of Arizona. After I pick up the kids, I do some household chores and now I try to cook dinner on the weekdays; the climate in Arizona is ideal since I get to grill steak at least twice a week! During the late evenings, I like to check my various accounts and update my net worth.
Do you donate financially to or volunteer for charity?
I volunteer at the Titan Missile Museum in near Tucson, Arizona.
What worries you and keeps you up at night?
I am retired, so nothing keeps me up at night.
Most people have medical insurance through their employer. Is finding / affording medical insurance more difficult / expensive now that you are retired?
As part of the voluntary separation plan, I got 18 months of Cobra which was based on the best health insurance you could buy through Intel. Starting in 2014, the best health insurance at Intel starting cutting benefits and they stopped paying for Occupational Therapy for one of my daughters and I got a surprise bill for $700. Today, my wife gets health insurance fully paid through her employer (I believe it is equivalent to a silver plan) and my kids get free health insurance since eligibility is income based (not asset based). I suppose this is the silver lining of having a spouse who is poorly compensated as a teacher since paying for health insurance for my daughters would cost more per month than what my wife nets per month.
Do you have any advice for my readers about how to retire early?
Cost of living is key. I lived and worked in the Pacific Northwest for most of my career at Intel, but was paid above market wages since my peers worked in silicon valley. After retiring, we moved from the Pacific Northwest to the low cost state of Arizona.
Do you have any regrets about retiring early?
No.
