By Dr. Anthony Ellis, WCI Columnist
This past summer, I was off work for the longest time since I was in medical school. Back then, I was finishing two years of 40-hour weeks of classes and moving on to our third-year clinical rotations in Medicine, Surgery, Pediatrics, Psychiatry, and Obstetrics/Gynecology. Some of those rotations featured 50-hour work weeks, and others were 80-100 hours with night call duty spent in the hospital. I took a month-long trip in 1987 to the UK with my father, who was British, and that was the last time I had a full month off.
That was about 35 years ago. It was an awesome trip, one of the best.
Now that I’m semi-retired, those grueling days and long work weeks are long gone, as are the bulk of my side gig weekends and the many holidays I've worked for the last decade and a half. I decided to continue to work for my current employer via a W-2 pass through payroll entity, making tax time easier. I’ll be working two days a week remotely. My focus will change to embracing the new life we have built and taking better care of our health. What good is wealth if you do not have your health and function? I don’t want to be another anecdote about wanting to work “one more year” and then have a health crisis ensue where I can’t enjoy the money I've earned.
When I was packing, I found my Michigan Master’s swimming ribbons and my two dozen sprint distance triathlon medals. I mused over the two dozen 10-mile road races, several half-marathons, and a hundred other 5K road races I had completed. I truly enjoyed these peak physical years from age 35 to 55 and quietly thanked my body for allowing me to run and bike the roads, hike the trails, swim the lakes, and compete and train in the pools in Michigan with my like-minded friends. These ribbons and medals and memories are what's left of those endeavors.
But being in excellent shape in those middle years is associated with a reduced risk of dementia, and it pays health dividends that enhance functional longevity. Soon, I’ll be back at the YMCA, joining the North Carolina Master’s, and hiking in some of the most beautiful mountains and trails in the Tarheel State, adding more health dividends to my retirement portfolio.
Before that, though, I took off that full month.
Making Adjustments for Our New Life
I had August entirely off from work to move out of our Michigan “McMansion” that we sold after four days on the market this past May. We spent about 1.5% of the eventual sale price on pre-market repairs and reconditioning. We closed at the end of June and began packing, sorting, throwing away, or donating 20 years’ worth of “things” in preparation for our move to the mountains of North Carolina. Buying the retirement home—we now call it “Soul Harbor”—there in 2016 was fortuitous, and the 2.5% mortgage “pandemic low” refi rate is going to offer some options with the proceeds from the main home.
To pay off or not to pay off the mortgage on that retirement home? That will be the question. I’ve read several posts on WCI about this conundrum.
Either way, we began preparing for our exit. I happily called the water company in Michigan to ask how to end our quarterly water and sewer bill. The North Carolina home, being built into the side of a mountain, has a septic field and a deep well that produces water that tastes like Dasani from the filtered tap (savings: $125 per month, minus the septic tank evacuation every five years). I looked up our energy bill summary for the Michigan McMansion and noted how much it had cost to heat and cool our high-ceiling, custom-built home. There was a 10% increase in the average energy bill from 2021 to 2022, indicative of recent post-pandemic inflation. The new LP gas on-demand water heater will help with energy costs, along with the whole house attic fan that can be used to recirculate air in the evening, replacing the daytime summer air with the evening mountain air that is frequently 20 degrees cooler (savings: $300 per month, minus the refilling of the LP tank yearly). Groceries and cell phone bills will be the same, although I think I’ll be cooking and grilling healthy foods more often. My drive-through days are over.
I relished the phone call to end the lawn care and snow removal services from our trusty landscaping company and thanked the person I talked to for their years of service. I won’t need this regular service at the mountain retreat, as the snowfall and accumulation are minimal (though the occasional substantial snowfall shuts down the town and the mountain). I’ll be doing my own weed whacking and similar chores at 2,900 feet (savings: $250 per month). I do occasionally have to power up the chainsaw to cut up a fallen tree, and since we will be living in a forest, stick-removal duty will fall to me. I pick up the sticks from the one-mile trail around the top of the mountain and put them in a bag to save for kindling for the fire we light most mornings in the cooler months.
I will have to buy a cord of wood per year despite splitting some myself, which I find therapeutic. The tranquility of a morning fire and cuppa joe is underrated.
I will be ending the cable and internet services and replacing them with satellite internet on the mountain. We will not have regular cable TV but will keep our streaming services. I find we don’t watch regular network shows anymore, but if needed, we have Hulu . . . and Netflix . . . and Amazon Prime Video . . . and Vudu . . . and the kid’s Xbox. The satellite internet and streaming services will stay about the same in cost (about $200 per month). If we can’t live without network cable or the data needs exceed the satellite capabilities, I can get a dish service. But I don’t think we will miss TV stations.
More information here:
Are Physicians Who Retire Early Abusing the System That Made Them Rich?
Dropping Fixed Expenses in Retirement
Since I decided on continuing to work two days a week doing telemedicine, I’ll need reliable internet service with adequate data speed, and this will cost about $130 per month. Moving my job to the mountain comes with a laptop, a separate larger monitor, a work cell phone, and malpractice coverage. The monitor has a built-in camera and microphone and connects to and powers the laptop, so I’ll only need one plug, my employer’s Zoom account, and secure EMR to do this work.
I’ll be “seeing” the same patients I have for the last seven years on a video screen with vitals having been recorded by a mental health aide that takes them to the telehealth room equipped with a large monitor. Only 5% of my patients opted for an “on-site” clinician when offered the choice to continue with me “on a screen.” Psychiatry is easily adapted to this mode of care, and the pandemic taught us that similar care can be delivered in this way. I have been assaulted by agitated patients twice in three decades. The rare physical risks to me that are inherent in my field will be reduced to zero. Guess what else? No mask for me.
My lower property tax bill is gratifying (savings: $300 per month). We have lived on four acres in Michigan in a gated subdivision, and the taxes were more than double what I will pay in North Carolina in the 35% smaller home despite a six-fold increase in property size. Yes, I know. Who needs 25 acres of mountain top? Apparently, I do. I bought the lots on either side of us, so there are no other lots on our one-third mile steep road to the top. The views of the valley are magnificent and the solitude and quietness of Soul Harbor are unique for a property that's 15 minutes from downtown and 10 minutes from a Home Depot, grocery store, gas stations, and a Sam’s Club.
The bills keep dropping. That’s a $1,000 decrease in monthly bills so far. My children’s 529 plans are sufficient to stop this $1,000 per month that I have invested for over a decade. That’s $2,000. Our car insurance costs will drop, but I haven’t gotten bids on this yet. I’d estimate another $150 drop per month. Of course, the largest savings will come from the sale of the McMansion and paying off its 2.5% 15-year mortgage that was fully four times the North Carolina home and land mortgage payment. I bought the extra lots across the past six years, and they were paid off with side gig money. With the sale of the Michigan home, the large mortgage payment drops out. The mountain home mortgage is also at 2.5%, another pandemic-era refi.
Now, we are up to about $5,500 lower expenses per month. The insurance of $200 per month on the large house goes away as does the big house’s maintenance and repairs, knocking out another $500 per month. Mark it as $6,200 in monthly savings.
More information here:
Early Retirement and the Likelihood of Regret
My Side Gigs in Retirement
With my lower income (by over half), my taxes will drop substantially. I won’t know exactly how much until I get into 2023, as I will have worked full-time through July 2022. But my tax situation will change a lot. We may be taking the standard deduction of $27,700 in 2023. Imagine not itemizing! My guess on the tax savings will be as much as half since I’ll be making about half as much. This would add another several thousand in taxes I won’t be paying. I will no longer have access to the 457(b) and my 401(a) and match.
I haven’t yet worked out how much money I’ll be taking off the top in my new two-day workweek world or what pre-tax account type to use, though I know WCI is a fan of individual 401(k) accounts. I will have W2 income for the two days per week and continued 1099 income from the markedly scaled-back side gig, doing an occasional long weekend in Michigan that will allow us to come up and visit friends while earning nearly five figures for a four-day holiday weekend of inpatient work.
I have budgeted quite a bit for entertainment, dining out, hanging out at several local vineyards after a hike, and vacations. Our first vacation in the Soul Harbor scenario was an October trip to the Pacific side of Costa Rica for my wife and me and then a family vacation to coastal Florida for Thanksgiving. These vacations will be paid for with an upcoming bit of inpatient work at my trusty side gig. Like my current employer, they also kept me on.
It’s good to be needed.
What to do with the Michigan house proceeds has become a focus. In the short term, I have placed a year’s worth of expenses in high-yield savings accounts. These pay a yield of 2.0 %, but with liquidity and rising rates, this may go up. I put some of the funds in various notes on a platform called Yieldstreet at three-month, six-month, and nine-month durations, and this pays me between 4.5%-6% in yield. I put some of the money in my Fundrise account where I have enjoyed 14% average yearly returns due to its banner year in 2021 (its long-term average is closer to 9%). Neither of these last two options is entirely liquid, but the one-year emergency fund money is.
So far, I have decided not to pay off the North Carolina home. The total monthly yield helps pay the mortgage and taxes in North Carolina, but the house proceeds are still with me.
I took a month off to arrange a few projects at Soul Harbor and began my journey back to wellness. The past decade of extra side gig work and the pandemic has been a bit stressful. The move has turned out to be the most difficult thing we have done in many years. Having sifted and sorted and packed 20 years of purchases, I may never buy anything non-essential again. We have been very fortunate that the pandemic did not derail the train to the mountain or the transition to part-time work for me. With the sale of the house, the move, the month off, and those planned vacations, I feel like things are looking up.
As John Muir once said, “The mountains are calling, and I must go.”
If you've retired, how did you immediately get your financial house in order? Did you downsize? Did you continue working part-time? If you haven't yet retired but are getting close, what are your plans? Comment below!