[Editor's Note: I don't get very many international submissions for guest posts, which is fine since my website has a fair amount of focus on US tax rules and 98% of my readers are from the US. This one comes in from a recent early retiree in Scotland who has started blogging about retirement after a long career in IT management. Since her blog is anonymous, we'll keep her anonymous here. It's not particularly physician focused and it is interesting to see the talk of “pensions” and no talk about how to pay for health care in early retirement. But other than that, the issues faced by early retirees are pretty darn similar on both sides of the pond. I liked the points about getting the finances right, retiring TO something, and the concept of trying retirement out before committing to it. We have no financial relationship.]
I’m not advocating extreme early retirement, just retiring a bit ahead of time, when you have the wealth to do so, and the health to enjoy it. Too many of us work far too hard, and then die within sight of that elusive pension. In 2016, I attended 8 funerals of friends and family. Half of them were 50 to 65. They never saw their pension.
I retired early a few years ago, aged 55, and I can safely say it was the best thing I have ever done. Since then, my husband and I have traveled the world. I spend time on my hobby working with metal. I manage our investments. I read widely, both fiction and non-fiction, I am learning French and Spanish. Recently I have taken up blogging. If the weather is good, I work in the garden, or just stretch out on a lounger and enjoy the sun.
I left my IT management job and the 6 figure salary behind without a second glance. Why? I realized that I was killing myself. The warning signs were there, the weight was piling on, the blood pressure wasn’t what it should be, I was always away from home, I worked all hours, took too little exercise. You get the idea… My husband, a chartered engineer, still had several years to go before his pension kicked in, but he hated all the admin at work. My elderly mother was at the time about 90, and while she was in great shape, I wanted to be able to spend more time with her and do more to support her.
We only get one shot at life, so we decided to retire early. Once the idea was voiced, it started taking shape. It took about 2 years preparation. Here are some things to consider, stuff that we did, to make it work for us. Regardless of whether you are ready to retire, they are still good things to do.
Note: I am not a financial advisor, so do make sure you take professional advice.
Priority 1 – Get the money right
- Calculate your net worth. All your assets less all your debt. If you are seriously considering retirement and your net worth is not positive, then you need to do some serious work on it!
- Work out how much money you will need in retirement. Factor everything in, from holidays, to home repairs, replacement cars etc. If you don’t have free healthcare, make allowances for what it is likely to cost. Work it out as a monthly rate. Will your proposed income match it? If not, you’ve work to do. Either increase your retirement income, or cut your spending!
- Consider what income you will have immediately. How many years will you have to wait until any workplace pensions start? What are you going to do for money in the gap between retiring and pensions? In my case, while we could have used investments, I decided to take an actuarial reduction in my pension, and take it early. My pension would comfortably keep both of us until my husband’s pension started 2 years later.
- Are there any actions you could take in advance, that will help later?
- Several years before retirement, I significantly increased my pension contributions. Under UK tax rules, I was able to take some of these tax-free when I retired, effectively giving me a 40% return on my money.
- Be aware of any potential changes in legislation. In the UK, there is now a limit on what you can put into your pension each year, and how big your pension pot can be.
- How long will your money have to last? My family members all live into their 90s, so I planned for 40 years. There is lots of discussion about the Safe Withdrawal Rate of 4%. In my view this is too high. So be very sure of any calculations you do. Be pessimistic, not optimistic. It’s better to take less out to start with. You can always revise it, ten years in. Beware of inflation!
- Do take professional financial advice. Preferably paid by the hour, rather than by a percentage of the funds being managed. If you do not have an advisor, ask friends or family for a recommendation. The advisors will understand the nuances of the law, and work through the options with you. It will be money well spent.
Priority 2 – Work out what you are going to do, once you are retired
There is no point in retiring if you are going to get bored, just snack and watch daytime TV. You’ll be better off at work.
- Consider reducing your hours rather than retire completely. A few months after we retired, my husband was asked to do some work for his previous employer. He negotiated a part-time contract where he works only on the things he wants to on his own time and he can flex it around our travel plans. A friend who is a doctor, aged 60, isn’t ready to retire, but now only does day shift in maternity. No nights.
- Consider some part-time roles. If you’re a professional, it might be possible to obtain a paid non-exec directorship in an appropriate industry. This will probably take up 2-3 days a month, and lets you continue to use your expertise.
- Do you have hobbies you want to spend time on? Are there things you have always wanted to do but not had time to? Now is your opportunity. Do the research in advance.
- Do you want to travel? Where? Why? When? One of the benefits of retirement is that you have far more flexibility about when you travel and for how long. We factor in one long-haul and one short-haul each year. We like to spend at least a month in a different European city each year.
- De-clutter. You’ll feel great doing it.
- Are you going to move homes when you retire? Downsize? Re-locate? Now is the time to start the research on how and when you are going to take those steps.
- Consider some volunteer work.
Priority 3 – Try it Out
- Do you have the opportunity to take a short term break? I took six months off without pay for family reasons. That confirmed to me that I wouldn’t get bored, (I was a workaholic), and that we could live on our proposed retirement income.
- Reduce your monthly spend to your anticipated retirement income. We did this about 2 years out. It boosted our retirement savings, and also let us realize what we really needed to spend money on. There is a big difference between Need and Want! It starts gently changing your mindset.
Finally
You (and your partner, if appropriate), have done all your sums, you’ve reviewed them with your financial advisor. You know you’re going to be able to use your time sensibly, and live comfortably.
- Talk to your financial advisor. Put the initial financial steps in place. Get the money in the right places, ready for when you need it.
- Start preparing yourself mentally for wind-down.
- Start talking about your plans to friends and family.
- Only when you are very, very, sure, resign, have a great party, and start the rest of your life.
Enjoy!
What do you think? Would you like to retire early? What will you retire to? Do you have a method of trying out retirement? Comment below!
Great post!
For me, Health Insurance is a big cost once you do early retirement. I calculated it and it’s almost 1000 dollars per month. A substantial amount!
I agree that health insurance cost is a big issue for us in the U.S. That is part of the reason many of us are looking at continuing work but with fewer hours. Part time or “semi-retirement” can be a nice transition to full retirement. It may allow full benefits, income enough to cover current expenses, and continued structure/meaning.
I could take my pension at 55 similar to this poster, but will not have free health insurance unless I stick it out to 60. So I understand the pressures of insurance. Who knows where we will be with health care in 20 years (19 actually before I turn 55). It may be a whole new world out there.
Health insurance is one big reason I am working at 59. It is unpredictable right now. Really unpredictable now.
To each their own, but there are several reasons I feel 4 percent is perfectly fine for a withdrawal rate in retirement
1. You are unlikely to run out of money
2. If the market has poor returns at the beginning, you can temporarily make adjustments (find a temporary source of income, withdraw less).
3. If I do run out of money, I will likely be at the end of a long life (mid eighties, nineties) at which point I could probably live on much less. I will probably be more than content at that age to spend time in my backyard versus traveling the world
4. Social security will probably exist in some form to provide some income. If I did run out of retirement account money, I could always do a reverse mortgage or ask for help from my kids
If u want to leave a large inheritance, that’s one thing. I would much rather help my kids as much as possible when they really need (college, first car, first house) and by the time I die, they probably won’t need an inheritance anyway.
The point is, is not the end of the world if your retirement accounts are depleted to 0, especially if you are in your eighties or nineties
My MIL’s fear is being in a bad nursing home. I used to say I don’t want to be in one that smells like urine, but now I figure by then I won’t be able to smell… Anyway I want to have money to spare for increased costs like nursing home until at least 100. I’ll spend more if my life expectancy seems lower or if we have more than expected. But 2-3% is all for now.
2%? Can I be one of your heirs? 🙂
The nursing home costs would eat up any remaining assets pretty quickly. If I go to one, just my preference, I would hate to see everything taken away for that…id rather let Medicaid pay and focus on spending my assets and enjoying life with my family before I get to a nursing home
The Nursing Homes that take Medicaid patients aren’t necessarily the best. Consider LTC insurance.
http://wealthydoc.com/blog/who-will-pay-for-your-nursing-home
Well-written and thoughtful article, but no mention of a significant barrier to early retirement to many of us, our children. Take away my teens (or get someone else to pay for them), and I will give my notice tomorrow.
I also agree that health care expenses in the U.S. are high and unpredictable. I suspect that many workers in the U.S., who could otherwise afford to retire, stay in their jobs because of this.
I hear this a lot. I have two kids too but that wouldn’t stop me from giving notice? I’m not as diligent at tracking my expenses as WCI and others here, but we make ends meet on less than 1/2 of my income. The biggest expense coming is college, but I have been saving in 529 since they got a social security number. With state schools, 529, scholarships, their savings and their work – it should be affordable. A lot of parental spending is optional, in my view. Am I missing something?
I guess I am surrounded by kids that are exceptional in various ways. Some with special talent and some with special needs. (Fortunately, my kids are relatively unexceptional.)
I do know plenty of adult children that require significant economic support, including my 49 year old sister. My wife has an uncle (physician) with five children, four of which intermittently require financial support in their 40’s and a second uncle (physician) with three children, two of which he has largely supported well into their thirties and continues to support.
I guess at some point you can tell the kids to “take a hike”, but in my experience, it is easier to tell someone else to tell their kids to “get lost” than it is to tell your own kids to “buzz off”.
I would submit that there are parenting issues involved and the relative optionality of continued support (so called, economic outpatient care), but these circumstances exist, and I know that I would have trouble walking away from my kids if they needed me…at any point in their lives. So I have to take this into account.
“four of which intermittently require financial support in their 40’s”
Require? They’re 40. They don’t ‘require’ his financial support. Now, does he feel guilty about being a terrible dad for all those years and continue to throw money at problems to paper over that as he always has? Likely. Of course, your stated scenario speaks to the ‘personal’ side of personal finance. Also, it well serves as a reminder that behavioral choices (like divorce, feeling obligated to continue to prop up derelict adult family members, etc) can have a far greater impact on your finances than relatively trivial concerns like portfolio tilt, pay off low-rate mortgage or not, etc. ever will.
This is an excellent excellent post. I have seen this where I live and in my extended family and friend circle.
Tough to ignore your own kids
That’s particularly an issue with docs as a lot of us don’t even start our families until 35. If you have a kid at 42, he won’t be out of the house until you’re 60 at a minimum. That certainly limits what you can retire too.
We knew we wanted to retire [relatively] early and do extensive traveling; thus, were very interested in having the kids out by our early 50s and, fortunately, were able to follow the plan. DW had one in each of the last two years of residency, then the last in the second year of private practice–those 6 weeks off work were a bit more of an economic hit.
Yea, we were on that plan. Then # 4 showed up. 🙂
I am the author of the post! A slightly different generation.
Our two kids are through college, and financially independent. They have been for 10 years. We paid all the private school fees, college fees and living costs from 1987-2007 when they graduated. (I had them young!). Our timing was great though. If the boys had gone to college, post 2009, we would have had to pay £30k each in fees rather than £3k each!
They are also virtually mortgage free (even with London property prices) due to a bit of help from us, and we also ‘jumped a generation’ with family money. My mother’s house helped clear their mortgages…. We decided we didn’t need it, also the UK inheritance tax laws are strict!
For us the difference came in 2007, when we realised if we really concentrated on putting money away, spending less, it would speed everything up. We still had a great Caribbean vacation every year, and Bank of Mum and Dad was pretty generous, but apart from that we spent a smaller proportion of our income.
Wind forward to 2012 – job done. Game on!
Hi, Erith,
Thank you for the explanation. My first reaction to your blog was that you must not have had kids. I did some reading on your site, and it became clear that your financial responsibility for your kids was well into your rear view mirror.
At any rate, well done. It sounds as if you have earned and are enjoying a pleasant retirement. Cheerio!
I certainly am enjoying retirement! It has everything to recommend it.
Our boys have been financially and personally independent from aged 22 on. They don’t want or need a Bank of Mum and Dad, but we want to pass it on!
Good Luck!
Erith I just went to look at your blog. I plan to read some more posts this weekend. I love the pictures of Scotland. I did an elective in Edinburgh when I was in medical school. I have been back to Scotland twice. Beautiful country. I have talked about buying some wee beasties to put on my farm but it I think they would be too hot. I saw you had a photo of a couple of them.
Agree! I gave some lectures in Edinburgh. I never wanted to leave that magical place!
True, early retirement is quite different when you have kids. I recently retired with 3 young children but the benefit is definitely more time to spend with them on my terms. Travel becomes difficult but we plan to work around their summer schedules off from school. Although scary to leave a medical career so early, I don’t regret the decision!
I like the idea of “try it out” in theory, but we didn’t see a realistic way to do that with an OBG in a small private practice and a commercial litigator in a tiny boutique firm. Even if one of us could take a couple weeks off, trying to coordinate the demands of both jobs has been difficult (and, in fact, that lack of flexibility is the thing we look most forward to getting rid of).
Nonetheless, we neither one have much concern about finding things to fill the days when we bail this summer in our mid-50s.
As for healthcare, if it becomes unavailable in our location (or exceeds 3-4K for monthly premiums), we’ll move.
Best to work PT and get some compounding of your IRA
Of course healthcare is the biggest issue; worse if pre existing conditions is revised however
I am 46 with a 12 year old, trying to sock away enough over the next six years that I can significantly scale back the working hours when she leaves the house at 18. Another motivation: hubby is 58 and already retired, he will be 64 when I can finally work part time and spend more time with him. I call it the “six year plan” and it is helping me do everything I can now to make sure it all happens on schedule!
I’ll be taking Erith’s advice to heart.
This fall, I’m transitioning from full time anesthesia to part-time with a schedule that will give me lumps of time off in 3 to 4 week intervals.
When I “retire” from clinical medicine, I’ll treat it as if it’s a sabbatical, keeping certifications and licenses active, leaving the door a few inches open for an unlikely return. There are all kinds of things I’d like to with my time when I retire. If there weren’t, I wouldn’t be considering an early retirement.
Cheers!
-PoF
I think that is smart. One of the options with early retirement is the ability to return to paid employment if needed or if desired.
I agree with healthcare comments. I find the comments on children interesting. I, myself have considered decreasing hours now to spend MORE time with my kids. Then, while it may not be necessary financially, — it would be possible to increase hours after the kids leave the house… Not the most FIRE attitude, but conforms to my life priorities
Exactly. They’ll benefit more from my time than my money.
There are special circumstances, of course, but I don’t anticipate needing so much money to support them that it would keep me working unnecessarily.
We’ll have the 529s funded, live somewhere with good public schools, and certainly have enough to pay for after-school activities, musical education, etc… Kids can cost a lot, but most of those costs are optional for most families.
PoF, you’re right.
Sadly our finances at the time wouldn’t allow for it. Bad choice of house, Public schools nearby were pretty rubbish, so school fees were essential. We were also supporting my mother to keep her house her independence and pay her bills. Our boys appreciated that we couldn’t just stop work. We were always open with them, and to be fair they have a great understanding of money today as a result. Meanwhile my Mum was great, there for them every day coming home from school, and loved by their many friends. My Mum was an uncritical ‘parent’ to them, she fed them, friends and all, pancakes and home baking, but didn’t give them a hard time about their homework!
So somewhere in there is a compromise. The secret is finding it!
Good Luck
SJ, I absolutely agree with you. It is what is best for you and your family. Take the time to support your children. I unfortunately didn’t have the choice, part-time jobs at a senior level in my industry at the time(1980’s), were extremely rare. I got given an ultimatum – full-time or no job. It couldn’t happen now, but it did in 1987!
When my kids were teens, I was doing an MBA, my husband was doing a PhD, in addition to us both working full-time and travelling loads. My Mum filled a lot of gaps, bless her, which is why I was so pleased to be able to spend a couple of years with her at the end of her days.
Meanwhile my boys seem to have survived pretty much unscathed. That’s not saying we didn’t have our dramas….
Great post, Erith. Thanks for featuring it Dr. Dahle.
Our path to retirement was similar. We had a 3 year plan and although we didn’t take a break from work, we both already worked from home. Plus for several years our living expenses were what they’d need to be in retirement.
My biggest fears are dementia, outliving Mr. G and not wanting to be in assisted living (AL) or a nursing home. I’ve dealt with both for my mom and my aunt. From my experience, AL here in the U.S. is actually the more frightening model. And we don’t have children so I’d be relying on a niece or nephew to step up.
Hi Mrs G.
Dementia is also my enemy. My Dad had Parkinson’s and dementia – not a winning combination (vast understatement)!
My Mum bless her was sharp til the day she died. I hope I have her genes.
Bluntly, my boys wont be stepping up for me. One is 500 miles away, the other 11,500 miles away! So we too are going it alone!
I’m going for the daily exercise, healthy living (with some wine!), and keeping my brain active, of which blogging is a part.
Here’s to a healthy and sharp centenary!
Great post! I’d like to hear Erith’s thoughts on what IS a safe withdrawal rate, and why. I realize it’s an endless discussion, but I always learn something.
I intend to operate a 2% rule. Why? I lived through the 1970’s with rampant inflation.
I started my first job in Aug 1977 at £2,500 p.a, In Feb 1978, I got a promotion to £3,000 p.a,
In April 1978 my salary was £3,500 p.a. That took less than 6 months to increase my salary by nearly 50%. That was a junior doctor’s salary.
4% may be today’s recommended limit, but I am going ultra-safe with 2%. If I am wrong, in ten years, I will still be only 71, so that will be a fantastic family holiday somewhere. If I am pessimistic, I will have recognised that by year 2 or 3, and reduced my spending! So I will still be safe.
Seriously, call me a doom-monger, but I really feel there is massive inflation round the corner,..
I love reading about retirement and the possibilities out there to do it early and on your own terms. I’m kind of new to all of this. In the last year I found Dave Ramsey, WCI, PoF, etc….it’s been really eye opening as to how much we have not paid attention to all of this throughout our 40’s and now we are 53 (me) and 55 (my husband)
Both physicians
2 kids. One about to graduate college and one still in high school.
still have a mortgage however (essentially the only debt). Vacation home paid for and a mortgage on the main home.
My goal is to finish this off by the time I’m 60 (and hubby 62) and by then younger son done w undergraduate education which will be paid for by us (savings and cash flow).
Our financial planner did suggest the 4% withdrawal rule. That plus our passive income from upcoming real estate should allow us to survive 30+ yrs (after 60 and 62)
The key is MODERATION I believe. I think at 60 I will slow down (maybe halftime or less) and cont to walk, add yoga, painting, more travel and time with family. Stopping pt care altogether would not work for me. I love what I do —and bless them, patients still want to see me.
You must have done enough as you went along, even though you just now feel you’re becoming financially literate. The truth is a physician income, especially a dual physician income, can overcome lots of mistakes.
We did alot of stupid mistakes early on (pre dot com everyone including the hospital janitor was giving stock tips… warning sign that something bad was going to happen)…we bought and sold stocks; also did the dreadful and regretful purchase of variable life insurance (those policies lasted over a decade). What we did get lucky with is real estate (personal residences) …. location …location…location. Now the main home is worth ALOT (this is what still has the mortgage)—so net worth between $5 to 6 M.
I guess since I still derive alot of personal satisfaction from seeing pts, it is purposeful and good work and truly a privilege to continue in this profession.
Thank you for your insightful comments.
I like the concept of “Try it out” before completely pulling the plug. As my net worth increases, I plan to gradually transition to a practice setup with more flexibility and more time off. The end goal is to have a practice where I work only when I want to, and only doing the type of work that I find fulfilling.
The big one for me is health insurance as well. I’m pretty healthy, heck I’m only 36, but I have high anxiety. It tends to get tripped because of work so it’s a fun balance there for me. I find that I don’t get bored when I have time off. I’m starting to crave the simpler life because it help with my nerves. Fifty years of it may prove differently, but it really makes you want to get there sooner rather than later. All good advice in the post!
Speaking from experience, go for it!! If you have saved enough, and are not a big spender, it will be the best decision you will every make.
I retired a couple of years ago at 55. The first 6 months, I kind of questioned my decision. However, as time marches on, you gradually replace your physician life with your new life. Being a practicing physician was a great period of my life: rewarding professionally as well as financially. But a new chapter in the book of my life recently began as I started working part-time, non-clinical which requires and utilizes my knowledge as a physician, I couldn’t be happier. A few days a week, off when I want……what’s not to like?
Do not be afraid to pull the plug and move on, who knows where it will take it!!!!
What non clinical job did you get?
Thanks!