At 52, I quit my job. I had been in academic medicine for 25 years. It wasn’t my plan to retire in my early 50s—in fact, it was a distinct departure from my plan. I still had five years left on my mortgage, a car that was 12 years old, and two kids who haven’t started college yet. It was awkward when I told my family, friends, and neighbors that I left my job. They began frequently asking, “Have you found a new job yet?” or “Are you retired?” I found this increasingly uncomfortable, and on top of that, I wasn’t sure what the answer was.
Did everyone expect me to continue to take care of patients forever? When I meet someone and they ask me what I do, do I still tell them I’m an EM doc? My kids heard me say that a few months after I left my job and corrected me, saying, “No you’re not. You don’t do that anymore.” Do my kids think less of me now? It took some reflection to give myself permission to acknowledge that, after 25 years, I had saved a lot of lives (and taught countless residents and students to do the same), made a difference for tens of thousands of patients and their families, and made a lasting impact on my community. I tell my kids that they can pick whatever career they want, but try to make a difference—do meaningful work. I felt I had done that, and I slowly began to be OK with it.
I had paid my dues—more than that, even. I had given back to society tenfold.
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What to Do in Retirement?
There’s a lot to adjust to when you leave work, potentially permanently. They say that people get bored. I hadn’t taken real time off in decades, so I have plenty of forgotten hobbies. It’s taken some time to rediscover them—doing some carpentry, writing, photography, pleasure reading, coaching my kids’ soccer team—but I quickly learned to fill my days.
I found it harder to wake up without a sense of purpose. I don’t miss delving into 200 emails each morning, but I always went to bed knowing what I needed to accomplish the next day and the next week. I always knew when I was going to work on short- and long-term administrative projects and how I was going to tackle them. That’s probably why so many new retirees pick up a clinical shift a week or get involved in volunteering.
The other challenge established by our society is that our sense of identity and our self-esteem are tied to what we do. Over the years, when I meet new people, I should first introduce myself as a father of two. Instead, I’ve always said that I’m an EM doc. But how will I introduce myself today? Or tomorrow? It's certainly something I've been pondering.
In reality, I actually haven’t decided if I’m retired yet.
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How Do I Pay My Bills Now That I've Retired Early?
Of course, I couldn't even consider the question of early retirement if I hadn’t prepared for it financially. To be honest, I’m surprised that I’m there now (and I actually met with a financial advisor for a one-hour consultation to double-check my math for me, just to be sure).
Now I’m 52 and left my job, and I somehow squirreled away enough for retirement and college tuition times two kids. And not just retirement—early retirement. My money has to last a lot longer in retirement than if I worked another 10-15 years. That classic 4% rule (which should really be 3.5%—people are living longer and spending more than they used to) isn’t going to cut it at age 52.
There are a few things I learned very quickly. First, my money was invested smartly for someone who still has a decade left before retirement but way too aggressively for someone who is done with work. That needed a quick rebalance. I also had to take a deep breath and drop my disability and life insurance. I had enough money saved up now to take care of my family, so I didn’t need to spend any of it on monthly payments for insurance I no longer needed.
Next, I was used to having monthly expenses to pay and a monthly paycheck to pay it with. But it was very new—and rather disconcerting psychologically—to have those same monthly expenses but no paycheck. I also was no longer saving any money—something I had religiously done since I started earning a paycheck. With the help of some good advice, I decided to withdraw money (equal to that month’s bills) from my investments once a month and transfer it to my bank account to mimic a paycheck. It made sense from a financial perspective, but it also was comfortable psychologically to have a monthly “paycheck” land in my bank account to pay my bills.
That raised an interesting new question. I had always known that with the market, you “buy low and sell high.” But I had never thought much about it. Since I just invested each month and never really withdrew anything, there never was a risk of selling low. If the market dipped, it would come back up, and whatever I “lost” would be back in there (e.g. say, the Dow was x amount and it lost 10%. If I kept my money in there and three months later the Dow had climbed back to x, I’d have the same amount of money as before the market dipped).
But with a monthly “paycheck” coming out of my investments, suddenly selling low was a real tangible possibility. If the market dipped that week or month or quarter (or if there was a recession) and I sold investments to pay my monthly bills, I would be out a lot more than that amount and it would take a lot longer to recover that money (e.g. if the Dow dropped 10% and then I paid my monthly bills, the market would have to recover 110% to make up for what I spent when I wrote those checks). Without a monthly paycheck to cover my bills, I needed a new strategy.
I decided that when the market was doing well, I should pay my bills each month by transferring money out of investments to my savings account (where I pay my bills) as I had planned. But if the market wasn’t doing well, I needed another option. I would need to expand my cash in my savings account at my bank so that I could pay my bills out of that money. I decided to expand my “emergency fund” to several years' worth of expenses. I put this into a high yield savings account, typically 0.5% nowadays—not to plug any specific financial institution, but Citibank has a 0.5% option that’s pretty accessible (it’s not much, but it beats the 0.01% rate at my own bank). You can put up to $250,000 into a bank account and have it FDIC insured (and insure another $250,000 at a different bank, etc., until you have your cash buffer out of the market).
On good market months, I pay my bills out of my savings account and then transfer money from investments to bring that back up to $250,000. On months when the market isn’t doing as well, I just pay my bills out of my savings account. When the market rebounds back to its original high (next month, next year, etc.), I top my savings account back off to $250,000 again.
What’s my threshold for deciding if the market has dipped low? It’s helpful to know some history. Starting from World War II, a market correction of 5%-10% occurs on average once a year and typically rebounds back in about a month. A larger correction of 10%-20% occurs about every three years and typically bounces back in about four months. A 20%-40% drop is a recession. While I like to see a dip return to the previous high before withdrawing (and just pay my bills out of my savings account), I will tolerate around a 5% dip if the market doesn’t seem like it’s going to come back for a while.
Pulling that much money from the market when it is doing well and putting it in a bank is painful since bank interest is so poor. The market averages 5%-6% over the long haul, and inflation is typically 2%-3% over time. “Investing” money in a bank nowadays is under the inflation rate, so that money is losing value. It’s especially odd when I’ve always thought of market investments as long-term and not as a month-to-month re-valuation. Several years' worth of living expenses is a lot of money coming out of the market and into cash. How many years do you need? I’ve read 1-5 years, with three years being the median recommendation. The Great Recession of 2007 lasted five years until the market returned to its original pre-recession number.
You’ll have to decide your comfort zone. If I had to do it all over again (and actually retired when I originally planned to retire), I would have started shifting cash over earlier and more gradually over a five- to 10-year period before retirement, as it would have made the transition easier and also made for a more appropriate asset mix as I neared non-working age.
I’m not sure if I’m retired. I might go back to work clinically. I might test the academic waters elsewhere. I might start volunteering for Habitat for Humanity or maybe start my own business. I’ve always dreamed of becoming a Park Ranger. Or maybe I’ll sit home and write, take up photography and carpentry again, read a book for pleasure and help my kids with their homework after school. I can’t wait to see how it plays out.
If you've unexpectedly retired early, how did you go about paying your bills? Did you sell your investments? Did you expand your emergency fund? Psychologically, was it a difficult transition? Comment below!