Episode 71 – Rethinking early retirement: downshifting, not disappearing
Episode transcript:
[music intro]
Jenny
Welcome back to Fund Your Future with DRS. Today we’re diving into, a pretty popular topic around here, which is early retirement, and we get a lot of questions about this. Seems like all of the articles and podcast episodes that we put out are everyone wants to know how to retire early.
And we’ve invited Christine, who’s been working at DRS for quite some time now, who’s considering an early retirement. We’ve invited her to the podcast to tell a little bit more about your plans and how we’ve got to this place.
Christine
Thank you for having me.
Seth
Christine, I think when people think about early retirement or retirement in general, it’s like I need to sit on a beach, play golf all day. I need to not work for pay. And I know you and I became fast friends in the office because we talked about early retirement a lot and a desire to what we would refer to more as downshift. Not, go sit on a beach, but maybe have a different kind of job or a different career, or maybe the same job, but work part time.
Jenny
Just to kind of jump in and lay some groundwork. Could you tell us a little bit about how old you were when you first started working for the state?
Christine
I think I was 24 when I first became an official state employee, and 25 when I came to DRS. Based on that, I plan to retire or had planned to retire at 55. And now to Seth’s point, I’m considering a little bit more what retirement looks like for me and what it means.
Jenny
And do you mind sharing how old you are right now?
Christine
I’m 46.
Jenny
Okay, so about in ten years you were thinking, but then…
Christine
Yes, but when I was 25 and I came to DRS, retiring early to me meant just not working. And now that I’m nine years out, it’s a little bit. What does retirement really look like for me? Because it’s not necessarily sitting on a beach. And it’s really certainly not golfing. But how do I retire early and not just sit and exist, is where I’m at with figuring out early retirement plans.
Jenny
And then tell us a little bit more about how you kind of started thinking about early retirement. You said you really didn’t think about it a lot before you started working at DRS.
Christine
Well, I didn’t really think about retirement much at all before I came to work for the state, so I feel lucky that I found a job in the state because I’ve kind of lucked my way into having a retirement future that’s somewhat stable. I didn’t start at DRS and I don’t know how it is for all state agencies, but for the agency I began at once, I became a state employee.
I was handed all my here’s your official new employee paperwork, and that included my retirement paperwork and put it at the side of my desk and celebrated with my coworkers and friends like, yeah, I’m finally a permanent employee. And it wasn’t until I came to DRS and I was in orientation, where DRS started talking to me a little bit more about my retirement and the choices that were available to me while I’m changing employment.
That was kind of when I really started thinking about my future, and it was the first, like, conscious decision I made towards retirement in kind of selecting the tiered as I age, my contribution rate goes up and making sure that as I do have promotional opportunities and make more money as I advance through my career, I wanted to also make sure my contributions were potentially increasing with that to maximize my retirement where I can. Because as you know, I can’t change my contribution rate for PERS 3 any time I choose to. I can only do it when I change employers.
Jenny
Right. And before we started recording, you kind of were crediting the fact that you did end up in Plan 3 with this ability to possibly retire early. Was that a conscious decision? Do you remember?
Christine
No, I’m a default to Plan 3. I did not make a choice. But I do think it worked out well for me just because I have made a career with the state, and it’s going to lend itself to allowing me some early retirement options a little more. From my perspective, Plan 2 is great as well, but I think a lot of people fear Plan 3 when they hear, the pension calculation. And we don’t necessarily learn about the other benefits of Plan 3.
Jenny
That is true. I know we have a lot of DRS employees that are huge proponents of Plan 3.
Christine
I’m one of them.
Seth
You mentioned you started work as a public employee in your mid 20s and how it really forced you to start saving for retirement, before you probably normally would have. And that that might look different now for, a person who’s 25 today. And what sort of life expenses they have and kind of life circumstances. But can you talk a little bit about what your life looked like at that point?
Christine
Well, yeah. My now husband and I, we had two children at the time and we were as stable as people are, but we certainly weren’t not living paycheck to paycheck. Childcare is outrageously expensive, and all the things that come with raising children is really expensive. And then just living like rent and feeding yourself and those things are a challenge.
But I don’t think outside of DRS, or an employer where I’m required to contribute to a retirement plan, I would have seen funds available to begin saving for retirement in my 20s at all, really. Because there were always things that I needed money for.
Seth
Yeah, it’s something that we’ve talked about in a lot of other episodes about, you know, sort of this idea of paying yourself first and having that money be out of sight, out of mind, and saving for retirement almost by default. And if the money’s available for other things, retirement at 25 isn’t going to be a priority.
Christine
That’s right.
Seth
I think it’s similarly for people who are in their 30s or 40s, that there are always other things that feel more pressing.
Christine
Right. And let’s not discount having fun in life as well. Like, everyone wants to enjoy a little bit of their work. And retirement is so far off, it’s hard to feel excited about it when you’re early in your career and spending money towards that.
Seth
Can you talk a little bit about when that shifted for you in your mindset of thinking about like, “hey, at some point I am going to want to stop working and maybe I can do that earlier?”
Christine
So when I first started here, I was an office assistant and I wasn’t in the teacher’s unit, and I really wasn’t deeply involved in retirement at all. But I would say it’s about the time I became a retirement specialist. This might be dark, but I first was a death and disability retirement specialist, and that really gives you some insight into longevity and how life can take you by surprise sometimes.
And I really started thinking about retirement isn’t just the place you get to because you can’t work anymore. It’s supposed to be when you get to enjoy your time and you’re not bound by other people’s expectations and their schedules. What I’m really trying to say is, it was around the time that I started experiencing other people’s retirement, that I started considering it.
There’s the people who waited, and sometimes things didn’t work out in their favor. And then you also get to witness people who are retiring early. And one of the benefits of our job is we get to work with those people, and they come in and tell us about their plans and what they’re doing and how it became possible for them. So, I think once life felt a little more stable, I got to start thinking about what does life after work look like.
Jenny
Yeah.
Seth
It’s so true in that at DRS we have an opportunity to “practice retirement” isn’t the right word, but you get to see so many experiences and get that immediate feedback. Where I think for a lot of people, retirement doesn’t become real until you see your parents retire or there’s some trigger in your life where you’re like, “oh, that’s the retirement I want, or that’s the retirement I don’t want,” and we get to fast forward through that, or see lots and lots of different experiences.
And one of the things that has always struck me in working here is how many people retire before they want to because of physical disability or a poor work environment or their job is downsized. There are things that are outside of their control.
And I think one of the things that had always been important to me is trying to figure out how I could have control if something like that were to happen. Can I just walk away and feel secure and safe or secure and safe enough where I’m not reliant or dependent on this job? I’m curious what you’ve thought about doing after.
Christine
It’s a really great question. I’m kind of exploring that, and that has nothing to do. It’s things I really haven’t considered until my kids have gotten older. We have four children and the youngest and the oldest are 11 years apart. So, it’s been about 27 years that focus on children and what they like. So, I haven’t really learned what I enjoy doing outside of work or hanging out with friends.
How do I spend my downtime if I’m not required to go to work? So, I’m trying to identify hobbies that I enjoy. I’ve tried drawing and pottery, and my husband and I have recently started rock hounding. Which I’ve heard there’s like three things you do — rock hounding, birding, and I can’t remember, maybe it’s crocheting — as you get to middle age. And it’s trying to find those things, but also trying to find what do I want to go do in a day if I never have any obligations?
Am I going to sit around and stream TV? Because that’s what I did in COVID and that didn’t prove to be healthy. So, what am I going to do when I really have no obligation in the world? So, trying to make sure I have structure in place. You speak of watching other people retire and have that kind of guide what you do and don’t want.
And I’ve seen in my family, people who have thrived in retirement and done all the things they dreamed of doing, and then others who do sit around and watch life go by. So, trying to find out how to not be the person who sits and watches life go by has been my focus recently. I don’t have a solid hobby yet. Drawing is the only one that I consistently stick with. Pottery is a patient person’s hobby.
Seth
I really appreciate the comment about structure because I think that has been the thing I have struggled with as I’ve thought about what I might do after paid employment and just having a schedule and similarly, knowing what I know about myself, it’s really easy to go down unproductive rabbit holes what feel like days or weeks. And it’s not all about productivity. And this is one thing I certainly struggle with. Not everything I do has to be productive.
Christine
That’s something I’ve been recently thinking about. Like in those hobbies, do I have to produce something for something to be a concrete hobby? And then do I have to turn that hobby into a moneymaking thing, or can I just draw for the sake of drawing?
Jenny
Exactly. That actually reminds me, I read an article the other day about how as adults, we just need to have more play in our lives. We get caught up with the bills and the work and the stuff you have to do that it is important for your mental health to incorporate quote unquote play, which are the things that bring you joy, whether that’s drawing or going outside and birding or volunteering or whatever that is.
But I love that you mentioned that. It doesn’t have to be, “oh, I’m going to draw and I’m going to be become the best artist in the world, or that I’m going to sell this.” It’s just fun.
Christine
I may never show any of these to anyone.
Jenny
You don’t have to show it to anybody. But just for the sake of fun.
Christine
Yeah, yeah.
Jenny
I know during COVID, I ended up learning piano because that was something that I had wanted to do for a long time, and I found an app online and to teach myself, and I would just do that in the evenings for like 20 minutes after work. And it just, like brought me so much joy. Like I didn’t even want to perform in front of anybody. Yeah, but I just loved doing it and it just made my heart so happy.
Christine
Our daughter learned piano and guitar during COVID and continues, but also self learning, and I don’t know if anyone will ever hear her play either instrument outside of the people who live in the house.
Seth
It’s interesting how both of you brought up COVID, when many of us had more free time on our hands. It did start to feel a little bit more like retirement or like, how am I going to fill this time? Like it’s so easy to just go through day by day, week by week, month by month and kind of have a routine.
And I think retirement in general for people, whether that’s early retirement or at a later age, it’s just such a huge life shift in your routine. We’ve talked a lot about what you’re going to do to fill that time, but I know one of the things Christine, you and I have talked about is as you downshift into retirement, practicing those things or exploring what those things could be. Do you have additional thoughts on work in retirement?
Christine
I don’t know if I could go from straight working to straight retirement and have enough structure to thrive, if you will, in retirement. So, I would see it more as a downshifting potentially, and we’ll see when I actually get there, what’s going to occur over the next nine years. But I did learn in COVID, it wasn’t how I want my retirement to be, and I don’t know if that’s because we were in a lockdown or if I naturally would have been in a self-imposed lockdown, but I would like to have this structure ahead of time.
So trying to figure out what those days look like, and then I don’t know if I want to live where I live in retirement and what that might look like, and practicing being in the places more than just a weekend or on holiday, being there to see if it’s a place I really enjoy living, or if it’s just because it’s a really nice vacation.
Jenny
We’ve talked a lot about “What are your going to do with your time?” But I also want to just touch briefly on kind of the minutia of planning for an early retirement. You had mentioned that you have Plan 3. I’m assuming you have a DCP account as well?
Christine
I do, yeah.
Jenny
And do you have an IRA?
Christine
That’s it for my retirement plans. My husband has a 401K. And then we have some outside assets.
Jenny
Yeah. But you obviously have four children. That you’re now planning to put through college.
Christine
Well, no. I don’t know that any of my children will go to college, but three have graduated. Our third just graduated this year, and then in two years our last, will graduate. But even without college, there is helping people navigate into the adult world. It’s not cheap.
Jenny
Oh, yeah, absolutely.
Christine
And then I also feel like there’s certain things I want to make sure I do. Like, I can keep my kids on my insurance till they’re 26. And I feel like I want to do that for them because I want them to have medical insurance, and it can be expensive and prohibitive if you’re just like getting your financial feet under you.
And then I always want to feel like if they encounter hardships in life, they have a place to land. So, if I don’t want to live where I live, do I have to have the same size house wherever I land? And then beyond my children are other family members that are elderly and have not planned for retirement and needed to retire early.
How much financial obligation do I have to them emotionally and I don’t even know what word I’m looking for. But what is someone’s obligation to financially support a family who hasn’t ended up in a situation where they have adequate funds to survive?
Jenny
That’s a really great point, because I think that is a very big concern for a lot of people when they’re thinking about an early retirement or they have siblings or parents who maybe haven’t saved, “am I going to have to financially support them?” And what kind of conversations have you had with your kids and your spouse about that?
Christine
With my kids, not many. But with my spouse, we have discussions about what our obligation is to other adults in our life, often because we don’t always align exactly there. But trying to understand or even predict what your financial output might need to be if you incorporate support for others is the kind of gray area. So, I feel like we’re going to have to say this is how much we can support others in a financial way if needed. Otherwise, you can sleep on the couch. Yeah.
Jenny
So, you’re really talking about having a budget of how much can we put towards helping out family members.
Christine
And not my kids so much, more the older people in my life that have no retirement and nothing to fall back on outside of Social Security.
Seth
Yeah, I feel like there’s a common topic as well. Children, I feel like I’ve had the conversation more around children than where it’s such an unknown in the budget. Like what is that predictable dollar amount? I know how much my mortgage is going to be, or I know how much my car insurance is, generally speaking. But those unknowns of either health care expenses for or elderly folks in your life, or, you know, housing expenses or other expenses for younger folks in your life, it is a real challenge.
And one of the things I always fall back onto is you first have to take care of yourself, like you have to make sure that you are in a stable place so that you can possibly provide some of those things. But I also thought your comments about moving really resonate with me. Like, where is the right place to live in those circumstances, especially as families spread out and trying to figure out which parts of your family are able to be more responsive to or responsible for.
I think it’s just a really difficult challenge. And how flexible can you be, especially as you’re thinking about early retirement.
Christine
Those are the things I think about now. I know if I retired at 55 and my husband retired, assuming we’re at the same health level, we are now and nothing alarming has occurred in our life, we would be fine with our income and our needs. So now the question just for me is what about the people around me that I love and feel some sense of obligation to help out if needed?
Jenny
Yeah, which is a totally valid concern.
Christine
That’s been kind of the most challenging conversation we’ve been recently having. What’s the number that you put on that? I don’t know.
Jenny
And then also kind of get back to where you were with your kids. What kind of conversations have you had with them as they’ve been growing up thinking about their financial future? Kind of all those like college versus not college conversations.
Christine
As many as young adults are willing to hear from their parents. At this point in time, I think I have one child who has a little bit more of an interest in it, but he also is now working for the state, and, seems to be planning for retirement the same way I did, whether by choice or accident, I don’t know.
Seth
You said something about feeling confident with your budget at 55, or at an early retirement age. Is that mostly because you have the security of a pension and maybe an annuity from Plan 3? I think one of the things that make people concerned about early retirement is, I never know if I’m going to have enough. And what makes you feel confident?
Christine
Well, I do have a lifetime benefit, so that certainly makes me more confident than if, say, it was just my husband and I in his 401k. Because then you have to try and predict how long that money will last and how long you might live. But it’s also choices that I think we make. We don’t we don’t exist like you do.
And we certainly haven’t lived a frugal life throughout our time. But we also don’t spend a lot of money on new cars and where we can buy a car and just pay it all out right, we’ve chosen to do that, but we also buy used cars. And although I don’t know if I want to stay where I’m at, we will have our house paid off before retirement occurs.
And if we do decide to relocate, I think we’ve decided that any sale of our house would need to buy the new house because we want to limit as much of our output as we have control over. So I think that’s also making me feel confident that we’ll be able to, if it’s just us, and without consideration to others.
Seth
Yeah, it sounds like you have a really good grasp of what your standard fixed expenses would be.
Christine
Part of it is being a consumer. Seth, you and I have talked about this. Like I’ve recently stopped using Amazon altogether. And just that change in behavior alone has changed how much money is leaving our bank account. Because I can’t just impulsively say “I want that thing, I bet Amazon has it.” Because they do. And it can be here today or tomorrow.
Maybe it’s because I grew up in the 90s, but I remember a world where I didn’t have all these things that entertain me right now, and I feel like I was equally as happy and entertained. So I’m starting to think about what are the things that I might enjoy, but don’t really add value to my life. Streaming services, for one.
Yeah, I don’t think it’s healthy for me to have so many choices and things to watch.
Jenny
Yeah, I love that you brought that up about focusing on what really adds value to your life. And I’ve kind of done some my own personal reflection in the last couple of years as well, and really trying to focus more on, like experiences versus things. We do enjoy going out to dinner and we enjoy going to movies, but you know, we don’t buy each other a lot of big gifts for birthdays or Christmas or things like that, and kind of figuring out what are those important things to you.
Have you and your spouse met with a financial planner at all in regards to planning for retirement?
Christine
I don’t know that we will. He keeps a pretty good log of finances, and I hadn’t considered a need for a financial planner in my life until I was actually reading your questions. And I guess I’ll ask either one of you. What would you see the value add in a situation where your pension is pretty clear and defined?
Seth
And yeah, I’ve been thinking about that a lot lately. What sort of system shocks? If Social Security is only 75% of what I’m projected to have, like what additional income might I need from that and planning that out? But there’s also a lot of really good software available and websites. I’ve been playing around on a site called Boldin.com. There’s a couple of other similar sites where it works in a similar way a financial planner would run thousands of scenarios for you based on the different savings you have.
And I don’t know if I’m planning on converting maybe as much of my savings into annuity options that you might be considering. Those are still things I’m weighing. As far as early retirement goes. I would be curious about what things am I missing? Things like insurance and or life insurance or long-term disability insurance? Or are there things I’m not thinking about and what other savings or vehicles I should be considering?
Jenny
Well, Christine, I just want to thank you so much for coming on the podcast and kind of opening up to us about your life. And I think the fact that you have four children and that you’re still thinking about an early retirement is extremely inspiring to a lot of people.
Christine
Just on the kid thing, I just want to say that there’s a few things that I think I’m lucky in that maybe isn’t available to other people who had four children. One of those being is my husband in his job, had the opportunity to take a different position for less money at the time to work an alternate schedule from me, so that when we had, our youngest two, we weren’t having a two-year-old and a newborn in daycare. Because at the time, that would have been my salary.
So, we didn’t have the daycare output. But the sacrifice, of course, was time with each other because for 12 years we really [only] saw each other on weekends and days off. oh my gosh, But, that combined with so far 3 to 4 have not chosen college as their path, are probably the main reasons why early retirement might be feasible for us.
We had more access to our funds than families who have to involve childcare.
Jenny
Yeah, absolutely. And I think that’s important to acknowledge, too. We understand that there’s financial struggles out there.
Christine
You know, kids are expensive.
Jenny
Yes, absolutely.
Christine
The amount of money I might have without children, I won’t ever try and calculate because I love them and I don’t need to know that number.
Seth
Yeah. But I think, Jenny, to your point, it is really important to understand that there are many different alternatives. And talking with each other and coworkers and friends and family of, “hey, I’m thinking about this. Have you considered this?” It is one of the things we’re more fortunate at, I think sometimes at DRS, to have these conversations about [and] an exposure to more of these topics.
Jenny
Absolutely. Well, thanks, Christine.
Christine
Thank you.
[music outro]
Disclaimer
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