Editor’s note: Annoyed Nomad is generously sharing his process and insights with the community. This is in no way meant to be financial advice. As with all things, educate yourself before undertaking any action.




A bit about me:  I’m 58 years old and married (my wife is 57). I met my wife about 13 years ago. This is a second marriage for both of us and we have three adult daughters between us (mine is 32, hers are 28 and 26). My wife trusts me to be the lead on financial planning.

We retired recently – our last day of work was March 27, 2020. The retirement date was selected and announced well before the coronavirus panic started in the US. And yes, it was during one of the biggest drops in the stock market.

Our retirement goal was to get there as early as possible without having to give up quality of life along the way. And to have enough retirement funds to continue living a high quality of life. A main component of “quality” for us is travel. We’ve traveled various places over the past 13 years and want to kick it up a notch in retirement.

Many of our friends and coworkers have commented that we’re retiring “early” since we’re still in our 50s. But I wouldn’t consider it an extremely early retirement, not like the FIRE movement (I have read some of the FIRE examples). Also, as the stock market took a plunge, people asked us if we needed to reconsider our plans and continue to work for a while longer – maybe even another year. A month ahead of our retirement date I responded confidently that the stock market drop wasn’t a concern. As we got closer to the date and the stock market went further down; we saw the way the government was hurting the economy with their pandemic response; and it all appeared as an unprecedented situation, we definitely had some trepidation. I rechecked the numbers and my estimation spreadsheet a number of times in the final weeks before the date. In the end, we held to plan. At the peak of the stock market we had about $2.3 million in retirement savings. On our retirement date it had dropped below $2 million, which was scary. Thankfully, the market has rebounded somewhat and we’re back above $2 million.

Why did we hold to plan? Well, psychologically we had been counting down to that retirement date for months. We had each done what we could to prepare our employers and our customers for our departure – giving two months advance notice to allow for a smooth transition. When we gave that notice, something was triggered in our brains that made it painful to think it might not happen. We didn’t want to “not retire.” But more importantly, I had a plan for market downturns. I just didn’t expect to need to use it at the beginning.

Our Retirement Plans

Keep our house in the Dayton, OH suburbs. Our daughters and three granddaughters all live in the Dayton area.
Spend January through March in some warmer climate. We have a condo reserved in Venice, FL for Jan-Mar 2021.
Travel around the world and the U.S. We have $30,000 in our annual budget just for travel (about a third of it is going to be used for the Florida condo).

Our Retirement Approach


Pensions are NOT a significant portion of our plans. My wife has a modest $10,000/year pension from a previous employer that will start at age 60. I have an even more modest $741/year pension from a brief time with one employer that will start at age 62. I often refer to my pension as “beer money.” We expect to rely mainly on our investments for retirement income.

Low Cost Index Funds

We only own about $5,000 in individual stock shares. I was given some company stock by my father as a gift in the 1990s and my wife bought about $200 of shares at a discount price when her employer was spun off from the parent company. We don’t even count it towards our retirement goal-planning. It’s “extra.”

I don’t feel confident enough to know which stocks are the “right” ones. Who wants to experience an Enron situation? Before I met her, my wife actually lost some significant savings when her company’s stock became worthless when the company went bankrupt due to CEO corruption. So, mutual funds are a good way to spread our money across many companies. We’re basically invested in capitalism.

Index funds vs. actively managed funds. Since actively managed funds have higher management fees than index funds, they have to be able to out-perform the index funds to be worth the extra cost.  While there are managed funds that can do exceptionally well (at times), like the ones who shorted the mortgage-backed securities ahead of the 2007-2008 financial crisis, I’m not confident in knowing which ones will do well. Warren Buffett’s famous $1 million bet that an S&P 500 index fund would out-perform a firm’s actively managed funds helped convince me that index funds were the way to go.

Total Stock Market Index Fund.  I also don’t have any confidence in which sectors (e.g., Energy, Financial, Utilities, IT, etc. or large, medium or small businesses) of the stock market will do well. In fact, some sectors do well one year and then have a large drop in value the following year. So I invest in “Total Market” index funds. If a total market fund wasn’t available in our 401K, I’d pick a combination of an S&P 500index fund and Mid-cap and Small-cap index fund(s).

Bond Index Fund. When I chose to invest in bonds, I took a similar approach, picking a total bond market index fund or something as close to it.

ETFs. I started with low-cost index mutual funds and they’ve done well for me. I understand there are equivalent ETFs (exchange-traded funds) that might even have lower costs. I intend to check into these as I go forward.

Dollar Cost Averaging

The market has ups and downs and dollar cost averaging takes advantage of those ups and downs.

For our 401K and IRA contributions, we would determine the amount our annual budget will allow us to contribute. For our 401Ks we divided the annual total by the number of pay periods and set up a payroll deduction for that amount. For our IRAs we divided the annual amount by 12 and then contributed that amount every month.

I also took a dollar cost averaging approach when reinvesting cash during a transfer. I’ve worked for a variety of companies and when I left a company, I would do a direct transfer of my 401K money to my Vanguard IRAs. When doing so, it’s converted to cash within the 401K before transfer and is put into a cash fund/account within the IRA (usually a money market account/fund) and you have to direct that cash into your investments. I’ve learned to use the Dollar Cost Averaging approach when doing so – invest that cash in equal amounts over 6 to 12 months.


Back in 2009 I started tracking where every dollar has been spent.  That has helped me to create a realistic budget from year to year, refining the numbers based on actual experience. Having a realistic budget for our retirement years was a critical step to being ready for retirement. Our retirement annual budget is about $94,000 before income taxes (which will vary based on the income source). That includes the $30,000 for travel mentioned above.

The budgeting work was a precedent to the creation of the “big-ass spreadsheet.” I created a spreadsheet to forecast how our money would last in retirement. The goal was to have enough to cover our desired budget until age 100. I built the spreadsheet using conservative numbers. I assumed the following:

3% inflation in expenses
4% growth in our retirement funds (the expected growth of a 60% stocks/40% bonds portfolio is 6%)
That we will wait until age 70 to take Social Security (yes, I included SS in my plan; I expect it to be there for us)
2% growth in Social Security (while I expect to get it, I don’t expect it to keep up with inflation)
We will draw mainly from our “traditional” (taxable) accounts at first, then from our Roth (non-taxable accounts). This is because the taxable accounts will be hit with Required Minimum Distributions (RMDs) at age 72. I’m trying to reduce the taxable accounts ahead of the RMDs.

We hired a fee-only financial advisor we found via the Garrett Network last year to cross-check if the conclusions from my spreadsheet held up. She ran multiple monte carlo simulations which showed an 85-86% likelihood of still having retirement capital remaining at age 96.  That was reassuring.

Get the Big Costs Done Before Retirement

Mortgage: I refinanced my mortgage in 2012 to a 10-year loan at a rate under 3%. Back when I did that I thought I’d retire in 2022, about when the loan was paid off. Even though we retired ahead of that plan, there’s no need to pay off the loan early since the interest rate is so low. I feel that my money is better invested in retirement funds.  But having less than two years of mortgage payments left helps ensure our expenses in retirement are low.

Home Improvement: We’ve done a lot to improve our house, including:  remodeled master bath, remodeled kitchen, refinished hardwood floors, new furnace & AC, new 30-year roof, new driveway, upgraded electric panel, new water heater (tankless!), finished basement, a new deck and some landscaping work. We plan to be in this house for at least the next ten years, so it was worth making the improvements. We also have confidence that no really major home expenses should surprise us.

Car payments:  My car (a 2013 Kia) was paid off a year ago and my wife’s (a 2015 Subaru) will be paid off in a few months. We bought both our cars used in 2016 and 2017, and we tend to keep our cars for about 10-12 years (our previous cars were a 2003 and 2004).  The intent was to have reliable paid-off cars for the first 8-10 years of retirement.

Ratio of Stocks to Bonds to Cash

More than 10 years ahead of retirement: Over 10 years ago, I was probably about 85% invested in stock funds and was told by a financial advisor I was a very aggressive investor. If I could go back and give my younger self advice, it would be to use the remaining 15% to buy stock funds when the market dipped. To anyone who has over 10 years before retirement, I would recommend putting your retirement money into stock index funds. Maybe keep some of it, say 10-20%, in bond index funds (or maybe a cash-equivalent fund) if you think you’ll try to take advantage of market dips to buy some more stock funds when stocks are cheap. If you don’t feel like you’ll have the time or desire to buy during the dips, then I’d recommend 100% into stock index funds.

I remember a conversation with a work colleague back when we were both in our 30’s. He was putting a large chunk of his 401k money into a Treasury fund. He was worried about the stock market’s volatility.  Back then I didn’t think he was smart; today I know he wasn’t smart.  Here’s an article about the ten years from one of the “worst” times to have invested, August 2007. It shows that even though it took over 4 years to recover the losses from the Financial Crisis of 2007-2008, after 10 years your investment would be back on track. And if you were dollar-cost averaging your additional contributions during the down years (and/or using your bond money to buy cheap stocks), you’d be in a good position.

10 to 5 years ahead of retirement: During this period we had our retirement funds invested in about 75-80% stock funds and the remainder in bond funds. I would recommend that same range, with the goal of being about 75% at the tail end of this 5-year period.

Within 5 years of retirement: During this period I started adjusting our ratio to about 60% stocks and 40% bonds shortly before our retirement date. When there were new highs in the stock market (thank you, Trump?) I converted some of the stock money to bonds until I had attained the ratio. What if someone is in that period now, with a down market? The down market may make that adjustment for you; I’ve seen our ratios change as a result of the stock market dip (further addressed below).

In retirement: Okay, so frankly, I’m still figuring out some of the details. The goal is to have 60% in stock funds, 35% in bond funds and 5% in cash-equivalent funds. It’s kind of a “bucket” approach to retirement, but I haven’t created separate accounts for each bucket.  The 60/35/5 distribution is preparation for a down market. The 5% cash is expected to cover about a year’s worth of expenses during a highly volatile market in stocks and bonds. The 35% bonds are expected to cover 4-6 years of a down stock market. Yes, the bond market can also go down, but the worst one-year performance of the Vanguard Total Bond Market fund was -2.15%, which is a lot smaller loss than the stock market can experience; and the worst 3-year return was +1.33%. I plan to rebalance over time to attain the 60/35/5 balance. As I said above, I aimed for a 60/40 stock/bond ratio shortly before our retirement date. I achieved that. I’m planning to roll over my 401k to my IRAs and when doing so, use enough of that money to achieve the 5% cash in the accounts. This made sense since the money is converted to cash before the transfer.

We had saved enough cash in a bank money market account (outside of retirement accounts) to cover expenses for 2020, so we’re fine for this year and it gives me time to figure out some details. I mentioned above about the down market adjusting the stock-to-bond ratio of our investments. Since the stock funds went down in value and the bond funds didn’t drop much, our ratio actually changed to about 58% stocks vs. 42% bonds. So in early April and again in early May I converted $10,000 of bond funds to stock funds. I figure I’m getting the stocks at a low price and it’ll pay off in the long run. Even after the $20,000 conversion I still have enough in the bond funds to cover 4-6 years.

Tax-deferred vs. Roth Accounts

I’m a huge fan of the Roth option. If you’re young, I believe you should be putting your money into a Roth account. Many companies offer a Roth option in their 401k plans.  Roth accounts became an option in 1998, so it wasn’t available to me at my youngest investment years. I’ve tried to maximize my Roth accounts over the last 20 years (my wife has also for about the last 12 years), but they still only represent about 23% of our retirement funds. The head start in compounding years favored our “traditional” retirement investments and they’ve grown so much larger.

The trade-off between a traditional account vs. a Roth account is basically reduced taxes of today vs. tax-free in retirement. The money you put into a traditional account reduces your taxable income this year. The money you put into a Roth account is taxed this year, but tax-free in retirement. There can be good reason to still do traditional investments:

Years ago, one of our employers had the Roth option in the 401k, but their 401k match was based on the traditional amount invested by the employee, so we made sure to maximize the match before investing in the Roth.
If your income gets high enough, you will no longer qualify for a Roth IRA.  We actually hit that limit shortly before we retired.  In some the years we made traditional 401k contributions to reduce our adjusted gross income so we could still make Roth IRA contributions.  However, there isn’t an income limit on how much you can contribute to a Roth 401k, so you could just switch to that if it’s available to you.
You may need to keep your adjusted gross income down to a certain level for other reasons.  It could be worth it to avoid some other taxes/fees.

You can use a Roth IRA as an emergency fund. Many financial advisors recommend you maintain an emergency fund of readily available money – usually to cover 3-6 months of expenses. I agree with having an emergency fund and you can find multiple articles online advising on how to calculate the correct amount. But having money in a savings account, even a money market account, isn’t going to be growing very fast. Once I had a Roth IRA for five years, I treated it as my emergency fund. That’s because after you’ve had a Roth account for 5 years, you’re allowed to access the contributions penalty-free (even before age 59.5). The contributions are what you put into the account. You can’t access the growth without a penalty before age 59.5. That allowed me to always maximize my retirement contributions in my 401k and IRAs and still feel confident I had emergency money available. I was lucky that I never had to tap into it.

A Roth account provides flexibility in retirement. Having tax-free retirement funds is going to help with our expenses. Because we’re retiring prior to Medicare age (65) and we don’t have health insurance available via a former employer, we’re going to get our health insurance via HealthCare.gov (yes, Obamacare). There’s an income“cliff” where the government tax credits go to zero and the insurance premium increases about $1000 per month. We intend to draw from our traditional accounts to an amount below the subsidy income limit ($68,960 for a family of 2 in 2020) and then use Roth funds to cover the rest of the year’s expenses.

One more thing: Health Savings Accounts (HSAs)

Most of my employers didn’t offer an HSA-eligible health insurance plan, but my wife’s did. Between the two of us, we have about $25,000 in HSA accounts. HSA money has to be used for qualified health expenses, but health costs are expected to be significant in retirement years, so I have no doubt that we’ll be able to use those funds. The beauty of these accounts are that they are tax-free when you contribute to them and tax-free when you withdraw from them (for qualified expenses). If you’re healthy and selecting an HSA-eligible health insurance plan won’t negatively impact your current budget, I’d highly recommend selecting it and contributing as much as you can.