Mission Accomplished

Howard Rohleder

I JUST GOT A RAISE from Uncle Sam—and relief from one of early retirement’s biggest unknowns.

In December, when I turned age 65, I swapped my bronze-level Affordable Care Act policy for Medicare plus a Medigap policy. My wife was already on Medicare. Compared to 2020, when neither of us had Medicare coverage, our monthly cost today for health insurance is $684 lower.

My calculated risk has paid off. As a young adult, I set my sights on early retirement. In 2012, at age 54, I pulled the trigger. The question I struggled with: Would there be enough for our remaining retirement years once I hit age 65?

The biggest risk to our early retirement was getting and maintaining health insurance. Thanks to the Affordable Care Act, we had coverage. But an unexpected medical diagnosis could have drained our finances and compromised our lifestyle.

While I was still working, I plugged $30,000 a year into my early retirement budget as a worst-case estimate for health care costs. The reality wasn’t quite that bad. With health insurance premiums and out-of-pocket costs, including the dentist and optometrist, our average cash outlay over 10 years was just under $20,000 a year.

Now, 10 years later, I have reached “normal” retirement age. We aren’t bankrupt nor has our future standard of living been compromised. In fact, due to 10 years of a mostly surging stock market, we’re well ahead of where I expected us to be.

What did we do right? The quick answer is save, save, save. Thanks to extra-principal payments, we made our last mortgage payment in 2000, when our oldest graduated from high school. We finished paying for private college for our two children in 2007, the year our youngest graduated from college. From then until 2012, we accelerated our regular savings, dollar-cost averaging into both taxable and retirement accounts.

Luck played a big role. Many factors that I couldn’t or didn’t plan for came together to make early retirement a realistic choice. While many in our generation were delaying marriage and children, we plunged forward and married when I was age 22. Our oldest was born when I was 24 and our youngest when I was 26. I remember times when I felt overwhelmed by the responsibility, but it made me put a premium on navigating my career and paying the bills. As a result, we were done with the children’s college expenses the year I turned 50.

In a 30-year career, I had four employers and only moved twice. This is unusual in hospital administration, where changing jobs is one way to advance and often necessitates relocation. I was fortunate to have no periods of unemployment, which weren’t uncommon among my peers. We lived in communities with a very low cost of living. These factors held down expenses and avoided setbacks in our wealth accumulation.

We have been married for more than 40 years and our children have been launched successfully into the adult world. My wife didn’t work outside the home, instead focusing on raising the kids. Private college was expensive, but both children finished in four years with degrees that led to good jobs that have kept them employed.

The Great Recession’s bear market ran from 2007 to 2009, with the S&P 500 dropping 36.5% in 2008 alone. I was in my peak savings years, and all those retirement contributions bought stocks at depressed prices. This gave a boost to our retirement assets when the market rebounded. In my first full year of retirement, the S&P 500 returned 32%.

After retirement, I lucked into a part-time consulting gig that lasted two years and covered a large part of our normal living expenses during that period. This allowed our investments to grow, when we’d otherwise have been tapping them for spending money.

When things unexpectedly fell into place at work, one of my colleagues would comment that it’s better to be lucky than good. As I look back, there are many places an unlucky setback could have derailed our plans. But I also believe that we make our own luck. I couldn’t control the timing of recessions, but I kept plowing money into stocks and didn’t sell out at market bottoms.

I positioned myself to advance in my career and I was prudent in areas where I had control. Things still could have gone south, but they didn’t.

The past 12 months have hurt, with our portfolio dropping 16%. Fortunately, this came at the end of 10 years of early retirement, not at the beginning. I used 2022’s “opportunity” to harvest tax losses, convert money from my traditional IRA to my Roth IRA, and to buy depressed stocks and bonds.

Going forward, we’re in good shape. With enrollment in Medicare and Medigap, not only did our monthly premiums drop, but there will also be savings due to better coverage. My Affordable Care Act insurance plan had a large deductible and limited prescription coverage. Over the past five years, we have averaged about $4,000 a year in out-of-pocket medical bills. If we’d had Medicare plus Medigap, much of that would have been covered. Even our small prescription costs will go down, thanks to Medicare Part D. And my Medigap policy comes with SilverSneakers, so my monthly payment to the YMCA goes away.

Six years ago, I took a lump sum settlement on my defined benefit pension from my primary employer. I have now started a small pension from an earlier employer. I expect to start Social Security in 2025 at age 68.

Between the reduced health care costs, and the new income from the pension and Social Security, any risk of outliving our savings is greatly reduced. At this point, I can breathe easier. We’ll still need regular withdrawals from our investments, but it’s well within what we can afford. Mission accomplished.

Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.

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