Random Ramblings

Instead of responding to individual questions, I’m going to write one post about our journey to being sufficiently well-off in early retirement. First off, let me define early retirement: I retired six weeks after my 57th birthday; BD, who retired on the same day, was six months short of his 60th birthday. So this isn’t retiring at forty, but nor is it retiring at sixty-five or seventy.

Secondly, let me say that I know we were fortunate in many ways, and this is simply our story. Some of it was luck, and some of it was planning.  I don’t want to sound smug, or patronizing, or that I’m telling anyone how to do this. This is simply how it played out for us.

Thirdly, if you don’t want to read the story-telling version, and just cut to the chase, I recapped in the third-last paragraph!

BD and I met in university in 1978, in my second year and his last year of our respective undergraduate degrees (Now, for both the sake of my non-Canadian readers, and those younger than us, let me explain two things. One is that Canadian universities all cost more or less the same for undergraduate programs; there are not the private universities costing multiples of ten thousand a year vs. less-costly state universities that there are in the U.S.  Secondly, when we were in university, tuition was a smaller percentage of a year’s costs than it is now, so overall university wasn’t as expensive.  We were, I seem to remember, spending about $1000/yr on tuition each and a few more thousand each to buy books and to live, versus about $6000 a year on undergraduate tuition in Canada now.)

Both BD and I had been brought up by frugal immigrant parents. Neither of our sets of parents paid for our university educations. Both of us took a year off to make money before going ahead with university. He’d had very good factory jobs in his year off and in the summers and had no student loans at all; I had one smallish loan from my first year and after that had been able to make good enough money in the summer to not take out any further loans, although I did qualify for some grants, and both of us for some scholarships. BD had enough money saved, in fact, to buy a car (used and very small) at the end of his last undergraduate year; I had gone home for the summer (since I had a very good job waiting) and he wanted to be able to come to see me – and he lived 200 miles away.

We lived for the next six years on part-time work and graduate student stipends, and with hand-me-down furniture and little else. But all our friends were in the same boat, so it was just normal, and we had a lot of cheap fun playing cards, occasionally visiting somebody’s parents’ summer cottage, and going for $0.99 all-you-can-eat spaghetti at a local chain on Tuesday nights. But we actually also tucked away a little bit of money over those years into a special savings program that existed at the time to allow young people to save for a house and gave them a tax break. So the day we learned the little house we were renting had been put up for sale, we could actually, just, buy it, with a 95% mortgage. But, the mortgage payments were cheaper than the rent had been, and we were gaining equity in a rising market.

Grad school ended with a Ph.D for BD and an M.Sc. for me — we defended our theses two weeks apart – and then we did research at the same university for a few years, our tiny salaries being paid from successful grant applications we had written. (Talk about incentive to write a good one!) Somewhere around turning thirty (me, not BD) we realized while this was lots and lots of fun, it wasn’t exactly stable and the long-term prospects didn’t look rosy. So we did some hard thinking and talking about what to do next.

We already knew we didn’t plan to have children. We wanted to do something useful for society, but that would provide us with reasonable salaries and a decent pension. We weren’t interested in getting rich or being entrepreneurs. One of the things we’d both really liked about grad school was being teaching assistants – teaching the seminar or lab portions of classes to undergraduates. High school teaching (we both couldn’t see ourselves with smaller children) ticked all the right boxes.

(Another explanation here…the vast majority of kids in Canada are in public schools, not private or charter schools; in Ontario (all I can comment on) school districts pay their teachers respectably well once you get to the top of the salary grid, there are only minor differences in salary from one school district to another, and the pension plan is defined-benefit:  a guaranteed pension based on years of service and salary, with built-in cost-of-living increases. The result of a respectable, respected (mostly), and well-compensated education system is that is extremely difficult to get into a Faculty of Education to get your teaching degree. You need very high marks, lots of teaching-type experience, and, probably, luck.)

But lucky we were (plus all that grant-application writing stood us in good stead) and in consecutive years (we couldn’t afford to both go in one year) spent the requisite year becoming qualified. And got jobs, with the same school district.  So finally, at thirty-three and thirty-one, we entered the world of real salaries.

So, from 1991 to 2015, we taught – or to be precise, BD taught all those years; I taught for ten and then moved into a regional central-office position, but still directly involved with students and teachers. The pension plan took 13% of our gross salaries, and we put away on top of that every penny we were legally allowed to (it wasn’t much) into Canada’s Registered Retirement Plans, plus we paid off our mortgage by using weekly payments as well as yearly lump-sum payments. By 1993 we were free of mortgage debt, and that was the only debt we had – and we did it by not changing our grad-school life style (except for buying some teaching clothes) for those first two years.  We even only had one car – BD dropped me off at my school and then drove on to his, fifteen miles further south.

Then we took another look at finances and our lives. We sold the little house for twice what we’d paid for it, bought a fixer-upper closer to our schools for double the money we’d got for the little house – but we put 50% down on it, so the mortgage was easy to carry, and a second (used) car. Until this mortgage was paid (it took six years) all our holidays were in tents – some of them for six weeks at a time. BD had learned woodworking and construction from his father, so he (with me as barely-competent help) did the vast majority of renovations to the house.

That first car BD bought back in grad school was a tiny sub-compact, and we’ve never driven anything else except for one – my first used car, a $1000 Chevy Impala I drove for four years. Those sub-compacts – Civics, Escorts and Accents – were all driven to 300,000 km before being traded in; they’ve taken us up the gravel Dempster Highway through the Yukon and Northwest Territories to the furthest northern point you can drive in Canada, and across the US three times (and not on interstates), loaded with camping and hiking equipment.  A standard transmission, decent tires, and front-wheel drive will take you most places in North America.  And we’ve never paid more than $15,000 for any one of them, even new.

We never ever carried credit-card debt, but we put everything possible onto our credit cards in exchange for rewards:  first the Driver’s Edge rebates, which paid for big chunks of several of our cars, and more recently, once we began travelling more, a frequent flyer program which has taken us to many many places.  It’s worth paying $150 a year for a card that means you can both fly to Australia for just the taxes, while it pays for the insurance on the rental car while you’re there, and recompenses you for all your expenses when a delayed flight means a missed connection.

So, when my health took a turn for the worse in 2014, and I realized the stress of my job wasn’t helping anything, we discussed options again, and decided that early retirement was the best thing for me. It didn’t seem fair for me to retire if BD didn’t, so, we crunched numbers and decided we could do it.  The mortgage had been paid for fifteen years; our rural taxes are low; and we’d never forgotten how to be frugal.  What we were giving up was travel, but we had chosen not to wait for retirement for that – we’d seen too many people get to retirement and get hit by heart disease or cancer or diabetes, so we’d spent the last fifteen years travelling, every chance we could – spring breaks, Christmas holidays, summers.  We’d been to all seven continents, most of them more than once.   We had chosen to live on BD’s lower salary, and use mine for savings and travel.  And our combined pension incomes would be almost exactly equal to BD’s salary.

(Now, again, remember, this is Canada.  Health care is free (well, no, but paid for from our taxes), and I am alive and healthy today because it’s also, in my experience,  excellent, as are all our other friends and family who’ve been hit by the nasty and sometimes obscure diseases of middle age.  So health care costs, such a huge concern and expense in some countries – don’t significantly enter into our calculations. That is not to be underestimated.)

Here’s the recap. We got here, after only twenty-five years of actually working at real jobs with real salaries, by the following means:  we never lived above our means, and when we had to defer something – university, a car – we did.  We targeted employment in a field that would be personally rewarding but also pay us sufficiently and had a defined-benefit pension, choosing the long-term view over the possibilities of higher pay, bonuses, or entrepreneurial success (and were lucky enough to find employment in it.) We use credit cards to gain rewards that have real value to us.  As our salaries grew, we didn’t give in to ‘life-style creep’, but instead put the money into the mortgage and retirement savings, again deferring expensive travel until we could afford it.  We didn’t buy “starter” houses with granite and ceramic tile (nor do we have those things now) but instead bought older houses that needed work and put a lot of ‘sweat equity’ into them.  We still drive sub-compact, fuel-efficient cars.

We took a pension hit by retiring early, especially me, as I retired two years before my eligibility for a 50% unreduced pension, based on a formula of age plus years of service.  BD took a much smaller hit, as he was actually eligible to retire at the end of this year. As well, our pensions, by our choice, carry 75% survivor benefits and are set so in the first ten years of pension benefits, the survivor gets 100% of the deceased’s pension to the end of that ten years. We chose those benefits, and they cost us a bit each month, but we wanted to ensure whoever outlived the other had a good quality of life.

This isn’t going to work for everyone.  There is an element of luck in it, and what was possible to do in the 1980s when we were in university isn’t necessarily what is possible today. Not having children is a very personal choice, but one that also significantly affects finances.

Our next (probable) step is to realize the equity in this house by taking advantage of a healthy market in this part of Ontario and moving to the area where I grew up, where my sister and her husband live, and where housing costs are one-half to one-third of what they are here.  We’ll probably then use that available cash to continue to travel, but we’re still analyzing this in more detail.  And keeping an eye on what happens if China devalues its currency again.  Meanwhile, we’re enjoying our (frugal) life -and that’s what really matters.  And that’s what I’ll go back to writing about, after this.