I received a write-in from a reader who wonders if she is on the right track to retire early. She is 50-years-old, wants to retire early, and has some questions about what comes next. I love her story for a few reasons. First off, I think it’s relatable to everybody: she wonders about the impact of healthcare on her retirement plans and what her timeline could be. These are common questions when considering whether it’s possible to leave the workforce.
Secondly, this reader is asking the same questions my own mom has wondered, which means maybe I can kill two birds with one stone: retirement advice for two moms in one post.
Weigh in with your advice, encouragement, and thoughts in the comments.
Note: some links in this article are affiliate links, meaning if you click through I may earn a small commission at no extra cost to you.
Dear Financial Mechanic Community,
I’m MamaMinou, a 50-year-old nurse living in the Pacific Northwest (US). I’ve been a nurse for around 12 years (before that, doula and teacher). My lovely partner and I have been married for 26 years and we have two amazing adult kids. I love to travel, knit, read, write, walk, do yoga, hike, nap, visit libraries and the great outdoors, and make things. I want to do much more of all of these fill-my-cup activities, plus spend more time with my family and friends.
Financial Independence Goals
Just like for everyone, these last couple of Covid years have been difficult for me, especially working in Public Health. Although I’m no longer directly involved in Covid response, it was a long season of overwork along with heaping amounts of change, uncertainty, frustration, and shifting responsibilities. Several of my favorite colleagues moved on, I gained 20 lbs, and I am tired to the point of near burnout. I have an ongoing dream of moving…somewhere else, ideally with a different culture and language. Not sure where but I’m leaning towards France (though The Netherlands sound so nice!)
My lovely partner and I have very different approaches to financial planning, so we have opted to each do our own thing for saving and retirement. We contribute somewhat equally (I realized through this tally that he pays more) to shared expenses by dividing costs.
He pays for the mortgage, our single car (which he uses more frequently), and utilities.
I pay for health expenses, food, and household supplies.
Right now we all have good health insurance (HSA/HDHP) through my work (adult kids will age off this in the next few years). I’m not sure if our situation looks better individually or combined, but I feel it’s important to plan so that I could meet all our expenses solo if I had to.
MamaMinou's Family Expenses
Electricity and Water
Fuel for Car
& online news subscriptions
Home & auto insurance
Term life insurance
Phone (self only)
Groceries (3 adults)
Safe deposit box
Glasses for family
Clothing and shoes
We are aiming for a yearly budget of about $40k in retirement, though I think that could be smaller if we lived car-free in an urban center (which I would enjoy), and possibly health costs could be less outside the US. One adult kid is currently back home, which makes our grocery and utility bills a bit higher than they otherwise would be. My expensive phone is to keep two other family members on a shared group plan.
Some of our expenses are clearly discretionary and could be lowered, such as streaming and gifts. It’s difficult to assess unlisted others because they aren’t regular, like home repair (inevitable) and travel (highly variable and enjoyable). Also, I have no idea how much the health insurance costs would be if not covered through work and while here in the US (likely a lot more than now).
I use my HSA as an investment account, so pay up to our deductible out of pocket each year. I front-load my 457 and Roth IRA accounts and max both out by July, then begin contributing to the taxable account.
At the age of 65 I will have a small defined benefit pension (about $1k per month if I stop working now), though I prefer not to count on that or social security. I haven’t kept a large emergency fund because my job has been secure, and I’m aware that I’ll need a bigger cash cushion. I’m very good at living frugally and doing without, but I’d like to not have to worry or scrimp as I age…while still living lightly.
Public Employee Plan
HSA (as investment)
Cash Emergency Fund
Our House in the Pacific Northwest
We also paid off our own house, but had to take out a mortgage to buy the rental, so now we have two mortgage loans. Real estate prices here in the PNW are crazy! Zillow says our current home is valued at $467k. For a fairly funky 1000sq ft home. Insane!
I don’t consider equity in our current home as part of net worth, but the debt is $178k.
Most of my accounts are with Vanguard and are index funds. A few from an old job are with Fidelity and the employer 457 is Vanguard funds held in a different company.
I use Personal Capital as a way to see everything aggregated, which tells me that my current investment asset allocation is about 12% bonds, 16% international equity index funds (VTIAX), and 70% US equity index funds (mostly VTSAX). I’m currently adding more bonds and think it might be time to save more cash.
My goal has been to save and invest $50k or more per year. I am starting to feel anxious about having such a small cash emergency fund though, and am planning to increase that this year.
PapaMinou's Financial Picture
|Cash Emergency Fund||$15,000|
PapaMinou Rental Property Project
|Rental Property Equity||$182,000|
|Rental Property Mortgage Debt||$368,000|
Rental Monthly Income and Expenses
|Rental Income||+ $3,200|
|Mortgage Payment *||– $1,800|
|Property Tax & Insurance||– $500|
|Property Management Fee||– $225|
|Water bill||– $175|
|Savings for repairs and upkeep||– $500|
Total net income
*FM Note: important to mention that the mortgage payment builds equity, so it is different than other ‘expenses’
We technically both own the equity on the rental house but it belongs to PapaMinou, he has made all the payments and it’s his investment project. In case of a financial split he would get the rental property. It was purchased in Spring of 2021 (I think. Covid time is all a blur. But recently). Redfin says rental property value is now $593k.
So, Financial Mechanic and readers, please share your thoughts. What are my options? Am I CoastFIRE? What about the health insurance conundrum? What do I need to do to prepare, and when could I reasonably stop working, and/or move to the Netherlands or France?
Am I CoastFIRE?
What do you think about the health insurance conundrum?
What do I need to do to prepare, and when could I reasonably stop working, or move to The Netherlands or France?
There are so many things I love about MamaMinou’s write in. Here are some things I notice right away:
1. MamaMinou has something to retire to, she has already cultivated hobbies like knitting, hiking, baking, crafting, travel, and many other things.
2. She has a maintainable lifestyle, and has done a great job saving for it. I also really dig her investment approach: simple index investing.
3. Whether you and your partner have different approaches to financial planning or not, it is always prudent to take a look at your numbers individually. If your financial wellbeing is dependent on your partner, it is harder to say whether or not you are financially independent. (While doing the calculations, I did want to eat my words on this point, because Mama and PapaMinou’s expenses are quite entwined which makes it trickier. I still think it’s important, so I did my best!)
Already on solid footing, I’m going to tackle MamaMinou’s questions one-by-one.
Is MamaMinou CoastFIRE?
I’ll start with a quick definition of CoastFIRE.
Luckily, this question is relatively simple to answer for MamaMinou. It just takes some math. There is an equation to figure out your CoastFI number.
- A 5% expected growth rate (7% projected returns, with 2% subtracted to account for inflation)
- A safe withdrawal rate of 4% (recommended by the Trinity Study).
Coast FI # = Annual spending / SWR * (1+0.05)^Years Until Retirement
There are enough variables that could change that makes this a back-of-the-napkin type calculation. To try out different variations, check out this handy calculator by Walletburst! It also includes more information about how the equation is determined.
Let’s do a few different calculations, for each person in the couple, as a family, and in a worst case scenario (MamaMinou has to cover all family expenses). For the worst case scenario, I subtracted $150 per month for groceries but left the rest of the spending the same. MamaMinou has 15 years until traditional retirement, PapaMinou has 6.
|Yearly expenses||Assets to be CoastFI|
MamaMinou mentioned that she does not count the hypothetical value of her home in her net worth calculations, so I used two columns to show a comparison.
|Assets||Assets Including House||CoastFI?|
(Unless house is included)
The Minou family is ready to “coast” to retirement. PapaMinou would not be able to do so on his own, so in the case of a split, he would benefit from continuing to work for a few years before retirement. I am also curious about whether the rental property could bring in more passive income, but that is up to them as landlords in their specific market.
MamaMinou could “coast” on a lower paying, lower-stress job if she wanted to!
However, the CoastFI calculation is based on traditional retirement age and MamaMinou wants to retire as soon as possible. So, the more pertinent question is: are they financially independent now?
Can MamaMinou Afford To Retire?
Financial Independence # = Annual spending / SWR
|Yearly expenses||Assets to be FI|
So, given the Minou family’s assets, are they financially independent?
|Assets||Assets Including House|
So, it looks like PapaMinou is on the edge of financial independence, but he’s not quite there yet. However, as a family, the Minous have reached financial independence. Comfortingly, the Minous are financially independent as a family even without considering their home in the asset calculations.
Even in the worst case scenario, if MamaMinou would be willing to make some adjustments to spending, she is just on the edge of financial independence (assuming she and PapaMinou split the proceeds of their home 50/50). It sounds like MamaMinou will be eligible for social security and a pension, so that provides some extra safeguards.
MamaMinou asks, ‘when can I reasonably stop working’ and the answer is: now. She is 50 years-old and can retire by the age of 51 as planned.
I would recommend MamaMinou meet with a financial planner to go through the calculations as mine don’t include the difference in returns between equity, bonds, and cash. However, with these back-of-the-napkin type numbers, plus considering that she plans on working through the end of 2022, she is in a good place to consider retiring early.
However, early retirement comes with its own risks. In the case of a divorce or split, PapaMinou would likely need to continue working, and MamaMinou would need to cut back on expenses anywhere possible. And, as MamaMinou pointed out, she still needs to factor in an estimate of her health insurance costs.
What Should MamaMinou Do About Health Insurance?
Healthcare is the smudge on the glasses of every hopeful early retiree. The process tends to be opaque and changes by state. I am far from a healthcare insurance expert, so my advice is to go shopping for insurance as if you had to switch at the end of the year, and use those numbers to budget for early retirement calculations. Early retirees take several different approaches to medical insurance in retirement:
If Mama and PapaMinou decide to stay in the U.S. and both retire, they will need to plan to buy health insurance from the market. To get a glimpse into what to expect in retirement for coverage under the Affordable Care Act, head over to Healthcare.gov.
It asks you for a zipcode, estimated income, household size, and other details, then provides example plans.
This will help you plan in the future for what healthcare costs might be. Luckily it sounds like MamaMinou’s children will be able to get their own insurance plans relatively soon.
Tanja Hester from OurNextLife wrote about her experience signing up for health insurance in California here: Signing Up For ACA/Obamacare Health Insurance for Early Retirement. She talks about the process for estimating income, and to be aware that since income will likely be lower in retirement than on previous tax returns, most early retirements might get flagged and have to explain that they aren’t Medicaid-eligible.
The best thing to do is to estimate the subsidies you will be eligible for and get an idea of the plans that you would likely sign up for when you retire.
More reading on healthcare in early retirement...
Health coverage for retirees – HealthCare.Gov
The Power of a Low Income in Early Retirement – OurNextLife
Health (and Wealth) Insurance – AllOptionsConsidered
Early Retirement Health Care Costs for 2019 and Beyond – OurNextLife
Obamacare, Expats, and Limitations on Visits Home – Go Curry Cracker
Health Insurance in Early Retirement – The White Coat Investor
What’s My Health Insurance Plan As A Nomad and Early Retiree? – A Purple Life
What Does MamaMinou Need To Do To Prepare For Leaving Her Job?
The good news is that MamaMinou is doing stellar financially, so the next step is mapping out her exit plan. It doesn’t sound like her job is tenable for much longer, so I would encourage her to start planning for when she leaves.
One of MamaMinou’s questions is: when can she reasonably stop working? Based on just the numbers: now!
Well, at least, as soon as she has her other ducks in order. Like, can her adult children get on their own healthcare plans?
There are some practical steps to prepare before leaving a job:
- Make sure to get those dental cleanings, eye exams, and other medical visits in.
- Look into contributing to a donor advised fund before retiring.
- Adjust allocations of investments to something that feels comfortable for retirement, consider consulting a financial advisor to double check all the numbers!
- Make a withdrawal strategy for accessing money.
- Work on bolstering the emergency fund before retiring.
Then there are the emotional steps to prepare for retirement. It sounds like MamaMinou already has hobbies she can spend more time doing, but I also recommend making some plans to transition into early retirement. That might look like scaling back hours at work, or planning a long vacation to demarcate time between work and retiring. It helps to have something to help with the transition emotionally (I hear, I haven’t retired yet).
I also read that MamaMinou is unhappy at her job, but I don’t know about PapaMinou. Some couples make the transition into early retirement one at a time. This gives some financial stability to the family, while one person has more time to do logistical planning for when the second person retires. Just a thought!
What Does MamaMinou Need To Do To Prepare For Living Abroad?
If Mama and PapaMinou plan to move long-term to Europe, I would encourage them into looking into different visas that are available for Americans who would like to stay longer term. They can also plan a trip to visit different spots they might like to live longer term, then make plans from there!
It can be fun to dream of living abroad, but starts to get overwhelming in practice. It is best to visit online expat forums and research visas, taxes, and other laws to consider while living abroad.
I will note that in my experience it has been easier to move abroad while working. Most countries prefer expats who will be paying taxes into their economies, and there are rules that restrict long-term stays without a proper visa. For example, if I lose my job in The Netherlands, I have 90 days to find a new one that will sponsor me, apply for a different type of visa, or I have to leave the country. Each country has different rules, so it’s worth doing some research.
Mama and PapaMinou could also consider a split between the US and living in France and/or The Netherlands. They could look into Nomad health insurance. Some plans require that you live outside of the U.S. for at least 6 months out of the year, so you could try living in the U.S. for part of the year, and then doing 3 month stints in other countries. This would be quite the adventure to retire to, if that’s what they want! The best part about early retirement: lots of options.
In conclusion, MamaMinou is doing fabulously with her finances. Now is the time she can start dreaming about what her early retirement might look like, and then create a step-by-step plan of how to get there.
MamaMinou and her husband have put in the work to set themselves up for early retirement. Now, with an empty nest, they can start to put dreams into actions. MamaMinou can leave a stressful job with the peace of knowing she has the investments to support her financially and hobbies to support her emotionally. She would benefit from doing some more research into healthcare options and what it would look like to retire abroad in order to minimize risk. I second her plan to bolster her emergency fund, and I recommend meeting with a financial planner before turning in her resignation.
That said, I see so many opportunities for the Minou family to thrive in early retirement!
Readers Weigh In
MamaMinou wants your advice.
What should she consider before leaving her job?
What should she think about before moving abroad?
What are your thoughts on healthcare in early retirement?
Share your take below!