Retire Early With Muni Bonds – Adam and Jane’s Update

Hey, Everyone. Today, we have a guest post from Adam and Jane. They wrote a guest post for us in 2016 about their early retirement plan. He planned to retire at the end of 2019 and he did it! Recently, I saw the old guest post and contacted them for an update. Well, here it is! Let’s see how they’re doing in early retirement. There is a great section on municipal bonds. It’s a bit long, but really informative. That’s a solid passive income stream. Enjoy!

*I used the same format as my “It Takes More Than Money to Retire Early” series.

Here is Adam

Thanks, Joe for inviting us back for an update! It was a long 3 years of stress working from 2016 to 2019 supporting an IT system by myself without any backup since they laid off my co-workers in 2016. About ? (500 people) of IT were laid off and replaced by a consulting company from India.

Here are links to our two prior guest posts for your readers:

Reader Case Study – Work 5 More Years to Collect Full Pension? 1/20/14

Reader’s Story: Three More Years of Work for Adam.  7/25/16

Q: Can you give us a brief background about yourself? What career did you retire from?

I worked in IT as a programmer, systems programmer & then a systems administrator for a total of 32 years in the same company. I was responsible for systems that support several main websites for our company. I was on call 24 x 7 and I was the only support person after they laid off my co-workers in 2016.

Q: Early retirement means different things to different people. Lots of people don’t think I’m “retired” because I blog a few hours per day and I’m a stay-at-home dad. That’s perfectly fine. Everyone is entitled to their opinion. What does early retirement mean to you? Do you work at all?

I just don’t want to work for a living anymore. Retiring at 55 is not quite early but for me it’s better than 62 or 65. I wish I could retire in my 40s but we can’t afford it in NYC. I don’t want to get the IRP (Internet Retirement Police) mad, haha. Retirement to me means to NEVER EVER have to work again for the need of money to live on. After working for the man for 32 years, I don’t want to wake up to an alarm clock anymore or the dreaded phone calls in the middle of the night or anyone telling me when to wake up and what/when to do things. Being on 24 x 7 support really took a toll on me and I had to work the day shift and support any night time/weekend/holiday changes. I felt like one of Pavlov’s dogs where instead of salivating I would have anxiety. To this day whenever I hear my cell phone ring tone or the T-Mobile commercial, I would have anxieties thinking that it is a work-related call.

Now, I just do the things I want to do. I am perfectly happy being at home with the wife especially now with Covid to read, to collect, to do research on my vintage toy car hobby and to nap when I am tired. We did about 18 cruises prior to Covid. Cruising was the only way I was able to relax knowing I was not accessible by work while out at sea. We hope to take our world cruise and to travel with our retired friends and families one day when Covid is under control.

Q: What were your financial goals and how long did it take you to achieve them?

We got married at age 27. It took 28 long years to achieve our goals in order to retire at 55. Our goal was to be financially independent and to have a minimum of 2-3 times expenses. Since my wife and I were computer programmers, we needed to be thorough and have backups should things fail. This may have been overkill and probably added many more years to our retirement but we wanted multiple income streams in case one stream is taken away. Therefore, we needed to work until 55 in the same company in order to get a pension. If we left one day before 55 then our pensions would be 50% less and we would not get any money for retiree medical insurance.

After we were married, Jane has always insisted on living on one salary in case one of us gets laid off since we worked in the same company. Why do we worry about layoffs so early in our careers? Because when we started out as trainees, in the mid 80’s the company let go 150 people in IT to make room for us. I heard that people in some departments were told to wait by their desks. A manager will come by to escort the affected employee away. People would talk to see who was eliminated. In Jane’s department, she was told everyone was called to attend a meeting in the auditorium. If you had a “ticket” on your desk by the time you returned, you knew your time was up. It must have been terrifying back then. We knew from the start that our jobs were temporary and that one day we will make room for new employees. It is like the circle of life.

At age 27, we paid extra each month for our 30 year mortgage. All yearly bonuses were paid toward the mortgage and we paid off the 180K loan in 11 years. This loan amount may seem small now or small compared to other amounts that people borrow these days but in the early 90s, it was a lot of money for us to borrow when we were making 90K combined.

Here are the steps we took to reach Financial Independence.

Step 1. Reduce debt and max out 401Ks: From age 23-55, our goal #1 was to pay off the mortgage before 55, minimized expenses and max out our 401Ks to have goal #2 a min of 1 million in each 401K account by age 55. Our mortgage was paid off in 11 years at age 38. Goal #3 was to have combined 401Ks generate income to cover 1x expenses. While working, our yearly expenses were 40-55K with vacations. At work, our goal # 4 was to get promoted every 4-6 years in order to increase our salaries. Now that we are retired and have to pay our own medical premiums, our yearly expenses for 2020 is 63K without vacations. Medical expenses is 25% of our total expenses and that number is projected to grow 8% yearly for inflation.

Step 2. Goal #5 was we must reach the finish line to collect a pension at age 55 at all cost! From age 23-55, we MUST stay employed in the same company to collect a pension around 72K which depends on years of service and last ten consecutive highest salaries) at 55. Combined pensions will cover 1.3x expenses. Also at 55, the company also provides 8.3K credit for each of us towards the medical premium. There is too much money left on the table to walk away before reaching age 55. Any additional year worked after 55 will increase the pension by 6K.

Step 3. From age 46-55, we created additional passive income. Most people don’t have pensions so you need to create your own passive income. Our financial mentor suggested municipal bonds for three years but we were afraid to start. So why did we suddenly buy munis after 3 years? Something lit a fire under our butt! In 2009, we heard rumors of future layoffs and it will be bloody. At age 46 in 2010, we finally decided goal #6 to buy a lot of munis with our life savings so that it can cover our expenses. We only invested in individual municipal bonds to create a personal “pension” in case we lose our company pension or if we had to leave before 55. Since we are very financially conservative, none of our money was invested in the stock market. I have seen my father and uncles lose 20K to 80K each over the years. Our money in banks was and still earn less than 1% and there’s no way to live off of that taxable interest. Our current effective muni bond rate of return is 4.11% triple tax free. By age 55, our muni bond portfolio was generating 104K tax free which covers 1.6x expenses. We could have lived off our savings and let it deplete but we rather live off interest earned and to preserve our principle. It is scary for us to deplete savings since we want financial security.

Q: How did the layoffs affect you mentally and financially?

As I experienced and survived each layoff, I have become more aware of how important it is to be financially independent. I was also more mentally prepared for such an event should it happen to me.

In 2010, our manager’s boss was promoted to a VP. He decided to purge low rated employees in his department. No other VPs within IT were doing any purges.  I guess he wanted to look good among his peers. The bell curve doesn’t work well for highly specialized teams where almost everyone on the team is a strong technical employee. One member of our team was rated below but he really wasn’t. There were quotas to get rid of people whether they deserve it or not. After he was let go, he found a job as a manager of a support team whereas he was a subordinate on our team. On another team, a DBA that works from home was invited to a meeting in the office and he had to bring in his laptop. After lunch his badge was disabled and was not permitted to enter the building when he returned from lunch. He is a nice guy and works well with people. He did his job and in my opinion didn’t warrant such treatment. There was an at home employee who had her access removed and couldn’t log on. She spent hours on the phone with support to troubleshoot. Hours later she found out from our VP that she was terminated. Her direct manager did not even know her subordinate was terminated and wasn’t given any heads up from the new VP. There are many of these types of stories. I think that work at home employees were targeted.  I once asked a consultant, why is his cubicle so empty since he has been working in our company for several years. He said since he is a consultant, he can be terminated any time so he didn’t think that his job is permanent. At that point, I understood. We are all temporarily employees. I then started to clean my  cubicle and removed all personal items just in case I am terminated in the future. I would walk out the door empty handed and they can have whatever work related items in my cubicle. After the purge, the VP saw me in the hallway and asked how I was doing. I replied, “just waiting for something else to happen”. He said don’t worry and that will be it. Little that we know that 2 years later, there will be a larger company wide layoffs.

In 2012, our 5% muni bonds generated 40K tax free but we were not FI yet since it did not include money to buy healthcare. We needed to generate another 20K of passive income for healthcare. In 2012, 350 people were laid off. It was a surprise to us that our VP was also laid off. He could have stayed another 2 weeks but he packed up his stuff and left before noon. Karma works in mysterious ways. In 2010, he terminated many good people in his department and now it is his turn. We heard that he never found a job in IT again. Many people were in panic mode but Jane and I were calm because we had passive income to cover the bulk of our expenses. The re-orgs were announced and our team was supposed to report to a bad manager. As luck would have it, this bad manager was one of the 350 that was laid off! I was lucky to have a new manager that our team got along with. We saved money and continued to buy more munis to generate another 20K.

In 2014, our muni bonds portfolio generated 64K and we were FI! We felt so good because at this point both of us can just walk out and be OK. We knew that at least one of us should stay until 55 to double our pension to 72K and to get 8K for medical. In the 3rd quarter of 2014, our CEO told us that many will be replaced by consultants and the company will research different IT consultant companies in 2015. Layoffs will occur starting in 2016. We knew our days were numbered but Jane and I remained calm. We keep saving 87% of our incomes to purchase more munis bonds. Some looked for new jobs but many just hoped for a decent severance package and a pension to live on. Those who were between 50 and 55 were good. They will receive a pension. The company will add up to 5 years to their age and some money added to their pension allowing them to start collecting as though they were 55. They will also receive retiree medical. Of course, employees age 55 and over were golden. Many under 50 were screwed and they were worried since many of them did not qualify for a traditional pension because they didn’t have the required years of service. Instead of a traditional pension, they got cash balance pensions. After 15 years of service, they would receive about 1K a month after taxes which is better than nothing. Everyone received a severance of 2 weeks pay for every year of service, a max of 1 year salary plus your bonus. It was quite generous. Those under 50 didn’t receive medical credit for healthcare. Those under 50 with a traditional pension were in panic mode since they could not collect the pension as early retirement. They had to wait until age 55 to collect the pension and some of them had to seek employment. Jane and I were a bit over 50 so we were safe. When we all joined the company, all employees had a traditional pension and retiree medical. Over the years, the company started to cut off access to the traditional pension and retiree healthcare by age and years of service. Those that didn’t have a min of 20 years of service or a min age of 50 when the new rules came out, got screwed by getting a cash balance pension instead of a traditional pension. The cash balance pension is a lot less money.

In 2016, our muni bonds portfolio generated 84K tax free. Over 500 people were laid off which was ? of our IT department. Like in the mid 80’s, workers were told to wait by their desk. In Jane’s case, one morning she was individually scheduled to a “special” meeting with her Manager’s boss.  They basically went down the chain of command. By the time she came back, her team was grouped and invited to separate meetings. Many people that I know, and worked with, were all let go including my wife and her entire team. Jane received a 234K severance and a pension of 52K with 8.3K medical credit for the rest of her life. I was safe because the company will not lay off both spouses. None of my co-workers have passive income and they were in panic mode. We were calm because we are financially independent and we planned for a doomsday. After that, several co-workers asked me to help them create passive income with muni bonds but it was too late for most of them to make a difference. It took us 6 years with two salaries to create passive income to cover our expenses. We had a lot of savings because we are savers plus we have been prepping since we heard about the layoffs rumors in 2009. Although I told my co-workers about the rumours, no one prepared for it. Some continued to buy new cars and bigger houses.

Q: What lessons did you learn from buying munis?

We originally started buying individual munis through banks/brokerage (LPL, HSBC, Citibank) which charges from 1–2%. We didn’t buy any muni bond funds. I told my friends and family about it but less than 3% of them invested in munis because they were afraid of the unknown. I was afraid too but once you get familiar with your first purchase then it becomes easier to purchase the next bond. I remembered being so nervous writing a check for 350K to LPL to purchase our first set of bonds. It was the biggest check I ever wrote. A co-worker that did buy munis after I suggested it, said he has a Fidelity account and he purchased them by himself! Wait a freaking minute! What! I was so excited to be able to bypass the middleman. It took 10 mins to create an online Fidelity account. I learned that Fidelity ONLY charges 0.10% premium instead of 1-2% like the banks and brokerages! Suddenly, all future munis purchases will save me from paying such hefty premiums. For example, a 100K bond at HSBC would cost $2000 more due to the 2% surcharge. At Fidelity, the same bond would cost $100 to buy. I also set up electronic transfers from Fidelity to my banks so that I don’t have to visit a bank or to manually write checks to my Fidelity account anymore.

In the beginning, I searched for the highest yielding bonds like 5% but had to pay attention to the YTW/YTC (Yield to Worst or Yield to Call) column in the list of bonds available. For our first purchase, we bought 200K of 5% munis at $108 per bond and the YTW was 3%. Then one day, it occured to me to ask the broker to sort the list of munis available by YTW in descending order. This made it easier to clearly see the highest yielding bond at the top of the list. Is there a reason why three different banks and a brokerage never suggested that to me first? I also learned to stop buying bonds with such premiums and I set my max price at $102. Our 1st set of bonds were 5% at $108 from LPL which included the 2% surcharge. In Fidelity, the same bond would cost around $106. When this bond is called or matures, only the face value of $100 is returned. For example, 100 bonds at $108 cost $108,000. Each bond is $1000 and a minimum to buy is $5000 (5 bonds). 100 bonds x 10 x $108 = $108,000 plus any accrued interest. When this bond is called or matures, only $100K is returned. That $8K is the cost/surcharge of buying that bond. A 5% bond at $108, it will take 9.6 months of interest to break even. A 4% bond at $102 will take 6 months to break even. Now, we only buy bonds less than $102. Over the past 11 years of buying munis, I see that the best time to buy at lower cost is when there is panic in the bond market or panic with the environment/city/state/world.

Note: During the pandemic in 2020, I saw A LOT of NY MTA bonds selling for below PAR ($100). Seems that many people panicked and wanted to sell them. I purchased over 100K MTA or other bonds of 4% and 5% around $98 – $102. Like a quote from Warren Buffett, “be fearful when others are greedy and to be greedy only when others are fearful.”

Here are my Muni bonds criterias:

1. Ratings are extremely important. I tend to avoid investment grade which is a B but I do have a couple. I look for bonds that are rated a min of upper med grade (single A).

Best quality – AAA

High Quality – AA

Upper Med Grade – A

2. Buy what you know.

I like MTA (mass transit), water, Dorm Authorities for schools and hospitals. Make sure the school and hospitals are well known. People will always need these facilities. Bonds will vary from state to state so buy what you know in your state.

3. Have a mixture of GO and REV bonds but it comes down to financial stability of your state.

4. Tax exemption. Make sure it is totally tax free. Check the bond details.

Federally taxable – NO

Subject to AMT – NO

5. Insured

If a muni bond is insured then the bond is safer. Insured bonds are tough to find and they are usually a bit more expensive.

6. YTW (Yield To Worst or Yield To Call) greater than 4% when the price is close to PAR ($100). In a 33% tax bracket, it is like a 6% CD. In April of 2021, NY 4% bonds are very expensive at around $107 plus and 3% are around $103. That is why, when there is an opportunity to buy munis at a low cost I buy A LOT knowing that my other bonds will be called in the future.

YTW is the min the bond will earn when a bond is called. Most bonds are callable after 10 years of being issued so I don’t really pay attention to maturity date. Bond prices fluctuate   so I like to buy bonds in x amounts. Don’t spend all your money on just one bond. In the end, just be happy with the yield of the bond purchased and dont go crazy if the bond price drops. If you hold the bond until it is called or matures then you will get the face value back to avoid the lost of principle except for the premium paid.

I like to sort all the munis for my state with YTW in descending order which will display the highest yield at the top of the list. This makes it easier to select a bond.

7. Call dates, mature dates and month interest is paid.

You can buy bonds with different call dates and maturity dates to create a bond ladder. This way your bonds will return your principle at different years so that all of your money is not locked to a specific year. I also look for bonds to pay on different months of the year so that I will get bond payment every month. This is not a show stopper but it is nice to get payments every month.

8. Price of the bond.

Try to buy bonds at face value of $100 (PAR) or less. If you have to pay a premium then pay at most 1-2 dollars. For example, a 4% bond at $102 will take 6 months to break even. When this bond is called or matures, only the face value is returned to you. If you paid a premium then it will result in a lost of principle. This is not a big deal if especially you are happy with the yield and the interest you received

Q: What are your passive incomes?

We have 4 streams of passive incomes from tax free muni bonds, pensions, 401K and Social Security (SS). Since we are 55 we can’t withdraw from our 401Ks until 59 ½ and can’t collect SS until age 62.

  • Muni bond tax free income can fluctuate every couple of years as bonds get called or matures. I will replace them to maintain 80K-100K yearly.
  • Pensions are 52K and 72K before taxes.
  • 401K is 100% invested in fixed guaranteed interest. For 2020 it was 4.1% and it’s 3.8% for 2021. This interest rate changes every year and we hope the min will be 3.0-3.5%. At age 60, we can start withdrawing interest only if needed and withdraw RMD after age 72.
  • SS is 38K combined projected before taxes and we will collect at age 62 whether we need the money or not. A pension/Social Security expert gave a retirement class in our company and he said to collect SS ASAP because it will take you a long time to break even if you delay 1 year. I did the math and it will take 11 years to break even if I collected at 63 instead of 62. Everyone can decide for themself.
  • We each will receive $8.3K for retiree medical. Combined is $16.6K non taxable.

When I was planning my early retirement, I was consumed with the money part of it. I didn’t put much effort into the other details. I’d say it was 90/10, financial/non-financial. What about you? Did you put much effort into the non-financial side of early retirement planning?

Answer> Since I hated being on 24×7 on call and working after hours, I was obsessed with retirement starting at age 27. Reaching age 55 was the main goal. All of my friends and co-workers knew that was our main goal since I kept talking about it like a broken record. Everyone in the company also wanted to reach 55 for the starting pension payout. Every additional year we stay after 55 would increase our pensions by $6K which depends on their years of service and last 10 highest salaries.

Before retirement, I was 90/10 financial/non-financial and now after retirement it is less than 5%.

Where are you in your life cycle? Most people retire around the traditional age – late 50s to early 70s. Their children are grown, their partner and friends are stepping back from work, and their parents may have passed. In short, you have a lot fewer obligations at a later age. To go against the grain and retire in your 30s or 40s can be lonely and challenging. Do you think it is difficult to retire early with all these obligations?

Answer> There is no way we could have retired in our 40’s. It is too expensive to live in NYC. We are in our mid 50s with no kids. Without a pension, it would be tough to retire since medical premiums are so expensive. For medical healthcare, we each cover ourselves in order to get our own retiree medical credit. After retirement, each of our company supplied medical healthcare’s premium is $16.3K for Aetna for 2021. When Jane was let go in 2016, her medical premium was $11K. By 2021, it increased over $5.3K. After 30 years of service, we each get $8.3K (non taxable) yearly from the company credited for the medical premium and out of pocket is 8K for each of us in 2021. This amount is projected to grow about 8% every year. By age 65 just before we get Medicare, our premiums combined may be over 58K before the $16.6K credit kicks in from the company. We don’t have any children but we know from other parents that having kids is expensive too. Most of my cousin’s college tuition cost 50-75K per year and 2 cousins went to medical school which were paid by their parents. Most weddings were also paid by the parents in our family. With so much expenses with kids, it will be difficult for most people to retire in the 40’s.

It takes more than money to retire early

Now let’s focus on the intangibles. To be blunt, lots of people have more money than you. Most of them aren’t retired. They still work and contribute to the economy. What makes you special? How can you retire when almost everyone else in your position continues to work? Why are you different?

We still contribute to the economy! We spend more now since we have free time and medical expenses are an additional 25% of our expenses. We are just not paying more city, state and federal taxes since our taxable income is much lower. We are Not special at all! I just hated my stressful job but appreciated it for the money it provided. Now, we want to live off our passive incomes that we worked so hard to create. I was burnt out being on call for 28 out of 32 years in the company. This is a free country. If people want to work then they should continue. I am not stopping them. I saved my money all my life and I want to enjoy some free time before my time is up. We aren’t trust fund babies. We didn’t inherit any money. The pensions are the main reason we can retire at 55. My sister-in-laws need to work until 65 to get Medicare since they can’t afford to pay for healthcare on their own. Also, for most people the more money they earn, the more things they want like larger houses and fancier cars which equates to higher expenses. This keeps them running on the hamster wheel. You have to differentiate between a “want” and a “need”. We never felt keeping up with the Jones were an integral part of our lives.

In order to retire at any age, you will need a thorough financial plan to estimate all present and future expenses. We estimated 3% for inflation and 8% for medical yearly increases. We also over planned by having a minimum of 3x current expenses and have another passive income stream. Depending on your income, you will need to sacrifice by saving as much as you can. For many years, we saved 75-87% of our salaries especially after the layoff rumours. You will need to focus and follow through your plan. When the time is right, only you will know then you can retire when you have enough FU money.

Optional questions from the readers

Q: How is early retirement going? Are you enjoying it as much as you hoped? What are you doing with all your time?

Jane was forced to retire at age 51 due to layoffs and she is 55 now. She LOVES it. She doesn’t have to commute in the rain, snow or crappy weather days anymore. She plays games, researches recipes for cooking and baking, watches her british murder mysteries and reads ebooks. She had been working since age 17 in other jobs while attending school followed by working 30 more years in the same company and now she is enjoying her free time.

I also love my retirement. I am obsessed with my toy car hobby. I buy tons of stuff on ebay. I create custom 1/64 scale toy trucks and I painted them with an airbrush. I created over 60 custom vehicles in the last 3 years. This is my passion. Some suggested that I create a youtube channel to share my joy in customizing but that sounds like a job so no thanks.

Q: Why did you pursue early retirement?  What made the FIRE folks evaluate life and said this path is the right one for me?

My father worked hard all his life and got cancer at age 62. He then developed lung cancer and died at 69. I want to retire at 55 so that I can enjoy my free time before my time on earth is expired.

Working is overrated! It was fun when I was a programmer working for a manager. It was no longer fun as you gained more responsibility such as 24×7 support and managing people. The salary and bonus were decent but after 32 years enough is enough.

Now that you don’t spend 8-10 hours working in a full-time job, what are you doing with your time? What’s your typical day like? Do you have a problem finding things to do?

Jane said everyday is like the weekend. I think everyday is like a vacation day. I do whatever I want or don’t want.

Especially now during Covid lockdown, our typical day is boring to most people. Wake up, exercise, shower, plan lunch, check ebay for anything new to buy, check if any packages are arriving. Maybe work on my toy trucks if I feel like it. Watch youtube. Go shopping for groceries if needed, plan dinner. Some days I have to take my mom to doctor appointments which may be inconvenient when I was working.

Jane likes to play games, watch british shows and find new recipes to try kill me. She has a tendency of finding a recipe on the internet and tweaking it a bit. Sometimes it works and sometimes it doesn’t (like her exploding cheesecake – don’t ask me how that happened!!!!)…..

Sometimes we get stir crazy and we drive out to a hobby store or Harbor Freight for inexpensive tools for my hobbies. Jane likes to go to kitchen supply stores like Sur La Table but they are all closed around us. On occasion we make social distance visits with people in their driveway.

Q: What was your biggest challenge after early retirement?

None! Covid lockdown followed almost immediately on the heels of my retirement but I am an indoor cat anyway!

Q: Would you change anything about the way you retired from your job? Sometimes, I wish I stuck around for 6 more months. I could have worked out a deal and get a severance package instead of walking away with nothing.

If my old managers and co-workers didn’t get laid off in 2016 then I would have stayed another 3 years to increase my pension $6K/yr to $18K more. With my co-workers being around as my backup then I wouldn’t be so stressed. Now that I am retired, I rather have 3 years of freedom instead of trading it for 3 more working years for salary and for extra pension money that we don’t need.

Jane was let go in 2016 with a 234K severance package and she started to collect her pension at age 51. I wanted to be let go too. It is company policy that they won’t let both spouses go at the same time. I tried to also get a severance package to save a co-worker but no dice. She is quite happy to not work again.

It turns out that my timing was perfect since my position was going to be transferred to a different manager and that would have been more stressful. My retirement was right on time. Let’s say they were shocked I submitted my retirement 1 day after my 55th birthday! I did tell my manager and people that knew me in 2016 that I will retire at 55 so they shouldn’t have been surprised but they were! I did spend the last 2 months working full days to transfer knowledge to the new team.

I remembered that day clearly! I wanted to log onto the pension system to ensure that my pension amount doubled after I turned 55. During this time, I was interrupted by Network Operators for a problem I wasn’t responsible for. Then an application team called me for the same problem. At that moment, I said to my wife “enough is enough, I am submitting my retirement today”!

Q: Did you make any big mistakes? How can we avoid them?

My biggest mistake was not to max out my 401K asap! I started work at age 23 and by age 27, I started to max out my 401K. Also, I should have invested some of the 401K money in the stock market like S&P 500 instead of 100% fixed interest rate of 3.8% -7% throughout the years. Even though with NO money in the stock market in my 401K, it exceeded 1mill at age 55 which was my goal at age 27. I am not greedy. I am like a turtle, slow & steady and just happy reaching the finish line.

Q: How much time do you spend (per week or month) reviewing your finances, or reading about retirement finances/investment/etc., now that you’re retired?

Not much. Now that I am retired, I am no longer financially obsessed. While writing this guest post in April 2021, I finally created my monthly muni bond income chart for 2021 which should have been created December 2020 for the new year. I have created these yearly charts since we started buying muni bonds in 2010.

We are fortunate that we don’t have to worry about our finances when so many people in the world are suffering especially now with Covid. Our pension checks are deposited and we still save 2-4K per month and the muni bond income is also banked. For the last year, I haven’t read my two favorite PF blogs anymore (sorry RB40 and the Financial Samurai).

Our finances are mostly on autopilot. We only invest in NY individual municipal tax free bonds. When a muni bond is called or matures every couple of years then I will search for a replacement on Fidelity otherwise my finances is like the Ronco phrase from the 70’s, “set it and forget it”!


Q: What are you still not getting done/postponing, even in retirement? Perhaps some goal or something you said you’d always do when you have more time

There are a lot of things to do in the house to fix things up but they are still on the back burner! I am just enjoying my retirement by lounging around to free my mind from unnecessary stress.

Q: Looking back on your journey, any regret?

None! NO REGRETS! Just so happy getting off the hamster wheel! It was a long 28 year financial journey but it is worth the effort getting the pensions and retiree medical credits.

Q: What’s your next big dream?

Just to stay healthy. Maybe sell the house and move into a condo so that we don’t have to deal with exterior maintenance. This would allow us to travel for an extended time when the world is safe again.

Our Pipe dream would be to buy a small place with an ocean view in Oahu, Hawaii. Who am I kidding? The best would be to just rent in Hawaii and then leave. It is quite far from NYC to Hawaii.

Thank you, Adam and Jane!

That was a great interview. I hope you enjoyed it as much as I did. It’s great to hear a story with a happy ending. Adam had a difficult few years, but it worked out very well. They are both very comfortable now with a solid passive income. The section on muni bonds was a bit long, but it was very useful. I’ll refer to this when I need to increase my bond allocation.

Ok, I need your help. I love this interview series, but I need more people to interview. The problem is this is a long post. It’s a lot of work! Please volunteer to be interviewed. I’m desperate to continue this series.

Let me know what you think of this interview series. If you have any questions you’d like to ask, leave them in the comment as well. I’ll add them to the interview. Thanks!

Previous Interviews

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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18 thoughts on “Retire Early With Muni Bonds – Adam and Jane’s Update”

  1. I’m very impressed by the tax free muni bonds. I’d love to get some of those! The only bonds I can get are taxable, and sadly at $80k per annum of income they would attract marginal tax at 45%.

    Impressive set of income, looks like a great diversified strategy you have there for income!

    Reply
  2. This was a phenomenal interview. I’m surprised the former boss never found a job in IT again. If I ever get laid off, I told myself that I would try my hand at entrepreneurship and see what I can come up with there.

    Although I work in a money generating department I know I can be affected at any point in time. I wonder how I’ll get laid off.. I’m DYING to get laid off while the enhanced unemployment benefits are still in effect.

    Reply
  3. Adam and Jane:
    Very interesting story.
    Do you blog about your muni. bond investing strategy so one can learn more about it?
    Most of us do 60/40 stock/bond fund mix, and not much know about muni. bond.
    Thanks

    Reply
    • We don’t blog or have a website. In the beginning, I just Googled municipal bonds to learn the basics terms which I mentioned in my story. If you have a self service brokerage acct like from Fidelity, TD, etc then you can search for individual municipal bond offerings for your state on your own. If you live in a tax free state like Florida for example then you can buy municipal bonds from other states and the interest earned will be tax free. When you get a listing of bonds, studying some of the bonds for the price, ytw, call/maturity dates, etc to get familiar with the terminologies.

      If you go to a bank for muni bonds then I bet they will try to sell you a muni bond fund, an annuity, life insurance or long term care insurance. I only buy individual muni bonds. At a bank, just stick to your guns to ONLY buy municipal bonds and don’t let them talk you out of it. If they don’t listen to you then just walk out. They don’t make much money from munis so I can understand why they want to sell other financial products.

      We basically learned about muni bonds from the internet using Google search. It is best to get your feet wet with a single $5,000 bond purchase either from a self service brokerage or from a bank. Interest will be paid to your brokerage account every 6 months. At a bank they will charge 1-2% surcharge but that will be your price of education. You can ask the broker all the questions you like to educated yourself. When you are comfortable then you can buy them on your own in the future.

      Do some research on your own and let me know if you have any additional questions. I will be happy to answer them here.

      Reply
  4. Great story but replace your ringtone. Or put it on buzz. Or mute. Anything to get rid of that association. No point getting recurring episodes of PTSD.

    Reply
    • I tried changing the ring tone years ago and my wife said, “why didn’t I answer my phone?”. Since it sounded different, I didn’t recognize it as my phone in the house. Well, I had to change it back. Whatever my home or cell phone rings, I would say, “what now?”. After retirement, I rarely get calls on my cell. It was mainly used for work and family emergencies. Whenever it rings, there is usually a problem which causes me stress. Now, the main person that calls is my 80+ year old mom and I guess she also causes me anxieties. My “PTSD” from my ring tone has reduced a bit since I retired. I think the main problem is that I associate any phones calls with problems.

      Reply
      • I rarely answer my phone these days. It’s usually robocalls. But sometimes I do get a call from the school.
        If it’s important enough, they’ll leave a message. I usually check the messages very soon after and call back as needed.

        Reply
  5. Hi Adam & Jane
    I also had a fear of losing my job and it’s not a nice thing to constantly have in the back of your mind. However, like you, the positive side is that it drove us to take the steps that got us to FI. I reckon that you must be some of the last people to have the benefit of the salary related pensions – lucky you!
    I’m not from the US, and every time I read about the amount you have to pay for medical cover, it blows my mind.
    Congratulations on your early retirement, it sounds like you’re enjoying it.

    Reply
  6. One thing stuck me the most as I read your experience with your former employer:

    How simultaneously heartless and generous your company was/is.

    Sure. The layoffs, abrupt terminations of employees who deserved to be treated better, being on call 24/7 seem inhumane! Yet look at the benefits: 401k with employer matching, pension (!!), medical insurance after retirement, medical premium credit, even dental insurance after retirement, bonuses, severance package, etc. I would say the rewards are not so shabby. There are companies out there who treat their employees just as bad or worse while providing much less in benefits.

    Reply
    • You are 100% correct about “how simultaneously heartless and generous” my company was. Jane and I were never bitter since we knew not many companies even have pensions and retiree medical. It would have been nice if we did get retiree dental but we missed the new cut-off. Originally, we were qualified for 3% for every year of service for retiree medical, max of 90%. After 30 years of service, the company would have cover 90% of our retiree medical premium but we missed the new cut-off again not being age 50. We were in the 2% pool. After 32 years of service, the company would have covered 64% of my retiree medical every year. Then they changed the cut-off again and not being age 50, we now we get a fixed amount of $8.3K every year for retiree medical. This fixed amount is still nothing to complain about. Something is better than nothing. As the years goes by, the benefits are diluted to save the company money.

      The company has always treated Jane and I well. No one should expect to be employed for 30+ years in the same company. The bitter ones don’t know how lucky they had it in our company. My parents worked in a garment factory so I alway knew my job was a lot easier than theirs. Sure 24×7 sucks but I chose to be a system administrator and that comes with the job. To be honest there were some dead wood in the company. Instead of middle managers doing their job to get rid of them for low performance, they allowed them to skate by for many years. As a result, the CEO had enough and cleaned house along with 90% of the VPs and the middle managers. Replaced most of IT workers with consultants from an India outsourcing company. A clean slate with new suckups and dead wood.

      Reply
  7. I really enjoyed reading about Adam and Jane’s journey. It sounds like it has parts of ours – pension and big retirement accounts. I’m curious if he’s done the math to see if he’s going to run into RMD’s at a high tax rate. From the sound of things in the interview, he probably doesn’t care, because he’ll still be able to do all things he loves.

    Joe, I’m starting to think this Oahu compound idea of yours has legs. My wife would move there in about 30 seconds.

    Reply
    • I’m not sure about RMD. I’ll see if he can answer this.
      We should set up some kind of timeshare. Oahu is super expensive, though. Did you guys find any affordable area?
      The Big Island is way cheaper.

      Reply
      • Meh, didn’t you say that you wanted to spend down your money? I think Oahu could work (if nothing else, maybe an interesting blog post). I did a little Zillow search and the pricing on places is weird. Some cheap, but with huge HOA fees.

        Didn’t look at the big island much.

        Reply
    • Lazy Man, I figured we will pay whatever is the tax rate when we are forced to withdraw the RMD. Our base taxable income will be about $168K (pensions and SS) in the future and I hope we can still be within the 22-24% Federal bracket but who knows in the future since it may even be over 30+% depending on the government. What ever will be will be. I will speak with my accountant when the time comes.

      Reply
      • I’m a older than you and face a tsunami of RMDs in a few years. I’m doing Roth conversions. Initially I filled whatever tax bracket I was otherwise in. Last couple of years I’ve converted so that total income including capital gains = 250K since above that there’s a ~4% investment income. (This surcharge is not indexed for inflation so it will apply to more and more of my capital gains as time goes by.)

        You should at least fill your current tax bracket with Roth conversions since you income will go up.
        s

        Reply
  8. man, that was an excellent interview. it’s a little odd that i just wrote about the pension cliff a few days ago and this illustrated the point to perfection. work one more day until age 55 and the pension doubles! wow. that was also a fantastic tutorial on fixed income and individual bonds. good luck going forward.

    Reply
    • Freddy, Thanks! I just read your Pension Cliff post and it sounds like our company! It sucks that you missed the cut off by that much. I also forgot to mention in the post that Jane and I along many other employees missed the cut off for dental retiree coverage since we were not 50 at the time. Many people were pissed but couldn’t do anything about it. We have to pay for our own dental.

      Reply

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