Retirement Planning: How One Couple Retired Early
Maxing out retirement-plan contributions and maintaining a diversified portfolio helped these retirees build a well-funded nest egg.
Bob Parisi was determined to retire while he was still healthy enough to enjoy it. “My mom died at 63 because she was a diabetic, and diabetes runs in the family,” says Parisi. Now 61, he retired from his job as a data-processing executive for IBM in July 2012, when he was 59. He and his wife, Janice, 56, moved from New Jersey to Gilbert, Ariz., a Phoenix suburb where they had family ties. Their oldest child, Brian, had recently graduated from Arizona State University; their two other children are currently attending ASU.
How did the Parisis manage to retire early and send three kids to college? Throughout Parisi’s working life, he maxed out on his employers’ 401(k) plans, and he worked for large companies, including IBM, that matched contributions up to 6% of his salary. During his 17 years at IBM, he was able to invest 10% of his salary in company stock, which did very well. To diversify, Parisi invested in four New Jersey condominiums. He has sold three of them and plans to sell the fourth this year. And he left IBM with a lump sum of about $220,000 in lieu of a pension. Parisi’s seven-figure retirement savings account is worth about ten times his final salary.
Even with a well-funded nest egg, Parisi wanted to make sure his goal of early retirement was realistic. He created a spreadsheet to track all of his family’s expenses. He dropped the cost of his 80-mile round-trip commute, but he assumed most of their regular expenses would remain the same. He included tuition for the two children who are still at ASU; both have been approved for in-state tuition.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Parisi also had to budget for health care. He can purchase group health, vision and dental coverage from IBM. Premiums for the Parisis and their two college-age children cost $18,500 a year. Parisi is using money from a health care account established while he was working at IBM to cover half of the premiums; he’ll pay the remaining $9,250 out of pocket. The health care account has enough to cover half of his premiums until he’s eligible for Medicare at age 65.
While Parisi says he planned to retire debt-free, the couple ended up taking out a mortgage on their new home. Their financial planner, Jim Parks, of Ridgewood, N.J., recommended that the Parisis take advantage of low interest rates and the tax deduction for mortgage interest. Even with a mortgage, Parks believes the Parisis can make their savings last into their nineties, based on an annual inflation-adjusted withdrawal rate of 4% a year, plus Social Security.
Parisi’s advice? Rather than wait until fate happens, run the numbers—and if they work in your favor, take the plunge.
Haven’t yet filed for Social Security? Create a personalized strategy to maximize your lifetime income from Social Security. Order Kiplinger’s Social Security Solutions today.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
-
Stock Market Today: Markets Slip on Hot Inflation Print, Layoff News
Economic data continues to complicate expectations for Federal Reserve rate cuts.
By Dan Burrows Published
-
CPI Report Points to Gradual Pace for Rate Cuts: What the Experts Are Saying
CPI Inflation surprised to the upside last month but the disinflation trend remains on track.
By Dan Burrows Published
-
Medicare Basics: 11 Things You Need to Know
Medicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
By Catherine Siskos Last updated
-
Six of the Worst Assets to Inherit
inheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
By David Rodeck Last updated
-
403(b) Contribution Limits for 2024: Good News for Teachers
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Last updated
-
SEP IRA Contribution Limits for 2024
SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 a year.
By Jackie Stewart Last updated
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Last updated
-
SIMPLE IRA Contribution Limits for 2024
simple IRA The SIMPLE IRA contribution limit increased by $500 for 2024 and workers at small businesses can contribute up to $16,000 or $19,500 if 50 or over.
By Jackie Stewart Last updated
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
By Jackie Stewart Published
-
Roth 401(k) Contribution Limits for 2024
retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
By Jackie Stewart Last updated