Retirement Planning: How One Couple Retired Early

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.

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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.

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