Free at 40
by Donna Rosato

February 22, 2008

The Nielsens planned to retire early from the day they got married. Now they've actually done it—and just might be able to make it stick.

Eighteen months ago, Todd Nielsen was stationed at Balad Air Base in Iraq, 55 miles north of Baghdad. It was Nielsen's second tour at Balad, where he was fire chief, putting out blazes amid the daily attacks on the base. But the worst part of his deployment wasn't the mortar fire around him or the sandstorms or the boredom at night. For Todd it was knowing how much his wife Julie, a master sergeant stationed at an Air Force base north of London, and their three children—Kayla, Colin and Annika—worried about him.

They're not worried anymore. Last July, after more than 20 years of service—a period in which the family moved 15 times, lived in four countries and endured three deployments—Todd, 44, and Julie, 40, retired from the Air Force. Now they live in a four-bedroom house on a quiet cul-de-sac outside St. Louis, exulting in the ordinariness of their life. Every morning Todd cooks a hot breakfast for the kids before school. He and Julie are there to greet Annika, 9, when she dashes off the school bus every afternoon. They can attend all of 11-year-old Colin's soccer games, and Julie has time to make hair ribbons for 13-year-old Kayla's middle school cheerleading team. The couple's biggest stress these days? Helping the kids get through the mountain of homework they have each night.

What's unusual about the Nielsens' life these days isn't their decision to leave the Air Force to create a more stable life for their family. It's common for people in the military to retire after 20 years, when they become eligible for a pension and lifetime medical benefits. But usually those ex-military people go on to jobs in the private sector. Todd and Julie, on the other hand, don't plan to work again. Ever.

For most families, quitting work for good in your forties, especially if you have three children bound for college in a few years, is the stuff of sheer fantasy. But for Todd and Julie, it is the fruition of a long-term plan made possible by two decades of frugal living and serious saving. "When we tell people we're retired, we get one of two looks," says Todd. "First is the 'Oh sure, you'll be bored in a few weeks' look. The other is almost disdain, as if it's irresponsible of us to retire this young and we won't take care of our kids properly."

The Nielsens are out to prove the naysayers wrong. But they do face some serious financial challenges to their goal. Since they left the military, their income has dropped by more than half, from $127,000 a year to just $58,500, so they have to watch every penny—they don't buy much beyond the necessities and whatever they do buy is always on sale. Another concern: They don't have any money earmarked for college for their kids.

True, while they were in the military they managed to save an impressive $400,000 for retirement, which is far more than most couples their age have. But that nest egg has to last them 40 or 50 years. "I know we have all this money, but sometimes I still feel broke," says Julie. "We're still clipping coupons, and I worry whether our savings will last."

A ROCKY START

Todd and Julie are keenly aware that financial security can be an ephemeral thing. Both were raised in middle-class families—Todd in Minnesota, Julie in California—but saw their standard of living drop dramatically after their parents divorced when they were teenagers. When Todd's parents separated, his mom had to go to work for the first time in her life and money was tight. Todd recalls being so hungry he would wait in the driveway on the day his mother got paid and went grocery shopping. When he was 16 he got a job in an Italian restaurant so he could eat meals for free. After high school Todd went to college in Corpus Christi, studying criminal justice for two years. He worked in an auto-parts store to pay for tuition, food and rent but still struggled to cover his expenses. At 20 he withdrew from school and enlisted in the Air Force.

Life was also more difficult for Julie after her parents divorced. Though she and her siblings never went hungry, they moved from a house to a small condominium and there was no money set aside for college. Unsure of what to do after high school, she joined the Air Force at 19, training to become a dental assistant.

Julie and Todd met in 1988 when they were stationed at a base in Okinawa, Japan, and got married just nine weeks after their first date. They shared a yearning for financial security and a family and vowed to do everything they could so their children would never worry about money as they had growing up. They knew the military could help provide that safety net, especially if they served 20 years and qualified for pensions. They also knew that a military pension alone wouldn't be enough to fund a comfortable retirement.

So from their first days together Todd and Julie focused on saving money. They agreed that any purchase over $100 had to be approved by both of them. They ate at home instead of dining out, drove used cars, scouted out sales, bought clothes at thrift stores and didn't take vacations. "We focused on how little we could spend and put the rest in savings," says Todd, estimating they managed to set aside 35% of their income. Julie says the adjustment was harder for her than for Todd: "I was an impulsive shopper and was used to spending my whole paycheck."

Investing their savings—first in mutual funds, later in individual stocks—became Todd's hobby. Instead of playing cards or watching TV during downtime at the fire station on base, he read investing books. Within two years of getting married, they already had a portfolio worth $40,000.

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The opinions and views expressed in this publication are for general information only and are not necessarily those of Mutual of America Life Insurance Company.

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