Retired at 40

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.

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By Donna Rosato, Money Magazine senior writer

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The Nielsens have plenty of time for family - like sitting down to a breakfast home-cooked by dad...
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...or twirling around the ice skating rink.

(Money Magazine) -- 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.

Sticking to the plan

Those early years set the pattern for the next two decades. The Nielsens' goal, vague at first, gradually became more focused: They shifted from simply wanting to retire in comfort one day to wanting to retire early (although they didn't decide just how early until later), to wanting Julie at least to be able to quit as soon as she qualified for her military pension.

Looking back, Julie admits there were times she wanted to abandon their 20-year plan, especially once they became parents. The couple had struggled to have children and were married for six years before IVF helped produce Kayla, then Colin in 1996. Julie desperately wanted to stay home with the babies. By then she had eight years invested in her military career and staying on for another 12 seemed like an eternity. But Todd urged her to hang in, arguing that the kids would still be young enough to need her at home if she held off retiring until she'd served 20 years.

When Annika, a happy surprise, was born in 1998, going off to work every day became even harder for Julie. "It was gut-wrenching to drop her off at day care. They had to peel her off me," she says. A low point came when Annika was three and Julie had been in the Air Force for 14 years. Julie was studying for her master sergeant's exam and would return to the base after dinner and on weekends to study.

Promotions were critical to their plan - the higher the rank at retirement, the more lucrative their pensions would be. One morning Julie got a panicked call from Todd saying Annika was missing. The little girl was found a short while later wandering around the base, looking for her mom. "I felt so guilty I wanted to abandon our plan right there," says Julie.

But by then Julie was only six years away from retirement. Talking it over with Todd, she reluctantly agreed not to give up when they were so close to their goal.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.