Post FI Notes 005: Expat Living in Panama

After a recent run of anonymous healthcare professionals baring all for a full-frontal financial centerfold, I bring you an interview with a friend of mine who is neither in healthcare nor anonymous.

His name is Jim, and you may be familiar with his writing at Route to Retire. Like me, he retired from his career job at 43, and started spending time with his family outside of the States. Unlike me, he sold darned near everything and set out to live full-time in the mountains of Central America. When given the option to live in Panama, you might as well jump, right?

How did that go? What has he learned? Will they stay away long-term? Read on to learn more about the ex-pat life for Jim and his family of three.

If you’re interested in participating in one of three interview series, please download the most appropriate form for your life situation: FIRE Starter, FIRE Crossroads, or Post-FI Notes. To see other posts in the series, visit our Q&A archive.

 

 

Getting to Know You

 

Hi everyone – I’m Jim! I retired at the age of 43 at the end of 2018, and I’ve been enjoying every minute of the extra freedom with my wife and daughter ever since.

We’re from Ohio but we’re probably most well-known for our move to Panama a couple of years ago (did you see us on House Hunters International?). We moved here as an adventure once we were no longer tied down to our jobs. It’s been an incredible part of our lives!

With a net worth of just over $1.6 million, we don’t have the cool fatFIRE title like my friend, Leif here at Physician on FIRE, but we do have enough money to cover our needs and wants without a problem. However, because his net worth is higher, he’s obligated to buy beers next time we run into each other. Sorry, Leif, I read that in the bylaws somewhere and rules are rules! 😉 [PoF: I think I can afford some $1 Panamanian cervezas.]

 

You’re financially independent. About how much does your household spend in a typical year? How much could you spend while still abiding by the 4% rule?

We initially thought we’d be spending around $40k-$45k/year when we retired at the end of 2018… yeah, we’re not big spenders! Unfortunately, we were essentially guessing because we knew we were moving to the country of Panama right after I retired. We’re all about the adventure! But that meant we didn’t know for sure what our expenses would be here (though we had a general idea based on a lot of research).

Once we got here and got settled, we had some jumps in costs because of things like starting fresh after moving. Plus, once the COVID-19 pandemic hit, that made for some interesting twists. We ended up taking a humanitarian flight out in July of 2020. Then we found ourselves “stuck” so we bought a used Honda Pilot and went on a 40-day road trip before returning to Panama in October of 2020.

In other words, life happens and you can’t plan exactly what’s going to transpire. However, we’ve been spending around $50k annually over the past couple of years.

 

Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?

We have a household of 3 – me, my lovely wife, Lisa, and my awesome 11-year-old daughter, Faith.

As I mentioned, we’re living in the beautiful town of Boquete in Panama. We’ve been here since the summer of 2019 and it’s been such a great experience for all of us.

We’ve also been homeschooling our daughter for the past few years (Lisa’s doing most of the work there).

One problem we have here is that Lisa and Faith tend to get homesick even though we head back to Ohio 2-3 times a year (I’m too mentally tough for that!). The other obstacle is that this is mostly a community of older ex-pats. Although Faith’s got a wonderful friend here, we want to make sure that she’s surrounded by other kids. She spends probably too much time around me and Lisa and, although we love that, she needs more friends around.

So, although it’s been wonderful, we’ve decided to move back to Ohio in the spring of 2022. We’ll be closer to family, our friends, and to Faith’s friends, which will be nice.

 

Are you still working? In what career? Did your work schedule or attitude towards work change once you knew you were FI?

I started as a Systems Engineer in 1999 (brought on to fight the deadly Y2K bug!). After a few years, I became the manager of the engineers and continued to work at the same company until I retired at the end of 2018. Although it’s pretty unusual for folks to stay at the same company for so long, this was a great employer who really had his employees’ interests at heart, so I stuck around for almost 20 years.

I enjoyed my job as an engineer more than that of the engineers’ manager though. For one, I love technology and problem-solving – it’s fun to me (I’m sure a lot of you are cringing while you read this!).

But the other issue is that I’ve always seemed to find my way into middle management positions over the years… and they suck. It’s an under-appreciated position where you spend your day striking a balance between taking care of your employees as well as your employer’s demands… all while ensuring everything gets done. I feel like I did a great job over the years but it’s still a stressful position to be in for decades.

So, yeah, I left as soon as I knew we were financially independent.

 

Was financial independence a long-term goal of yours? Did you think you might retire early or be able to do so when you first got started in your career?

Like many folks, I just figured you worked until you’re old and gray and hoped you could retire in your 60s. I didn’t even know that early retirement was a real thing unless you were swimming in a vault of cash like Scrooge McDuck!

Things changed though in 2010.

My daughter was born that year and I took off a week from work. When I had to go back after that, it crushed me. She was my world and I wanted to be with her as she grew up. Although I still did my job and did it well, I no longer loved it – I didn’t want to be there. I put on a great show, but I was miserable.

A couple of years later, I randomly ran across Joe Udo’s blog Retire by 40 and was shocked. Here was a guy around my age… who worked in IT… with a wife and a kid around Faith’s age… and he retired early! Wasn’t this only a possibility for insanely rich people?

After a ton of digging into his blog and eventually enveloping myself into the world of FIRE (financial independence / retire early), I was hooked. This was my way out.

I talked to Lisa about it (probably too much) and she eventually got on board with the idea. I figured out all our numbers and came up with a game plan for retirement. I started the blog, Route to Retire, in 2015 as a way to chronicle the things I was learning and to help hold myself accountable. Not only did that work well, but it helped me become more ingrained in the community propelling me to learn even more and be able to retire sooner.

I retired from my job at the end of 2018 granting me the freedom to be around my family more and be a bigger part of my daughter’s life as she grows up… it’s been wonderful.

Thanks, for your blog and for opening up my eyes, Joe!

 

Investing

 

How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?

I try to keep my portfolio allocated to around 70% stocks, with the vast majority of it being in a low-cost total stock market ETF (VTI). We had a couple of rental properties over the years, but I just sold the last one (a duplex) in January of 2020 because of the crazy real-estate market. The place had appreciated to 50% more than I had bought for in just 5 years. Plus, I was ready to be done dealing with the aggravation.

I took the proceeds from the sale of the duplex and put it into a Vanguard REIT ETF (VNQ). This accounts for almost 10% of our portfolio.

The remainder of our portfolio consists of a bond ladder of BulletShares fixed-income ETFs and cash. These are structured in a way to provide us with a solid bucket strategy to help protect against needing to sell stock during a bear market.

 

Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?

I was fortunate that in 2021, I became a 401(k) millionaire. However, that accounts for about ⅔ of our net worth. Along with my wife’s old 401(k), that means the far majority of our wealth is sitting in tax-deferred rollover IRA accounts.

It’s also one of the reasons I needed to wait a few years before we retired. We needed to build up more money in our taxable and savings accounts to cover us for at least 5 years when the first of our Roth IRA conversions after retirement would be ready.

We’re in a very good position though because our spending is very low. We’ve been doing Roth IRA conversions each year at an incredibly low tax rate.

It’ll take years to get them done, but we’re in no hurry.

 

Do you have investments in an HSA? How about 529 Plans?

I love HSAs! I didn’t fully understand how valuable this account was for a while ,though. I haven’t been able to contribute since I left my job, but my account has still grown to over $42,000. I just leave it fully invested in the Fidelity ZERO Total Market Index Fund (FZROX) and watch it build up.

We pay for medical expenses out of pocket and I scan and save all receipts along with using a spreadsheet for tracking. We’ll be able to reimburse ourselves completely tax-free sometime down the line when we’re ready for it. Best account ever!

We also have a 529 plan for our daughter. However, in our case, I didn’t want to just pay for her education 100% – I want her to have a little skin in the game. Right now, the account is valued at just under $24,000 and I still contribute $125/month to it. That’s not going to go far with the prices of education nowadays, but I’m ok with that and I think she’ll do just fine.

 

What has been your best investment?

When I first started investing, I was pretty stupid (weren’t we all?!). But my thought was to buy individual stocks with companies I enjoyed as a consumer. Some worked out and some didn’t.

But, I made one amazing investment. I bought Amazon stock in the early 2000s for $67/share – yeah, you heard that right… $67/share!

Unfortunately, not only was I young and stupid, but I also didn’t have a lot of money. So I only bought 13 shares.

Regardless, as I write this, Amazon’s trading at $3,425.52/share! I spent a total of $871 on all 13 shares. I’ve sold 3 shares over the past couple of years to pull out my initial investment and to help bring down how much I have invested in a single stock.

But even after selling my 3 shares for a great profit, my remaining 10 shares are currently worth over $34,000! That’s a lucky win in my book.

 

 

Your worst investment?

I’ve been pretty lucky that I haven’t had an investment go too sour… but I’ve had some not-so-great winners. Here’s one example…

I bought my first rental property in my late 20s. I had read a couple of books and went to a seminar on real estate, but looking back, I really had no idea what I was doing. I bought an old house (about 100 years old) where everything would break and fixing or upgrading was a disaster because nothing was standard in those days.

It was also in a horrible location (location, location, location!). It was in a bad neighborhood where we even had a shooting happen right outside of the house.

When I bought it, I just factored in that rent should more than cover the mortgage, taxes, and insurance and we would be good. But, of course, there are other expenses such as the cost of repairs, vacancies, capital expenditures, property management, and so on.

Even so, I got pretty lucky. We had the same tenants in the place for almost 10 years and they paid their rent on time with only a delayed payment a couple of times.

Most years, we barely made much money on the property. But with depreciation, we were able to show a loss on our taxes each year so that was helpful.

In the end, the tenants moved out and had destroyed the place. Things were broken, I don’t think they ever cleaned in there, and they left so much junk in it.

It was at that point we sold it… at a loss. We sold it at about a 30% loss from what we bought it for over a decade before.

This could have ended so much worse and overall, I’d guess that we came out just slightly ahead from start to finish. We would have done much better by just investing this money in the stock market or in REITs.

But the key with “non-winners” such as this one is that I learned from them and that’s helped me to make better investments since.

My second rental property was a duplex we bought in 2015. I now comprehended the numbers better, understood the locations better, and helped spread risk on non-rent with it being a multi-family. This property cash-flowed extremely well for the years I owned it and was a really great investment.

Mistakes are good if you take a lesson from them and don’t make them again.

 

Post-FI Life

 

What do you like to do with your free time? How much free time do you have these days?

One of the things I pushed off for too many years was working out. I could say that I didn’t have time for it while working, but that’s a cop-out. We all know that whatever’s a priority will work its way to the top in life… and for me, working out didn’t spend much time at the top.

I always said that once I retired and had more time, I would start working out. Well, I retired and no longer had that excuse anymore… so I started working out.

I’ve been working out about 5 days a week now for the past three years and I’m in better shape than I’ve ever been. Here in Panama, it’s wonderful – just before 9am, I walk about 0.5 miles to the gym while admiring the beauty of Panama on the way. There’s a full gym here with rarely more than one or two people there, which I personally love. And then I jog back that half mile (I hate every second of running!). Working out has now become part of my routine and I’m extremely glad that’s the case.

Then, as I’ve said, my main reason for striving for financial independence was to spend more time with my family and be around as my daughter grows up. And that’s exactly how I spend most of my time. We hike, we play games and video games, we explore, learn together, go shopping, watch movies, and just enjoy time together. It’s a blessing that I’m extremely grateful for in life.

Of course, I also spend a fair amount of time working on my blog. I generally post about once a week, but between the writing, the marketing, the technical side, etc., I probably spend about 20 hours each week on it. It’s something that I enjoy doing, though, and once Faith gets a little older and no longer cares about hanging out with us, I’ll likely ramp up the time I spend on the site.

I also have a list of things I want to get to – hobbies and other passion projects. But most of those will also wait until Faith is older. I don’t want to get so busy that it takes time away from her right now. I probably have only another year before that daddy-daughter time starts fading fast.

 

Do you enjoy travel? Tell us about a favorite trip you’ve taken.

We love traveling. A couple of years ago, I would have said that cruises are my favorite vacation. I love being on the water (especially staring at the stars at night), traveling to different places, and enjoying the food and drinks. I’m ready to get on a ship just thinking about it!

But, I’d have to say that my favorite trip was a little unexpected. During the pandemic, when we came back to the U.S., we decided to take an awesome road trip. We bought a 2012 Honda Pilot with the intent to be able to occasionally sleep in the back of it. We got an air mattress to put in the back and brought camping supplies.

We covered a lot of the country on this trip and didn’t return for 40 days. Sometimes we slept in the back of the car, other times we put up our tent, and some nights we stayed in hotels or with family or friends.

Although this was a last-minute trip, it was phenomenal. We explored so many great places across the country, got to camp a lot (something we love), and were able to spend all this time together. We were in awe at some of the great sites, laughed together at some fails along the way, and created a ton of memories.

We had so much fun that we’re going to do something similar in the spring. of 2022.

 

 

Do you incorporate giving (money or time) into your post-FI life?

This has been something I regret. When I budgeted for our retirement, I didn’t even think about including charity into our numbers. I think I was just so determined to make early retirement happen that it area wasn’t at the forefront of my mind… oops.

But that doesn’t mean we don’t give to charity. We donated a couple of times to help the Panamanians here who were struggling to feed their families when the country shut down during the pandemic. And we give at other times as well… it’s just not as much as I’d like.

As our income starts to increase from my blog and from Lisa starting a part-time job (because she wants to) when we get back, I can see our giving increase as well.

In the meantime though, what we do have is time. And as that time together with our daughter starts to diminish, I’d like to start to do something more. The areas that bother me a lot are hunger and homelessness and I feel like I should be doing something big to help in that area. I haven’t figured out what that big thing is yet though. Until I do, I might start with volunteering for something like Habitat for Humanity once we return from Panama.

 

If retired, do you miss work? Do you get bored?

No and no.

I don’t miss work one bit. And no, I never get bored. In fact, that adage that you have less time in retirement seems to hold true. I don’t have enough time in the day and it caused me many sleepless nights for the first couple of years trying to figure how to get everything done that I wanted to do.

I’ve learned that balance is the key to life and that’s helped me tremendously. But if I could have my way, I wish I had more than 24 hours in a day!

 

What advice do you have for others hoping to achieve the financial success you’ve found?

Lisa and I are relatively frugal in general and we’re comfortable with that. However, I went down a path of super-frugality (is that a thing?) for about a year during our path to financial independence. I wanted to save every possible penny to reach FI faster. I needed to be done working and the sooner the better.

Big mistake.

It made all of us miserable. And honestly, how much did it count for? Let’s say we saved an extra $2,500 over the year because of that… not worth it. Plus, I spent so much time staring at the computer trying to figure out how to accelerate things that I wasn’t spending enough time with Faith… the reason I was trying to retire in the first place!

Luckily, I had a wake-up call so this only went on for about a year.

If you’re on the path to financial independence (particularly early retirement), don’t make that the finish line you’re trying to race to get to. It’s crucial to savor every day.

Yes, financial stability for your future is important, but what if you don’t make it to that day? Automate your savings and investments to make it count with a good personal savings rate of at least 20% (we were up to 60% at one point) and then enjoy the ride along the way.

Live for today and not just for tomorrow. Get the best of both worlds… it’s hard to lose that way!

 

PoF: Catch all the future interviews from those just getting started, at a crossroads, or at the end of their FI journey with a free subscription to Physician on FIRE.

 

 

 

I’ve shared my feedback privately with today’s guest. I wouldn’t want my opinions to influence yours. Please give your take in the space below!

Again, if you’d like to partake in a future Q&A, please download a FIRE Starter, FIRE Crossroads, or Post-FI Notes interview form.