How I Maxed Out My Retirement Savings While Making $28,000


person balancing a checkbookAfter my first summer job as a day-care assistant in high school, I followed my father’s advice and opened a Roth IRA with a $250 deposit and rosy dreams of retiring at 30 years old (hey, I was 16!).

Being somewhat of a perfectionist, I didn’t take this responsibility lightly. I knew from my dad’s ongoing retirement lectures that to retire at all, I would probably have to contribute significant money for years to come.

With that in mind, I made a promise to myself: As soon as I got my first salaried job (that would of course net me six figures per year and be hopelessly fabulous), I would start maxing out my Roth IRA. Between the time I opened the account and the time I started that job, I would contribute what I could, which ended up being another couple hundred dollars each year. While it wasn’t much, every dollar was a dollar closer to being able to retire.

RELATED: 5 Things I Learned From Part-Time Jobs

Flash forward seven years, when I landed my first salaried position as a PR associate for a gross income of $28,000—which, after taxes, left me with just under $2,000 per month to live on. Needless to say, my career was anything but “six figures and hopelessly fabulous.”

It’s hard enough to just get by on $28,000 per year in Atlanta—even harder to save the just around $420 a month it would take to max out my IRA at $5,000 per year. (The 2016 limit is now $5,500 per year.) I knew that I’d have to put forth herculean effort to achieve this goal, but I somehow made it happen, and I’ve managed to max out my Roth IRA three out of the past four years. And, despite the fact that my salary is nearly double what it used to be, I still live my life by the principles I share below.

If you feel like I did—like you couldn’t possibly save for retirement, because you just don’t have any money—you aren’t alone, and it isn’t impossible. This is how I did it, and how it may be possible for you too.

1. Change Your Priorities

The truth about living on a small salary is that you should prioritize what you truly need and want, because a limited amount of money only goes so far. If you don’t prioritize actively, you will probably do it subconsciously, meaning you’re likely to prioritize what feels good and is convenient, rather than things that require greater planning.

RELATED: 6 Times We Tend to Overspend (and How to Stop)

For my first year in my salaried job, my priority was to max out my Roth IRA. This was no mere dream, or a hope that the money would show up somehow. It was a deliberate choice. Making saving a priority (the priority) meant that not only did I cut back on the obvious financial drains like dining out and clothes shopping, but I had to overcome my subconscious priorities, the ones I didn’t even realize I had—like maintaining appearances.

Six months into my new lifestyle, one of my girlfriends got married out of state and invited me to the nuptials. I totaled up the cost of the weekend affair, including plane tickets, hotel room, rental car, food and gifts: roughly $1,500. It would have been so easy to say yes, suck up the costs and go have a good time. I wanted to do what was expected of me by the bride, my friends and my ego. But I also knew that it would take away from honoring my priorities.

RELATED: I Can’t Afford My Friends’ Weddings

So I didn’t go. I saved instead. The bride was understanding, but it didn’t soften the blow I felt to my ego. With mixed emotions, I sent along a card and a gift certificate to a store on her registry, knowing in my gut that it was the right thing to do. When you have decided that saving is a priority, your goal may come at the expense of some obvious—and some not-so-obvious—lifestyle choices. You should prioritize saving anyway.

  • nuna

    What a nice article. The writer now makes twice as much as her original $28000 salary, but managed to save fully for her retirement- While sacrificing. I get tired of seeing the comments from people on other Learnvest articles that say- “Well, must be nice to make $50K a year” “gee if I made that much, I wouldn’t have trouble saving either”. The truth is that I know people that make 20K and others that make 70K. The amount doesn’t indicate money smarts. For instance, the 70K earner might go buy a fancy new vehicle and then also be up to the eyeballs in debt. I went to college for 4 years, lived off 18K a year (luckily I had a full ride), and managed to graduate with 20K in savings. It is absolutely possible to save money on a low salary. I love helping others with their budgets, because I can find ways for people to save no matter how little they make. However, it may require a little discipline.

    • Leah Manderson

      Thanks for your kind comment, nuna!

    • shannon4peace


  • Lola

    And thank you for mentioning that you sometimes felt disconnected or left out! So many of these articles make it sound as if it were a breeze, when the truth is, you’re sacrificing the right now for a better future. You might know you’ll be better off in the long run, but it doesn’t mean it’s easy now.
    Good article!

    • Leah Manderson

      I think you’re right, Lola, there do seem to be a lot of people who look back with rose-colored glasses about how all the sacrifice was strangely beautiful but totally worth it. It was worth it, sacrificing today so that I’m well-positioned for a bright future, but there are still some times I wonder what I missed out on. But I like to think the best is still yet to come :)

      • Carol F

        It sounds like you’re going to “miss out” on an insecure future full of unknowns, debt, and worry. As someone who has always contributed to a 401(k), but never before maxed out, I find you inspiring. I make about 3x’s the amount stated in the story and I still only manage to contribute about 10% into my 401(k). One of these days, I’d love to max out!
        First out the gates though: paying off about 8k we slipped into debt while the significant other was out of work for the past year, and the 6 mo of savings for emergencies. If I can get those out of the way, then maxing out, here I come! (Thanks again for your wonderful story).

      • shannon4peace

        indeed! the best is yet to come!

  • Lynn

    It sounds like you have to give up an awful lot (a friends wedding!) to save for a life that is 40 years in the future. What about the present? I mean what if something happens before then, what if you aren’t able to move around when your 60? I want to enjoy life now while I can, and also have money for when I retire. It sounds like you can’t have both.

    • Nuna

      I suppose it was an opportunity cost. She traded missing out on a friend’s wedding that would of represented 7% of her annual take home pay (for just one weekend!) to help her secure her financial future. She still sent a gift and her well wishes. I would rather forgoe an expensive outing then not be able to secure a comftorable future. What if she ends up living to a 100? Then what? Perhaps now that she is earning a little bit more she would make a different financial decision? 50K vs 28K makes a difference when it comes to priorities. Leah did mention that she now does go to concerts, weekend trips, etc.

    • Leah Manderson

      More likely than not, I WILL be around when I’m 60…even longer! And I don’t trust the government to have the support systems it does today (i.e. Social Security) to fund my retirement lifestyle. I believe that responsibility is mine, and I take it extremely seriously. I refuse to end up in poverty in my old age. There’s a stat I read once, that basically said 80% of elderly Americans in poverty are women!
      Imagine that. Imagine the last years of your life scraping by, living off your children’s dime, and not being able to afford anything other than basic necessities.
      I’d rather skip the wedding now, and put that $1500 into savings (and even earning returns, too!).
      Also, during that time, I could NOT have afforded both a present life, and a future life. I intentionally made the sacrifice. Now, however, I make more money, and I CAN spend both for the present and the future. Keep that in mind!

      • nuna

        Leah- I love that you are answering posts btw. I love budgeting and saving money. My peers are not so good at that… They enjoy drinking, nice vehicles, excessive shopping, etc. I figure that for every dollar I save, invest, etc- I can make returns. For instance, I saved $35K to put as a down payment on a duplex. I will be making a 20% return on investment immediately. I will then have passive income that will continue to build. I want to be able to live off of investments eventually and retire at 42 (when I get out of the military). I currently will be pulling in an additional $2850 a month based on the sacrifice I gave earlier. (no smart phones, no cable, no new cars, etc). That being said, I still treat myself to massages, nice clothes (I don’t need a lot though because I wear a uniform everyday), and quality food.

        • Leah Manderson

          I struggle to treat myself to nice clothes and massages (I’m still reeling from a few years of resisting my feminine beauty desires), but I definitely buy quality food from a local farmer’s market. After all, I do plan on living a long time! ;)

          • Nuna

            I understand how you feel. I went four years when I was in college without buying wants. I literally did not buy new clothes for that long… I was frugal to a fault. I forced myself to go on a vacation to Mexico and spend money on myself. I find a lot of joy in being a minimalist. I only have the things around me that I truly enjoy and use. I don’t have guilt for purchasing items that I wanted and never used. It is all about finding a healthy and happy balance. I finally started treating myself after I read the article on Learnvest about the 50/30/20 plan. I altered it a bit and challenge myself on the proportions. I started with must pays at 50. Savings at 30. and wants at 20. I currently have must pays at 40. Savings at 40 and wants at 20. I hardly use my wants proportion and I have a surplus of a couple thousand. I think I will use it on a nice trip to visit family on the East coast…

    • bd

      I find this comment hilarious. She gave up one weekend with a friend–not a friend. And truth be told, she probably wouldn’t have gotten to see the friend that much anyway since brides have a lot of demands on their time during their wedding weekend. It might be much more meaningful to take the couple out to a small dinner some other time when they happen to be in the same city to celebrate.

      While it’s great when you are able to join in on someone’s wedding, people have to stop feeling like it’s mandatory or a slight not to do so. It’s just a wedding and really that’s something between the bride & groom. Sorry for the bit of a rant, but I think I’ve read one too many articles of people slipping into debt to be a bridesmaid in 15 different weddings or traveling around the world to destination weddings. If you can do it without financial hardship, great I’m all for it. If not, send a gift and continue your friendship in other ways.

    • Raziel

      I totally agree. You need to have a healthy balance. It’s good to plan for the future, but thinking too much about the future will cause you to miss the beauty of the present. And the future is never guaranteed.

  • Katie

    I love this: “The final thing that really kept me in sync with my savings goal was to avoid shopping—not because it was a budget-buster, but because it fostered a sense of not-enoughness.” I have also found that the rush that comes from buying new things is fleeting!

  • Jjbucket

    I appreciate your honest perspective and advice on how to plan responsibly for the future without making a low salary an excuse not to save. I am curious though if you were also paying off student loans? Personally I would love to be maxing my retirement savings, but have student loans I am also paying on and it’s difficult to find balance between the two. It feels almost impossible to meet all of my financial goals on my meager salary, and I’m curious to know how others have dealt with this.

    • Leah Manderson

      I did not have student loans to deal with, since I qualified for the Georgia Hope Scholarship, which paid for my full tuition for 4 years (I dont think it still pays this much!).

      However, I’d like to say that the point of the article wasn’t that I maxed out this account, but the psychological and financial strategies I used to achieve a really aggressive goal. You could use these ideas to pay off big chunks of your student debt if that makes more sense for you!!

  • Cat

    I think her next goal should be to max out her 401k if she has that option. Just an IRA may not be enough these days

    • Leah Manderson

      Hi Cat,

      That’s a really great point.

      At the time, my company didn’t offer ANY benefits–not even health or dental insurance! Now, I work at a company that does offer a 401k program, in which I actively participate.

      • Grumpy Alum

        That’s good to hear – and if you haven’t already (I’m guessing you might have since you seem to really have it together, but to put it out there for other readers as well!) be sure to check out the relative benefits of different tax treatments for various savings methods so you can allocate your savings to their best effect. 401K or IRA vs the Roth versions of these is a first big decision to make – if you’re saving a lot but not making much, it may make sense to roll some over to Roth and take the tax hit while it will be lowest. Then, prioritize your investments – a good strategy might be 401k/403b plan to meet the maximum company match, if any, then max out an HSA (which you can save for medical costs in retirement, including medicare, and is entirely tax-free), then IRA/Roth IRA, then finally the rest of your 401K (as these have tighter restrictions like minimum distributions once in retirement) if you still have more left to save. Keep up the good work and you’ll be able to retire comfortably at 50!

        • Leah Manderson

          What a comment! Haha! Yes, I am aware of the tax implications of all of these (I’m in “financial planner school” after all!), but this is something others may be interested in. I have committed for the next few years to really get chugging on the pre-tax benefits of the 401k, but, I do believe in tax diversification just as much as risk diversification. We don’t know what will happen to tax rates in the future!

  • Raziel

    I think it’s very important to have a goal to save for retirement, but it’s also important to live your life in the present. Don’t stretch yourself so thin that you never leave your house and never eat anything else but ramen. Who knows if you’ll even survive to retirement age anyway!

    • Emily

      I spent two years in grad school eating pb&j and beans and rice, working full-time and going to school full-time, with a $2/month “wants” budget because I just didn’t have the money. Unexpected side bonus: it reset my sense of what’s necessary, and made “normal frugal” seem really luxurious. Now living on $20,000/year in DC feels kind of rich. I’d highly recommend a year or two of scrimping- I think it actually increases happiness (even in the relatively short term).

    • Leah Manderson

      I’d like to reiterate that it’s more likely than not that I WILL live to retirement age. I hate to say it, but I think it’s a cop out to refuse to plan for your future because of the chance that you won’t live long enough. I’m banking on a long, healthy life. Literally.

      • RoseJB

        Well played.

  • Grumpy Alum

    To sum up this article, “when society tells you to spend money, learn to be okay with saying ‘no’.” Self-discipline is a high-yielding investment. Good job to the author for her foresight and uncommon self-control!

  • Jenna

    Thanks for writing this. I’m so fed up with the current state of things – our government spending, the way my friends and co-workers encourage debt instead of saving. I really need support and motivation to knock out my student loans and I think you’re exactly that! I look forward to your newsletter.

    • Leah Manderson

      Hi Jenna,
      I’m so happy to hear that you saw this as motivation, and I’m so thrilled to have you on my newsletter. I do think that in order to achieve really big goals, you have to be okay with being “different” from the majority of people. Once you’ve made up your mind that you’re knocking out your student loans, the “not-so-good opinions” of your co-workers and friends won’t matter anymore :)

  • papillon

    It’s so funny to read these financial articles written by young bloggers, who attempt to write from the perspective of someone with decades of experience. In financial terms, four years is a blip.

    • Leah Manderson

      Hi Papillon,

      This was a goal for a single year, and so it was a year’s worth of experience–and, for what it’s worth, these were things I really experienced, did, felt and learned. I didn’t try to represent having decades of experience.

      Also, I think you can get perspective over a variety of periods of time. If you were to train for a marathon, and it took you 6 months, you can reasonably gain 6 months worth of relatable experience. You wouldn’t say, “I trained for a marathon, but have nothing to say about how I did it!” If you were a marathoner for 6 years, you might have different insights, but that doesn’t negate the life lessons you learned over the course of 6 months.

      Anyhoo, I always expect that there will be a certain amount of people who don’t like what I write, but I hope I’ve swayed you a little to reconsider the piece in a new light.

      • papillon

        I did not say I did not like what you wrote. But I expected a different article based on the title. For many people, $28k is not just a starting salary, it will be their salary for a long time. There are few resources for thriving on lower incomes so I’m always interested in articles that broach the topic.

        Good for you on setting a goal and achieving it. Others who are also in a similar, temporary situation will surely find your tips helpful.

        • Leah Manderson

          Disciplined budgeting, ruthless prioritization, automating your finances and simplifying your life are LIFELONG habits that are the foundation for achieving ALL financial goals–no matter what your salary.

  • Cathy

    Congrats on your success! I just wanted to point out- there’s no need to be deprived of new great reads when you’re on a budget- try the library! Many also offer free DVD ‘rentals’, as well as loan music CDs and passes fro reduced/free entrance to many local attractions. No need to feel deprived in the entertainment department if you utilize the public library!