By most people’s standards, I came late to the retirement game.
The light bulb didn’t go off that I needed to start investing for my life after work until I was 48 years old. It was 2001, and I was a single mother of a teenage daughter, Hope*, living in expensive Southern California on a schoolteacher’s salary.
I was dating a fellow educator, Don*, and while on a hike one day, the conversation turned to money. He was going on and on about his personal stock holdings, his pension, how he was maxing out his 403(b) and how he owned an investment property in addition to his primary home. Then he turned to me and asked, “What are you doing about your retirement?” My answer: “Nothing.”
My immediate reaction was, “What’s wrong with me?” I always considered myself to be a smart person, a feminist even, but a man was reminding me that I needed to think about my financial future. On top of that, I was a journalist in a past life, and knew how to dig for information. Yet I had never bothered to educate myself about my finances.
How the Past Nearly Bankrupted My Future
A lot of that had to do with the fact that I was a single mom just trying to make ends meet, so I was pretty much living paycheck to paycheck. Investing for the future wasn’t part of my reality. I had also been in some tumultuous relationships that had a severe impact on my life, both personally and financially.
Prior to moving to California, I had been a journalist on the East Coast and was financially comfortable. I owned my own home, and even held some stock options through my employer. I had been in an 11-year relationship with Hope’s father that ended badly when she was a toddler, and although we never married and he never supported us financially, he sued me for custody. I became embroiled in a bitter lawsuit and sold my house, cashed in my stock, and basically went broke trying to keep custody of my daughter.
The man with whom I had my next long-term relationship did support us as we started our lives over in California. He paid the bills and even did my taxes, and eventually we held some businesses together. But when that relationship went south, I was left with about $3,000 in business debt that I owed him, which took a year to pay off. These experiences left me feeling scared about money because I realized I wasn't prepared to deal with the unforeseen.
Starting From Scratch
That’s when I started to teach to earn a living. I wasn’t making much — my first job teaching high-risk students only paid $20 an hour — but my past taught me that I had to be in charge of my own financial life, regardless of my situation.
I think that’s why the conversation about retirement embarrassed me at first — but ultimately, it proved to be an inspiration. Don and I were close in age, but he was so far ahead of me when it came to investing for his future. Our relationship ended shortly thereafter (the breakup had nothing to do with money), but I’d already hit the ground running, trying to make up for lost time.
I started reading financial magazines and money columns in newspapers. I wanted to begin saving right away, but I didn’t have much to put aside at first. To open a Roth IRA with one of the major providers, I needed to start with $1,000, which I didn’t have. So I opened an IRA with my credit union instead, squirreling away $100 a month. Then, I signed up for my school’s 403(b) plan, investing just $50 a month. It wasn’t much, but it was all I could afford at the time. My 403(b) contributions were automatically deducted from my paycheck, so I never missed the money.
To open a Roth IRA, I needed to start with $1,000, which I didn’t have. So I opened an IRA with my credit union instead, squirreling away $100 a month.
Although I was diligently investing what I could, two or three years into opening my 403(b), I noticed my money was hardly growing. The only investment option I had when I opened the account was variable annuities. I remember the salespeople selling the plans, and like other teachers I knew, I had fallen prey to their tactics. And it didn’t help that, as in many other school districts, we had few retirement options to choose from.
I didn’t know at the time that variable annuities were laden with high, hidden fees and offered lousy returns. When I realized I wasn’t getting much growth, my reporter’s instinct kicked in. I started reading about 403(b)s through an advocacy website called 403bwise. I called my provider to ask what the fees were and how much commission my salesperson was making. I could never get a straight answer. And when I asked about taking my money out, I learned that there were would be a high surrender fee, somewhere between $600 and $700.
A Painful, But Positive, Course Correction
Fortunately, by then, better providers became available, so in 2004 I started a new lower-fee 403(b) that invested in mutual funds with Vanguard and let my original one sit. The problem, however, was that changes in certain IRS rules shortly thereafter prevented me from investing directly with Vanguard. So just four years after I opened that account, I had to open a third 403(b) with an insurance company, although I could invest in mutual funds.
Long story short, it was hard to know exactly how much my investments had grown because the accounts were so scattered. I just tried to focus on upping my contributions as my salary increased. By 2004, I was putting away $1,000 a month, and by 2007 I had reached $1,300.
During this time, I was also paying for Hope’s out-of-state college tuition, so I had dueling money priorities. My goal was not to leave her burdened with too much debt. Getting promoted and moving into the administrative side helped. By the time she graduated, my salary had reached the mid-$70,000s.
I also took advantage of times when I found myself with fewer bills. When I moved to a retirement community, I saved $500 a month on rent. That “found money” helped a lot with Hope's tuition. And after I paid off my car, I started putting that money toward retirement. We did have to take out some federally subsidized loans, but ultimately, Hope only graduated with $15,000 in debt, which really isn’t that bad.
Returns I Can Be Proud Of
By 2011, I had finally consolidated all my accounts into a single, low-cost 403(b) with TIAA-CREF, and then rolled that money into a traditional Vanguard IRA when I retired that June. (I had to stomach the surrender fees along the way, but it was worth seeing everything consolidated.)
The real growth began when my money was finally in one place. I was invested primarily in balanced index funds that were managed based on a 2015 target date (I knew I didn’t want to touch that money until further into my retirement). In 2011 and 2012, I saw more than 10% growth in my portfolio. And in 2013, it grew more than 13%. That’s pretty damn good.
Initially, it didn’t seem possible to retire that early. But I was burnt out from being an educator, and I wanted to move to Central Texas to be closer to Hope. I crunched the numbers and figured out that I could live off my pension in Texas (but not in pricey California), and supplement my income with some freelance writing and consulting for my old school district.
The real growth began when my money was finally in one place. In 2013, it grew more than 13%. That's pretty damn good.
Being the queen of frugality also doesn’t hurt, and in a few years I’ll be able to collect Social Security. I also still had that tiny Roth I started so long ago, which now has about $3,000 in it — I had stopped contributing to that in favor of the tax benefits of my 403(b), but I never forgot about it. The original 403(b) debacle aside, I’m pleased with my investment strategy.
My portfolio is currently about 50% stocks and 50% bonds, which is as risky as I’ll get — I’m a pretty conservative investor, and I’m OK with that. In 12 years, I’ve managed to accrue slightly under $200,000 — I even saw pretty good returns during the 2008 recession, and I’ve learned to stay the course. Between my pension and Social Security, I don’t expect to have to tap those funds until I’m required to at age 70½.
I'm so grateful that I can share what I’ve learned from my experiences with others. I attend a local women’s investment group, where we meet monthly to discuss finance topics. I always tell folks to educate themselves at all costs, or else you’ll be a sitting duck for scams. And of course, my story lets people know it’s never too late.
But my biggest motivation has been my daughter, who is now married and expecting twins. If there’s one thing I’ve always strived for, it’s this: I never want to be a burden to her in the years to come. And we’ve both learned from my experiences. In fact, I’m proud to say that she’s the one in charge of her family’s finances.
*Names have been changed.