BiggerPockets Money Podcast - 152: Reaching Financial Independence Despite a Very Late Start with Baby Boomer Super Saver

Episode Date: November 23, 2020

To say that Kathy from Baby Boomer Super Saver had a difficult journey ahead of her is an understatement. She was $70,000 in credit card debt, with a big mortgage, and a spouse that had a medical emergency. So how did she make her way to the millionaire retirement level? Through financial management communities like the FIRE movement, she was able to correct her spending faults, earn more, and invest most of her income into retirement accounts. Kathy put in the work to change her mindset about money as a whole, and reach for abundance instead of just survival. Now, Kathy teaches others how they can reach their retirement goals (even if they’re behind where they want to be) on her Baby Boomer Super Saver blog. Whether you’re just starting your career, or are a few years away from retirement, Kathy has some incredible tips on money management, maxing out retirement contributions, and being intentional with your money and your journey. In This Episode We Cover How to reach your retirement goals even if you start later in life Snowballing your debt so you can save more Changing your financial mindset to get where you need to be The 2 key ways to get your retirement savings up How catchup contribution accounts like the 457b plan can accelerate your investing Being intentional with your money while lining up your saving/investing with your values The importance of educating yourself and not relying entirely on others for financial advice And SO much more! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Dave Ramsey BiggerPockets Money Podcast 18 with Mad Fientist Check the full show notes here: https://www.biggerpockets.com/moneyshow152 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, show number 152, where we interview Kathy Lee from Baby Boomer Super Saver and hear her story of starting late on retirement savings, making just about every possible financial mistake she could make and still reaching financial independence to be able to retire early. Discovering all these other people, even though they were younger, who had retired early because they saved 40 to 60 percent of their income, that was really something that, like a light bulb moment, that it opened my eyes that, wow, there's another way to live. Hello, hello, hello.

My name is Mindy Jensen. And with me, as always, is my spending less than he earns co-host, Scott Trench. Thank you for saving the day with yet another original introduction, Mindy. Saving the day. Scott and I are here to make financial independence less scary, less just for somebody else. And show you that by following the proven steps, you can put you. put yourself on the road to early financial freedom and get money out of the way so you can lead your best life. That's right. Whether you want to retire early and travel the world, go on to make

big time investments in assets like real estate, start your own business, or simply catch up if you're feeling a little behind on the road to retirement will help you build a position capable of launching yourself towards those dreams. Kathy Lee and her husband always made good money, but life got in the way and they saved almost nothing. A freak accident put her husband in the hospital and left him permanently disabled. That was the wake-up call that they needed to stop spending, start saving, and get themselves financially healthy so that retirement could even be an option. Scott, I am super excited to have Kathy today because she is so inspirational. If I was in a position of not being able to retire, if I was in a position of, oh, I haven't saved enough for retirement,

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30-day trial at audible.com slash BP Money. Happy Lee from Baby Boomers Super Saver. Welcome to the Vigger Pockets Money podcast. I'm so excited to interview you today. How are you? I'm doing great. I'm so excited to be here. Thank you for having me.

I want to hear your journey of money because, spoiler alert to those of you who are listening. Kathy started later in her early retirement journey and her retirement savings at all. And this is a story that we have covered one other time, but it really needs to be told because like you say on your blog, if I can do it, you can do it too. And you did it from a position. Well, I shouldn't tell your story. I'll let you tell your story. Kathy, where does your journey with money begin? Thank you, Mindy. As you mentioned earlier, my husband and I didn't pay a lot of attention to retirement when we were younger. We knew it was something that we were supposed to do, but life always got in the way. And so we spent our money as we made it. We never really committed to

saving for retirement. We just spent our money on all the things and had a lot of fun. And we always thought there would be time later to catch up our savings or to save for retirement. And life doesn't really work that way because things happen. As you alluded, my husband had a medical emergency. He had a ruptured brain aneurysm in 2013. And he tried to go back to work, but he has short-term memory problems as a result and he was not able to do his work. So he was out of the job market and we had already been in bad financial shape most of our married lives. We've been married about 32 years now. And at the time, we had gone through some financial courses with Dave Ramsey, Financial Peace University, to try to figure out how to turn our money situation around. We did

end up completely changing our mindset about money before my husband had his brain aneurysm. So we were working our way out of debt. And then after he had his brain aneurysm, it was also, well, 2013 was like when you're trying to recover from the economic downturn in 2008. But there was just so many things our debt, the downturn, my husband didn't work for a long time. And then he went back to work and then immediately had the brain aneurism. So there was just, are a lot of things stacked against us. And you don't really think that you're ever going to have something like this happened to you. You don't expect to have a disability or, you know, you don't expect a pandemic, like in today's world. We don't expect something like that to happen. So being

able to save for retirement or have enough cash on hand to be able to survive something that's an emergency, we discovered firsthand how important that was. And so when we were, we were, we we were getting out of debt, we used all of Dave Ramsey's strategies such as cutting back our lifestyle and not going out to eat, making rice and beans, cooking all our meals at home, and cutting up all our credit cards. And to this day, we still do not use credit cards. But after we were out of debt, we realized we're really behind in our retirement savings. And Dave Ramsey had mentioned that you need to say 15% for retirement. We were already in our early 50s.

So if we were going to start saving 15% for retirement, we would have to work for 43 more years. And that just wasn't going to cut it. So I decided to start looking for ways to sort of supercharge our retirement and catch up for our retirement savings. And I thought maybe we could take the strategies from Dave Ramsey of really having that gazelle intensity to pay down debt.

Now that we had no debt, maybe we could use that gazelle intensity to supercharge our retirement savings. So I started looking online and trying to figure out, does anybody else do this? What are some good ways to do it? What are some other strategies? And I discovered the fire blogs,

which are the financial independence, retire early. And I started reading these blogs. Many of them were written by millennials, but I was amazed in story after story of people who had worked for 10 years, saved 40 to 60 percent of their income, and were able to retire in 10 years. They had enough money to retire. And I thought 10 years, we could do that.

So we started applying those strategies too. And we continued to save and take advantage of catch up retirement savings in order to really supercharge our retirement savings. So going back to the beginning of this, how much debt did you have when you first started working through your financial situation? What did that picture look like and what triggered maybe you learning about Dave Ramsey and generally getting better with your money? When we first heard about Dave Ramsey, we had the amount of debt that was just the debt that you're drowning in. We had multiple credit cards, probably eight to ten credit cards. We had a mortgage, a second mortgage. on our house and we were just drowning in debt. And there were many times in my husband's profession that he was out of work. He was a union carpenter commercial cabinetry and they don't work all the time. And his employer in that field, they don't even get paid on time by the contractors.

So it's just crazy that you don't get paid up front. But with all of the debt that we had, it became very depressing. We were trying to figure out how we're going to get out of it. And I found his radio show by accident. And I thought at first, and this guy is crazy. He's yelling at people. He's mean. But then I started to like the show.

And I loved hearing people do their debt-free story and scream that they were debt-free and they were getting out of debt in two or three years. So we started, you know, along that path and eventually took the financial peace class at a local church. I don't remember how much debt we had. It was something I wanted to just put in the back of my mind and forget about it.

but we did have a mortgage. So there was, you know, three or four hundred thousand dollars for the mortgage. We had multiple credit cards that were, they might have added up to maybe $70,000. So I'm not 100% sure how much debt we had. We did use all of the strategies that we learned from Dave Ramsey and we paid off a lot of debt. We used the debt snowball and did smallest to largest. What was that change like? Was it a hard, fast change that you made kind of overnight? Did it take you a couple of months to ease into the baby steps and begin making serious progress? What was that transition to, you know, kind of accumulating more and more of this debt drowning in debt to beginning to seriously pay it off? It was an overnight situation because in 2008, my husband

wasn't working. And I had a family daycare at the time. And my business dwindled down to almost nothing. And so I closed that business. I sold off all my supplies. I had an in-depth early child care program in my home. So I had a lot of good supplies. I sold them all off. We sold all kinds of other stuff, everything that we could. I took little part-time jobs. My husband tried to do that too. And I went back to social work, which was what I have a degree in. And so that provided some relief right away. And we stopped using credit cards and it wasn't easy, but we really didn't have any other choice. Okay. And around what year was this? Was this big change? Probably around 2008, 2009. Got it. Okay. And it sounds like you made a good amount of progress by the time your

husband had the health issue in 2013. Is that right? We did. We paid off a lot of of debt, but we ended up, even though we paid off so much debt, we couldn't do it all ourselves. My husband had been out of work for a long time and then had the brain aneurysm, and even though we paid off a lot of debt, we ended up having a bankruptcy, and we just, you know, had to use that to really start over. And we ended up losing our home, too. Bankruptcy isn't something that you want to go through, and we did everything we could to avoid it. But sometimes, you know, we're going to you might have to resort to something like that, which is what we had to resort to. And we ended up losing a family home, which is, you know, that's got a lot of emotional baggage.

Okay, so what I'm hearing is you kind of hit the jackpot and made every single financial mistake that you could. Your husband had a medical emergency. You had $70,000 in debt in credit card debt about, which is not insignificant. you had a mortgage. And yet, despite all of those things, you were still able to write the ship and turn everything around. That's huge. Yeah, we definitely had to change our mindset about money.

And it's changing our mindset that was key. That is really important. I want to focus on that for a minute. How do you change your mindset? And did you and your husband do this together? Did one of you lead the conversation? I was definitely the leader in this because I stumbled upon the Dave Riemc radio show first. I read his books.

I wanted to go to the class. My husband was completely against that idea. He didn't want to go to a class. He just thought we could do things on our own, but we had proven that we cannot do things on our own completely, that we needed some help. And so I had to find some way to convince him to go to the class.

And if he didn't like the first one, we wouldn't go back. But my husband is really outgoing and social. And I knew once he got to the class and met people that he'd be fine because he loves meeting people, he loves talking. And so we went to the class together. And I was right. And we did the whole class. And once we got in the class, we were both on the same page.

We quit using credit cards. And we're able to, you know, look at money in a different. way and look at what was important to us. We had to really look at how are we spending our money compared to what our values were. And we had to be more conscious about what's important to us and what we're going to spend our money on because why just fritter it all the way, which is what we had been doing? Kind of fast-forwarding a little bit to that, to the bankruptcy here. What year did that occur in? 2012. 2012. Okay. And so it sounds like coming out of that bankruptcy, is when you then began to, or following that was when your husband had the aneurysm,

is that right? He had the aneurysm right after the bankruptcy. Right after the bankruptcy. Okay. And so how did you proceed from there, given that, you know, those two devastating items that are happening to you all at once? When you face something like a death or disability, it really puts everything in perspective. At the time, my husband, he was.

I was working out of state when this happened, and so he was far away from me when this happened, and he was in a hospital. I did take a couple trips out to be with him, and luckily it was close to where my parents live, so they were able to help out. But a life or death situation puts everything in perspective. At the time, I was working at a social work job, and my employer told me that they were going to cut back everybody's hours. So not only was I the only one, you know, my husband's here. I don't know if he's going to live or die. And my employer is now saying, oh, we're going to cut back your income. So I figured this is not the worst thing that can happen to me.

The worst thing is that my husband would die. And so it's just an attitude of you've got to, you just do what you have to do. You just move on. That's an amazing outlook and really impressive and inspiring with that. I mean, thank you for sharing all of that. How do you manage? What did you do following that? And, you know, we kind of know the end state that you're really making some incredible progress financially or have made some incredible progress financially. But how did that happen and how are things gone in your life since then?

I think the way that it happened is just that accumulation of life experience. We've had a lot of other disappointments in life. And you just can't let these things rot inside. You know, you can't let it make you bitter. And I just, just always have the attitude that, well, things have happened for a reason, and there's a reason why this didn't work out. And so it's going to be better. Something's going to be better that's waiting for me. I don't know what it is. And so with our money situation, I think being able to change our mindset and realize that the things that we're doing and the actions that we're taking are going to make our life better is what helped us to move forward. And my husband having this life or

experience helped us, especially me, to realize what's more important in life. And even today, you know, it's a struggle sometimes with my husband's memory. And I just feel like I have to do what I just do what I have to do and just move on. That's what we do as humans, you know. And that's what's important. So today, that's our mindset is that we spend money on what we value. We don't spend money on things that don't matter. So we don't have like cable TV or we don't go to fancy restaurants all the time. We go to restaurants once in a while. We go on nice vacations because travel is what is important to us, experiences and people. And so we've just learned to be happy and content with the things that we have and spend our money on the stuff that's really important. Wonderful.

Following this situation, how did you kind of manage the family? lease finances in terms of how did you generate income, how did you begin budgeting and begin accumulating wealth for retirement following 2013? In order to be able to catch up retirement savings or to get out of debt, either one, you really have to do two things. Cut your expenses and make more money. And the making more money is the most important aspect of it. Because you can't really nickel and dime your way to retirement and catching up retirement. You really have to super boost it with a bigger income. So I got a job at a county government as a social worker. And I, you know, I am so grateful for that because my entire life as a social worker, it's been a low-paying

job. And finally, at a county job in a job I really love working with elderly people, I am making good money and I have great benefits, great retirement benefits. And I took advantage of the catch-up savings that the government allows to help boost our retirement savings. So with the government job, my pay is better, my benefits are better, and there's a pension. Not very many people have access to pensions anymore. So in addition to my saving for a retirement, I also have a pension. And then the catch-up contributions that I took advantage of, because I'm over 50, I can contribute more to my, it's like a 401K, but it's a 457 plan, and my husband and I can contribute a little bit more to our IRAs. So we max those out every year. And then I found out about the 457B,

which is the 457B is what I have for retirement, but there's a special option if you're behind in retirement savings that allows you to really supercharge that. And it's, It's the catch-up provision for the 457B. You have to make a commitment for three years to do this and work with the HR department. They figure out how behind you are and what you're going to have, how much you can contribute. And this year, it's up to $39,000 a year for three years. So when I started, I think it was at 36 or 37, and I wasn't sure I could do that. When I first started putting money in my retirement at work, I wasn't even sure I could do that.

our savings rate was zero when I started this job six years ago. And I knew I needed to save. So I started out putting in $5 a paycheck and then just worked up and finally decided, okay, I've got to bite the bullet and max it out. And so that was working fine. And I thought, okay, I'm going to try this 457B catch up plan. I'm going to put in $37,000 a year. I don't know if we can live off of that, of that big of a deduction of our income. But I figured, well, I'm going to try it. And if it doesn't work, I can always stop it. So I did try it.

It was fine, mainly because I have a second job. I got a second degree online right before the time that my husband had his brain aneurysm. I was thinking of changing careers to speech therapy, which is a very high-paying profession. And it was very similar to what I'd already been doing in my family child care. If you work with young children, toddlers who are language delayed, it's really like play. And so I ended up getting a license to be a speech therapy assistant. And I've continued to do that all this time because it pays very well and it helps me to boost our retirement savings. So when at my social work job, I am cutting my income down to contribute all this money to the 457B catch up provision.

My paychecks ended up being like $500 every two weeks. but at this point I had extra income coming in from speech therapy. And although initially my husband had no income for several years after his disability, he eventually was approved after fighting for it. He was finally approved for Social Security disability income. And once he was approved for that, he was able to retire early from his union and get his pension early. So we had like three other income streams come.

coming in that allowed me to cut back my income at my job to divert all that money into the 457B catch up. So I did that for three years, which really helped. And we continued to max out all of the retirement accounts as much as we could. And then we just put all the extra money that we could into a brokerage account. So we're invested pretty much 100% in stocks because we want to really catch up. this is an amazing, amazing, aggressive and creative and inspiring a plan of action here. When did you really begin that serious commitment? Was that in kind of like 2014? You said you started with $5 per paycheck and then you boosted it to 37, 39. How long have you been kind of sustaining this?

I didn't get that social work job until 2014. And I didn't start doing this right away. So I would say it was probably 2015 that we really got serious about saving more money. Awesome. And so you've been able to accumulate a significant amount of wealth in a very short period of time. How many hours a week are going into generating income at this point in order to sustain this? It's all coming from me in terms of the hours per week because my husband doesn't work. He does have an income from SSDI and his pension. But for me, I work 40 hours a week at my social work job,

and I have a flexible schedule. It's four, 10-hour days. Then I have three days off. And on one of those days, I do speech therapy. And so before the pandemic, I was going to my social work job four days a week. And then one day a week, I was going to children's homes and doing early intervention for children under three who are language delayed and would be doing speech therapy one day a week. Now it's all on teleth therapy because. of the pandemic.

I'm doing both of my jobs from home. Does it seem like you're working all the time? No, I don't feel like I'm working all the time because my social work job is four days a week. And the other speech therapy is like a half a day on Saturdays, and then I still have two days off. Kathy, I just love your story. I mean, I don't want to harp on this.

I hope I'm not making you feel bad because you have come so far. in such a short time, this is amazing. But like, you were just so committed to making this change. And what did you say a few minutes ago? We sold everything we could. We took part-time jobs. I went back to a job using the degree that I have from college. We stopped using credit cards. We didn't really have any other choice. You do have another choice. You could have just kept on going and then just worked forever. You didn't have to start saving. You didn't have to be focused on this. You could have just been like, well, too late for me.

I'm just going to keep doing what I'm doing. And I want to, I'm trying to commend you, but I'm just really tripping over my mouth right now. You're fabulous and I love you. Oh, thank you so much. I realize you're right that I wouldn't have done this if I didn't have some openness and flexibility. When I came, I never would have thought this was possible. But because we use that gazelle intensity with our debt, I thought, well, this is a new skill.

Maybe I can apply it to something else. And so we tried to use it for saving up for retirement. But discovering all these other people, even though they were younger, who had retired early because they saved 40 to 60 percent of their income, that was really something that, like a light bulb moment, that it opened my eyes that, wow, there's another way to live. most of us feel like we go through our life and we do all the things we're supposed to. It's like a map that's laid out. You go to college, you get a job, you have kids, you retire.

But there's other ways to follow that map. And I feel very fortunate that I found these blogs and was able to open my mind to those possibilities. That was the other point that I was going to make is you said, said you read fire blogs and they were mostly written by millennials, but they were saving 40 to 60% of their income and they retired in 10 years. They're not saving 40 to 60% of their income and then retiring because they're 23 or 30 or whatever ridiculous age people are retiring at. They're retiring because they have enough money. Did you do anything, any reading with the 4% rule? Yes. And I think that probably...

the things that really cemented it for us is, you know, we're not super technical or really into math. I don't even like to really do a monthly budget. We never tracked our net worth. So I'm not really nerdy. But we discovered that, you know, the message was consistent. Save this much money and have enough money that you have 25 times your expenses. And that's it. You'll be able to live off 4% of your income. So that's pretty easy to figure out 25 times what you need to, you know, what you need to live off of.

So if you want to live off $40,000 a year, you need a million dollars. If you want more, you just do the math. It's very, very simple. What is your goal here in terms of retiring now and thinking about that? Like do you, maybe not those specific numbers, but do you have like a time frame or what's the kind of endgame here? Well, since my husband's retired, he bugs me every day that I need to retire. But I'm not quite ready to do that.

We can't even go anywhere right now. And I want to keep working my job a little bit longer so that I can boost my pension to make it a little bit bigger. And, of course, pay for health care right now because once I quit, we'll have to pay for health care. I just want to have a bigger cash cushion than what we have. I could really retire right now. We have a net worth that's over a million dollars counting our house.

Our house is paid off. But I just don't really feel 100% comfortable doing that yet. I want to have a little bit more of a cash cushion, maybe three to five years of cash. Hold on. Hold on. You built a net worth of over a million dollars in less than seven years as the sole breadwinner for your household after your husband's brain aneurism. you're now a millionaire ready to seriously consider retiring.

Is that what we just heard? Not exactly because I'm not the sole breadwinner. I do have two jobs bringing in income, but my husband has two streams of income. He has a pension and he has disability. On top of that, we had to get a lawyer in order for him to get his disability claim approved. It took several times. But on top of that, he got injured while he was working at a job site. And at the time, we didn't think about workers' comp.

We didn't even realize that was something that was on the table. But that was brought to our attention that it was a potential, you know, another potential source of support. And my husband did end up getting a lawyer and filing a workers' comp claim, and it took five years, but he did have a successful claim. And so we used that money to buy our house. So we, you know, one of the things in helping to make sure that you can, like, boost your savings is reducing your expenses. One big way to reduce your expenses is to cut the main things like transportation, food, and housing.

Those are the big three. We live in a very expensive area in California. Our rent is super expensive where we live. And I was getting really tired of our landlords increasing the rent. And so I was not planning to buy a house. I just wanted us to put all our money in the stock market. But after the landlords continued to increase the rent year after year, I thought, this is crazy. And we ended up buying a house and it's paid off.

And so our expenses are a lot lower. But initially, I wanted to just find a cheaper place to live. But there was nothing here. So that's why we ended up doing this. So not everything that we have done is necessarily replicable for every listener. And you wouldn't want it to be because who wants to have a brain aneurysm? But a lot of the things that we did are replicable of cutting back our expenses, finding ways to make more money, looking for a job that might have 457 plan

where you could do a catch-up or a pension. That would be like a government job or possibly a teaching job, doing extra jobs, you know, those things are things that other people can do. Got it. I mean, yeah, I think, again, I think your story is just amazingly inspiring in those types of things. I'm very glad that you were able to get a workers' compensation settlement there to help out with that. I'm sure if you hadn't had that, that there would have been a hard decision about moving somewhere else or or creating a, because you say you're not good math or you're not mathematically minded or nerdy. But you have a really great framework around

expenses. That's the key is the housing, transportation, and food categories. And so your intentionality with that, I think, would have led you to make a similar decision or find a workaround, I'm sure, to that point, even if you hadn't had that settlement. So it's, although that certainly, I would imagine, helped you along a little bit with that. Yeah, it definitely helped in being able to buy a house. But you're Right. We would have found some other creative way, whether it would have been house hacking or whatever. I'm pretty determined. Yeah. No, we can tell. So that's awesome. So, you know, it sounds like you're kind of sitting here in November, December, 2020 with the pandemic. When the pandemic ends, you know, hopefully sometime next year, is that a time when you think

you might cut back on some of your hours at work and begin traveling more? Is that kind of the plan? Well, my husband, as I mentioned, is always bugging me to retire. And so we have a compromise that we take several nice vacations a year. And so after the pandemic's over, I want to still work for a couple more years. But once the pandemic's over and we can travel again, then we'll continue traveling. In the past three years, we've been to Greece, Portugal, Brazil. So we do a couple of trips each year. And some of them are just local trips, you know, but it's my way of placating him. Love it. Well, it sounds like a really good compromise there. And, you know, hopefully he continues to pester you to retire as you continue to build that stockpile. Right.

I'm sure he won't let up. Are you still contributing to the 457B plan, the extra ketchup $39,000 a year part? The ketchup contribution is over. I've already caught it all up as much as you're allowed to, as much as I'm allowed to. So now I'm just maxing out my 457. It's the equivalent of a 401k.

So I'm maxing it out and it's, I think, 26,000 a year. Okay, and that's the 19,000 plus the, 50 catch up, right? Yeah. Okay. So, okay, so that's interesting. The 457B, which is really only for college or teachers and government workers. Yeah.

So you can catch up up to $39,000 until you reach a certain threshold. In three years. It's a three year limit. Oh, okay. Okay. Wow. So if you're listening and you are in. in this situation, look into your 457B catch-up plan.

That's super awesome. I think it's really worth having that in your mind if you have to change jobs, looking for a job that offers either a pension or this 457 catch-up provision, not all employers offer it, but if you are looking for a job anyway, that's the job you want if you're trying to catch up retirement. Yeah, the government jobs are pretty amazing. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks,

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technology. Learn more. at about amazon.ca. Kathy, let's move on to the financial scan, which is where we look at your investments in terms of percentages. You had mentioned that you were 100% in stocks. Are you in any specific stocks,

or are you more in an index fund? Index funds. When I first started investing, I had asked my dad for advice and he invested in VFIAX, Vanguard. It's the S&P top 500. and so that's what I had started investing in. But then when we started reading the fire blogs,

and we realized that the favorite is VTSAX, the total market index with Vanguard, we started saving in that too. And that's where the majority of our money is. Wonderful. So it sounds like your portfolio consists mostly of your home, just the stock, the Vanguard index fund here, both in after tax and tax to farm.

for retirement accounts. And then you said you're building a cash cushion. What does a good cash cushion look like for you? Well, in terms of what our investments are, like you said, most of it, including our retirement accounts, are in index funds. And then my husband and I both have some old investments that we want to possibly roll over into our retirement funds. Like he has an annuity.

We want to get rid of that and put that into that. to his IRA. There's a few small things like that. My employer puts some extra money in an HRA for me that's used for retirement medical. And then in terms of cash, we just have a lot of it sitting in the bank and there's some in CDs. And it's not the most efficient way to grow money, especially when I say the majority of our money is very aggressively invested in stocks. but, you know, the stock market goes up and down. And if all of your money is in the stock market and you don't have any cash to live off of, then you're faced with the situation of, do I take money out to live off of when it's at a loss?

And you're really not going to lose any money when the stock market goes down unless you take it out. So I want to have this cash cushion to be able to live off of in case something happens. And the other thing is I have this plan that when I do retire, I'm hoping our income is low enough that if the ACA or Affordable Care Act is still around, that we can qualify for lower income health care insurance because I will not be able to yet be able to get Medicare. And my husband qualifies for part of Medicare, but it still costs money every month. And so right now through my job, all of our family's insurance, health insurance is completely paid for by my employer. So when I quit my job, I want to ideally not take my retirement for a few years. Oh, there's two reasons. One is for health care.

But the main reason is because there's a lot of money in traditional retirement accounts that are tax deferred. So if I can live off of my husband's pension and disability and our cash for a number of years, I can do that Roth conversion ladder where I move money from my traditional retirement accounts into a Roth, small amounts year by year so that I don't increase my taxes so much. And then hopefully the majority of it's moved into a tax deferred account and I really didn't have to pay a lot of taxes on it. that's something that is we're allowed to do. I thought you said earlier that you weren't a nerd.

That's amazing. Okay, I admit that's a little nerdy. So if you're listening to this, you're trying to follow what Catholic E just said. Basically, what's going to happen is right now she's in a reasonably high income tax bracket, making some good money enough to enable her to catch up significant in her retirement. When she quits, then she'll be in a much lower income tax. bracket because the household income will be very low. That means that she can backdoor Roth. That means she can take money out of her 401k, pay the taxes on that in a lower income tax bracket,

and move it into a Roth IRA. Then it can grow there tax-free, so when she takes it out eventually, she's not going to pay taxes on it. It's a very, very sophisticated and effective tax-advantaged strategy for managing your money. So that's very cool that you're doing that. And I love to It's very cool. Yeah. It's very cool that you have the ability to do that or the planning and the foresight and potential to be able to do it. Because she looked at her finances 10 years ago and said, we cannot continue this. Despite all of the mistakes that you made and all of the successes you have had, you had all these successes because you started being intentional with your money. You started looking at where it was going and what your values are and you lined them up. instead of having your money going here, but your values are over here, you have to get them lined up.

I want to plug a future episode in January, I believe January 11th, we are going to have the mad scientist on to talk about the Roth conversion ladder, the backdoor Roth, the mega backdoor Roth, all of these things that are kind of confusing. Brandon takes his admittedly very nerdy mind, brilliant mind, and reviews all of that, translates it into very easily to understand English terms and shares with you exactly how to do all this stuff. So, Kathy, I will send you a note when that episode comes out as well, just so if you have any questions, you can listen and be like, oh, that's what he means or that's what they mean by this, because that's as nerdy as I am. All this is kind of confusing. And, you know, when Brandon explains it, he explains it in such an

easy to understand way. Yes, Brandon is awesome. That'll be a great show. The other thing I wanted to say is that you really have to educate yourself. I feel like that's what we've done. And the fact that we read these books, we read these blogs, we've gone to some conferences, met people, talked about money, the reason, listen to podcasts, all of these things have contributed to my money education and they are invaluable. And actually, most of them are free because all this information is on the internet or at the library.

But this was key because if you don't educate yourself, your head really is in the sand. My head was in the sand for a long time. And even after catching up money or feeling like you contribute to your retirement and you're doing all the right things, if you don't educate yourself and you just depend on someone else to make sure things are okay, it's not enough. My brother was just telling me the other day that he wants to retire early. That's always been his goal. And he has a financial advisor that he relies on. And the financial advisor keeps telling him, well, you should work a few more years.

when I ask my brother simple questions like, well, what are you invested in? He doesn't know. How much do you need to be able to retire? He's not 100% sure. He's just relying on what somebody else tells him. So these are not hard questions. You can figure them out for yourself if you do a little bit of research. And it's vital because honestly, nobody else is going to care as much about your money as you are.

And nobody else is really going to know the, answers as much as you do once you figure out, here's what I need to know. And I've gone to enrolled agents for our taxes most of our life, but I've been disappointed every time because they do not know as much money as much about the taxes as I feel like I know. When I had a child daycare in my home, I found out all the things that I could deduct and I had to tell the tax person about it. How could you hire a good tax person if you don't know what you're looking for? right? I mean, this is, it's, it's this thing. Like, you cannot be, I just want to try it. You cannot be helpless with your finances. You have to know what good looks like to be able to even to hire a good

accountant. So just reinforcing your point there. Sorry for interrupting. I just totally agree with that. Yeah, even if you know, it doesn't guarantee that you're going to get the person that's looking out for your interest because you're just a number to them, really. I always look for enrolled agents because they have more training. But I have had to correct tax people, enrolled agents, and tell them, you know, this is what I'm entitled to. And they look it up and then they say, oh, you're right. But they have so many clients, they can't know everything.

So you're going to be the one that knows what's right for you. You just have to educate yourself. And I think that's really key because I wouldn't have known about the Roth conversion ladder if I relied on somebody else. Nobody else is going to tell you this. A tax person is not going to tell you these things because they just have too much going on. You have to find these things out for yourself.

Yeah. One of the things, I'm sorry, I'm jumping around here a little bit, but going back to your asset allocation, we know real estate in your home is a big part of your portfolio with this. Have you considered anything like, if you're going to travel more, for example, fending away to Airbnb your home, for example, while you're traveling to subsidize those trips,

or anything like that? Or is the house kind of really more just, we're paid off, and then we don't have to worry about the living expense to accumulate wealth. The house is kind of like a side note because we wanted to stop having our rent go up. But we're really set. If anything happened to our income, we could continue to live here and not have a huge expense. My husband and I have both talked about the Airbnb situation, about house hacking, about renting, becoming landlords. I'm not really inclined to do that, even though I thought I was at first, because there's a lot of hassle factor

if you're going to be a landlord or Airbnb. I mean, you could put together a team and have everything taken care of and be more remote. And I think that's still a good option and a possibility. But I'm really scared of all the wildfires that we have where I live. our town has had to evacuate three years in a row, and it just scares me that the whole place can burn down while we're gone.

Fair enough. Well, yeah, I love that you've thought about it and kept that as a major part of your strategy and then decided against it for, I think, very good reasons and all that. A lot of people don't do that with the paid off house. They don't even consider those possibilities with the paid off house. So I think it's another, it's just wonderful to see that you're thinking about the entire picture, and you've clearly got a great mastery over all of your income streams and expenses here to get to where you want to go. Another thing we thought about is, you know, if we sold this house in California,

we could afford to buy two or three rentals somewhere else in a less costly area. But I don't know if we'll do that or not because there is a hassle factor. I mean, once you're retired and you're traveling, you might not want to deal with somebody having a plumbing issue in the middle of the night. Yeah. That makes a lot of sense. Kathy, it is now time for the famous four. These are the same four questions we ask of all of our guests. Are you ready?

I'm ready. Very excited. Kathy, what is your favorite finance book? My favorite finance book is probably J.O. Collins book, the Simple Path to Wealth. It lays everything out and very easy to understand language. You know, anybody can read this book and feel like, oh, I understand what that means. It's simple. Love that book.

Yep. A must read in the personal finance space, I think, if you're listening to this show. All right, what was your biggest money mistake? Our biggest money mistake was just not saving money when we were young. And we did attempt to a few different times. We've had a couple of IRAs that we ended up, you know, cashing out to help us pay off debt. But the biggest thing is just that we never saved money in the past. If we would have, it would have made our life so much easier.

What is your best piece of advice for people who are just starting out? And I'm going to tweak this question a little bit and say, what is your best piece of advice for people who are maybe older in their journey and just starting out? I think if you're just starting out and you realize that you're behind in retirement, the biggest thing you can do is start saving today. And I literally mean do it today. call your HR department and start having some money taken out of your paycheck because that is something we think, oh, I'm going to do it. Oh, I need to do it. And then I never do it. So I started out with $5

out of my paycheck every week. And I didn't even feel it. And as I got raises or promotions, I put more into that retirement fund, had more taken out of my check. And once I got that practice of like $5 a week, it was a practice. It was something that, I mean, number one, it was easy because it was automated. I didn't have to worry about it. But also it kept it in my mind that this is important to do. I'm doing it, but I need to do more. And so I could continue to increase that until the point that I decided, okay, I'm ready. I'm going to max it out. How long was it between you putting the $5 in to maxing it out? Was that overnight that it changed within a few weeks or did it take you six months a year, several years?

It probably took me a year to really wake up and get on it. Yeah. I love that. Start today and know that by starting today, you can have this incredible curve that you're going to be climbing in terms of your contributions or wealth building. But it does take, I think, a few months to a year to really get in that groove of getting into that kind of like maximum efficient,

or at least what we hear from a lot of folks in the show here. I think part of getting into the groove is also educating yourself because literally we never did this our entire lives. And it wasn't until we read money blogs and read money books that we really put it into action. And we read money books in the past, but we never put it into action. So you have to do it today. You have to take action. Yes. I just love you so much. And I want to plant a little seed and tag off of what you just said. Right now is over. open enrollment season for health insurance. And this is a great time to talk to your HR rep about your company's retirement plans and retirement options. And if you have a 457B, yes, yes, yes, go get a second job someplace so you can afford to fund that ketchup plan because 39,000 times three is more than $100,000. I'm not going to do that math right away. Scott, you do that math right away. $117,000. $117,000 over three years, which will really be a bite if you.

you can't afford that. But you know what? That's really good, Mindy, because, you know, Dave Ramsey tells people all the time on his radio show when they're getting out of debt, go get a job delivering pizzas two night a week, two nights a week. You can make $15,500. And if you add that up over a whole year, it's $18,000. So if you had a full-time job and you feel like, oh, I can't afford to put any more money into retirement and you deliver pizza two days a week, you'll have $18,000. thousand dollars to put in retirement at the end of the year yeah which is almost the the contribution limits for this year absolutely kathy did what she needed to do to get to where she is now and it didn't

even take 10 years you said you read all these fire blogs and it was oh i retired in 10 years it didn't even take kathy 10 years it took her seven years and you said you were the sole owner or sole income provider, but you were for five of those years, right? You said it took five years to get the disability claim and all of that approved. So don't sell yourself short. I'm the president of Kathy's fan club, and she's awesome. Thank you, Mindy. No, it's again, it's absolutely outstanding. And, you know, look, I know that that sounds like a lot of work to get the second job or to do those different types of things. But Kathy, when you would describe your relationship with money prior to making these changes, was there kind of like a sinking feeling or a lack of comfort? How was your

relationship with money before, in your outlook with that, before you've made these changes? And what is it today? In the past, when we were in debt and when we didn't, you know, we just lived off our credit cards and our income and we spent more than we had, the attitude was really just being unconscious, like your head in the sand, I guess. When we had financial problems, I was really depressed, and I felt hopeless at one point. And so listening to, you know, people do their debt-free screams gave me hope, and it helped me to turn around. And I'd say my money mindset today is that I love talking about it and I love money. But, you know, it's kind of like the, when you see like the millionaire next door, it's not like I drive around in a flashy car or

wear fancy clothes because I don't, but I have a real sense of security and a real sense of peace that I know that we're going to be okay. And it just, you know, I know that if something comes up, we can afford to pay for it. So it's just a real sense of peace and calmness. And I don't take it for granted because there's there's lots of people who have lost their jobs in the pandemic or who have their hours cut back or they've become sick or you get a disability. You don't plan on these things. And for many people, they just feel like, oh, you know, I can't do anything different or I'm struggling.

Or if you're a low paid wage earner, it's really, really hard to save money if you don't even make minimum wage. So you really have to get creative. And I feel like the journey that we've been on has helped me to become more creative about how to save money. It's helped me to be creative in learning. I don't have to use credit. And it's helped me just be creative to realize that, wow, there's other ways to look at things. And there's other ways to solve problems.

I mean, the new outlook that you have on money, I would argue is, you know, if you're feeling behind or those types of things, that grind that you have to put in of delivering pizzas a little bit so that you can fund your 401K or whatever. To me, it feels so worth it to get to that end state of having the outlook on life and money that you have now, you know, rather than the one you had previously. I mean, that's a period of three years, which I'm sure we're tough, but really you managed it and you adapted to it. And it wasn't that bad. but that sacrifice or that extra effort really puts you into overdrive and into that next date into that next gear here to get going yeah definitely and the other thing is that time is

going to pass anyway and you can try something new and if it doesn't work out then quit doing it but time's going to pass anyway so you may as well try it and when I was um when I was you know had my child care business went you know kaput and I quit doing that and went back to social work. It wasn't my first choice because social work doesn't pay very well. So I thought, you know what? I've talked about becoming a speech therapist. I should look into online classes. It's less expensive that way. I already had a bachelor's degree so I could get a second bachelor's degree in speech therapy very inexpensively by doing the classes online. And I thought, in one year, I could either be in the same place or I could be that much closer

to having a different career or a second career. So time's going to pass anyway, take advantage of it and do something different. Awesome. Well, what is your favorite joke to tell it parties? Okay, I don't have a lot of jokes, but one that I heard recently was, what do you call the tiny waves or what do you call the tiny waves that wash up on a tiny beach? I don't know.

Microwaves. Oh, she's bringing the heat. I love it. That's awful. I thought it was good. I can tell you another funny story. Our daughter, who's 23, has accused us of being in a cult. And that's the fire cult. Oh, it's a cult.

She's not wrong. Yeah. It's her religion. Right. But, you know, it's funny. As much as she kind of puts it down, she has really good money values. And part of that is because she grew up. up listening to the Dave Ramsey show on the radio in the car where I had her trapped.

And so this girl sees all her other friends complain about never having any money. And this girl always has money. She has a savings account. And she's putting herself through college. She, you know, we offered to help her out with this. And she didn't want to take our help because she felt like I want to do it myself. So she's going to community college. Part of that is because she didn't really know at first what career she wanted to have.

So she thought it's dumb to spend all this money at a university if you don't even know what to major in. So despite the fact that she calls fire a cult, she actually has a lot of the same values and money principles herself. Well, tell her to join the cults. We'll welcome her with open arms. She sounds like she's making some great decisions. And you're the second person. person recently to come on Bigger Pockets Money, who said that they've used the car to trap a family member into financial discussion. So remember that if you're listening, that's a very powerful

tool to achieve your financial goals, our long car drives. I love it. So Kathy, tell us where people can find out more about you. I have a blog called Baby Boomers Super Saver, where I talk about creative ways to catch up retirement savings. I also have an interview series on the blog of other late saving baby boomers who were behind in retirement savings and they share their story of how they caught up. If readers are listening and you are someone in that position or you know someone in that position, have them get in touch with me so that we can feature their story on my blog. I'm also on Instagram and Twitter. And on Twitter, it's at Baby Boomer Saves.

And on Instagram, it's Baby Boomer Super Saver. Baby Boomer Super Savor. I'm following you right now. You should change your website name to Baby Boomer Rockstar Saver. Oh, that sounds awesome. Except that's a lot of things to type. Okay, we will include all of those links in our show notes, which can be found at biggerpockets.com slash money show 152.

Kathy, you're fabulous. I love you so much. I love your story. And this is truly a inspiration to anybody who is in that position and says, oh, I didn't start on time. I'm starting late. I can't do it. Yes, you can. Kathy did it.

You can do it too. I definitely think so. Well, you're right. You have to think that because you are correct. Yeah. Thank you so much for coming on and sharing the story and for being so open and transparent about really personal life issues. I think that the fact that you are so open and so successful with what you've done in spite of some of those setbacks is really just going to be inspiring to a lot of

people and really, really appreciate it. I know it takes a lot of courage to come on and share all of those details, the way you did. Yeah, lots of dirty laundry. But thank you so much for having me. I think it's important for people to talk about money and I appreciate the opportunity to do it. Oh, this is fabulous, Kathy. We'll talk to you soon. Thanks a lot. Thank you. Bye-bye. that was Kathy Lee from Baby Boomer Super Saver. What I learned from this episode is that I need to get a government job so I can take advantage of that 457B catch-up plan that lets me save up to $39,000 a year for three years.

Yeah, that's pretty incredible. And what's more incredible, though, is that how many people do you think have an option like that that they're unaware of because they're not being incredibly intentional about their self-education with respect to money or aggressive overall? their financial planning. How many people in Kathy Lee's position would have overlooked an opportunity like that or not had the foresight to see, oh, wow, that is going to jump, start my savings by nearly $120,000 over three years. In order to do that, I need to take a part-time job to cash flow my

life while I'm taking advantage of that opportunity. That's a rare mentality that enabled her to take advantage of that opportunity. Well, and not only that, I'll go back to your first, the first part of your question, you said, how many people are unaware of this? I want to send a, I want to call out to everybody who's listening right now. There's, you know, you've got the Roth conversion ladder. Who talks about that? Like, the mad scientist, and that's it.

And I'm super excited for him to come on and share that with us. But, like, who talks about that? Who knows about that? You only know about it if you do the research. Who's got time to research all of that stuff? So if you know of a cool retirement tweak or retirement savings account or like anything, even the 457B, which isn't available to everybody, if you know of something like this, please email me, Mindy at BiggerPockets.com and let me know about it so I can share it with other people

because that's why we're here to share the stories and share the tips. It's got to be legal. It's got to be, you know, I don't want to recommend anything that people are going to get in trouble for. Yeah, and let me just say that it might seem overwhelming, and these terms Roth conversion ladder and those types of things might seem really complex and, again, overwhelming. But honestly, you have our permission, because that's clear from us, but you have our permission to go out and obsess over this a little bit. Go out and dive in and learn as much as you can about these options to you. If you don't understand what a 457B plan is and you're in a government job or relationship, job, you need to go and educate yourself on that and get through whatever boring material

is in there because once you master these concepts, they save you. If you spend 10 or 20 or 100 hours learning about all the details of your employer benefits or benefits available to you as a government worker with those types of things, you might save 5, 10, 20 years of work time making the equivalent amount of money through less efficient means. Kathy Lee is going to save herself hundreds of thousands of dollars in taxes, potentially, if she goes about her plan, that would have been, that would have cost her years and years of hard work to accumulate in a less efficient manner. And, you know, you don't have to read all of the documents.

You can read the blogs where they break it down. I keep talking about the manned fiatist. He's going to come on and talk about the Roth conversion ladder and the, you know, accessing your retirement funds early. he's done all of that reading for you. And he has translated it into more easily to understand language. He was on our episode 18 to talk about legal ways to access your retirement funds early. And how early was Matt Finanist Braden able to retire?

Ah, he's in his early 30s or mid-30s? Yeah, he's just done in Scotland hanging out because he's mastered all of these items, you know? And yes, he did dive in and do a lot of technicality, which is why he calls himself the mad fientist. But by doing that, he's able to save 30 years of work. I mean, it's incredible. It's worth that obsession over yourself, your self-education and finances for a period of time to get over the hump and master each component of your finances. So that is automatic.

You have a why behind everything you're doing. And you can make the progress that someone, like a Kathy Lee or a Brandon from that scientist's made. And if you have a question about this stuff, ask, post it in our Facebook group. Hey, I think I have a question about this. I know a lot of people in our Facebook groups are in other Facebook groups too. We've got CPAs there that can help clear things up or go to their CPA groups and ask those questions specifically.

Everybody in the group wants to help. And we are so excited to have them help you with these sometimes really difficult to understand concepts. And that's right. And it's very hard to sustain a grind like Kathy Leaves or whatever if you're on your own. And so, look, if you don't know anybody who's doing this or you don't have a partner or whatever that's on the same page with that, maybe you're single and you're trying to work towards some of these things, look, join the cult. We've got the Bigger Pockets Money Facebook group. You can, you know, listen to podcasts like this or books on finance that you're constantly surrounded by people who are, talking about this because there's no reason why early financial independence or a really strong relationship with money can't be normal for everyone. It's an unhealthy part of society,

I think, and something that we're obsessed with changing Mindy and I. We are obsessed with changing your financial life. That's right. Yes, we are. Okay. Today's show notes can be found at biggerpockets.com slash money show 152. And if you have somebody in your life who is maybe starting a little bit later with their retirement savings, please do them a favor and share this episode with them. You can find this episode on any place that you can find a podcast. Scott, should we get out of here? Let's do it. From episode 152 of the Bigger Pockets Money podcast, his name is Scott Trench.

My name is Mindy Jensen, and we got a shake, Rattlesnake. Your altros are always hysterical. Bye, everybody. Bye.