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IT WAS JULY 2003. My wife and I were in our early 50s. We had jobs we liked and we lived comfortably. Our two children were about to go to college, and we had a plan for covering the cost. We had renewed our marriage vows on our 25th anniversary. We had no debt.
But I began thinking.
What would our financial situation be if we retired and our only income was Social Security? That was entirely possible. My employer’s pension plan had been woefully underfunded when I began working there. Future pension benefits were far from certain. Meanwhile, my wife’s employer had recently been sold, and the new owner had no pension plan.
Worse, we weren’t really savers. Somehow, we’d managed to set aside about nine months of gross income. But most of the time, the money that came in each month went out almost as fast. On top of that—despite having unhappy experiences with older family members who suddenly required long-term care—we hadn’t taken any steps to spare our children the financial and personal trouble we might cause.
In short, we simply weren’t preparing to pay for life after work, nor were we dealing with scary possibilities. We wouldn’t be able to maintain our lifestyle in retirement even if we waited until age 70 to claim Social Security. We also didn’t own a home. If our behavior didn’t change, we could end up—old, frail and broke—on our kids’ doorstep.
Neither of us knew what to do, but we knew what we didn’t want, which was to be a burden to our children. We had to make our own better future. Because we were starting late, we knew we’d have to save as though we were being chased by wild bears and angry hornets.
Reading about saving and investing wasn’t our usual fare. Still, we agreed to read a personal finance book together. The book we chose was Smart Couples Finish Rich by David Bach. The author stated bluntly that, while what we were reading might be entertaining and thought-provoking, it would be useless if we took no action. For us at that moment, those words were like a waiter prompting us to order from the menu we were staring at.
We set a goal of amassing a $1 million portfolio by age 70. We calculated that we needed to save 25% of our gross income, on top of our employers’ matching contribution, beginning the next workday—which we did. After all, if we’d been forced to take a big pay cut at work, we would have figured out how to carry on. By the same token, why not tighten our belts for the sake of our future selves?
We began investing in mutual funds offered through our workplaces—Vanguard Group for my wife, Fidelity Investments for me. Our formula was to save a lot, make appropriate asset allocation choices and then save even more. We accepted that we might not reach our $1 million. But we figured that even if we missed our moonshot goal, we’d still be among the stars. That’s bad astronomy, but it was good for our motivation.
My wife and I are very different people. She follows HGTV, while I’m in another room, watching the History Channel. On a nature walk, she’ll take 100 up-close photos, while I’ll be gazing off into the distance. I would happily eat chicken every day, she’d go for fish tacos forever. She loves to shop, while I’d rather have measles than wander through a mall. As you might imagine, with our new plan, we were constantly negotiating choices and tradeoffs.
Over the next four years, we settled into our new arrangement. We each had a monthly allowance. We bought a house in 2005. We made sure we saved by paying ourselves first through workplace withholding.
Those good times didn’t last. In 2007, I abruptly needed to find a new job. During the Great Recession, our investments imploded. The house we bought became a financial albatross, which we couldn’t unload until 2010. By the time we sold, we were so far underwater that we had to pay six figures above the selling price to clear our mortgage.
When the dust settled, we had lost our home and a lot of net worth. We also lost our daily life together when, in 2008, I finally found a new job—in another state.
When the house sold, we had a yard sale and downsized more. We were already living apart. For five years, we saw each other every other weekend and talked on the phone every day. A lot of people had it much worse, we knew, so we actually felt fortunate.
We also kept saving. Our brutal experience made us even more determined to become financially secure.
Eventually, things righted themselves. We were able to get under one roof again. Our investments recovered and the money we added during those bad times bought mutual fund shares that really blossomed as stock prices rose. We each retired when we reached age 70, holding off on Social Security until then.
Today, my wife receives a small annuity from a previous employer. My employer’s pension fund got better management and I receive benefits. We have enough money to enter a lifecare community we like.
Our success is due, in part, to luck and to not facing the discrimination suffered by those who are minorities, and we say so. But it wasn’t all luck. We also persisted with good practices during bad times, and we stuck to a “good enough” investing plan.
Tom Scott is a retired Episcopal priest. He and his wife live in Evanston, Illinois. They love retirement because they get to see more of their children and grandchildren, and they can spend more time at concerts, the opera and the Chicago Botanic Garden.
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I’ve gotten questions about what my last paragraph means. I meant the demonstrable and pervasive reality of INEQUITY that burdens many people, some in multiple ways. A Google search of the term will provide mountains of evidence and discussion. This is not a forum for addressing that topic, so I refer interested persons there. Many thanks to everyone for taking the time to read my little story and make a comment.
I don’t understand the comment in the closing paragraph about the discrimination of minorities. Are you saying minorities are not allowed to save or invest? Do they face 401k disadvantages? Are they not smart enough to do what you did? What is your point exactly?
I saw a documentary about the wisdom of age. The interviewees were all over 75 but this lady mentioned, “When I was in my 50s, it was the best time to live. I had some knowledge, and some time to use it.” You did good Tom!
Tom, I was puzzled by the phrase “not facing the discrimination suffered by those who are minorities.”
I tried to think of instances where minorities were somehow discriminated against when attempting to invest, or where the investment returns one earned depended on one’s social status. I couldn’t come up with any examples.
Are you referring to discrimination in the workplace or discrimination by investment companies?
You have a really nice lively writing style, and I enjoyed your story. We were somewhat late to the party in a lot of financial matters, so I know the feeling and am also grateful that we were able to “catch up” before there was a crisis.
By the way, I was born in Evanston (my mother grew up there, and my parents met at Northwestern), and I was baptized as an infant in the Episcopal church and also married in an Episcopal church. (In fact, we may make a visit to Evanston next year when USC, our alma mater, joins the Big 10 and come to play Northwestern.)
Thanks to all for your comments and questions. We have saved enough for the life care facility entry fee, which was our real goal. Any more will be lagniappe.
Congratulations Tom, this is a story of triumph overcoming terrible misfortune from which many often haven’t or cannot recover from. You both did it through discipline, hard work, perseverance, working together to achieve common goals & not wanting to be a burden on your children. Congrats again!
Thanks for your kind words. We were certainly focused on saving, but we were helped by having excellent health care benefits; good timing for investing (the catastrophes happened early); and, frankly, we had all of the hidden benefits of our class and race. Yes, we faced tough stuff, but we had just about the best odds to succeed.
I enjoyed your article. Thank you.
I took particular note of your comment that you waited until age 70 to claim your social security benefit. As a member of the clergy you had a unique opportunity at the beginning of your service to elect out of being subject to social security taxes. I hope you will comment or write an article on Humble Dollar regarding your decision to be subject social security taxes from the perspective of a member of the clergy and the factors you consider relevant for someone just starting their ministerial service.
Best, Bill
Bill, I emphatically implore you to stay in the Social Security/ Medicare system. I will be writing more on this. I would encourage you to make contact with Dick Quinn who is a regular contributor on this site, because he has important experience in this area.
I know Dave Ramsey (who I think has good stuff to say) and others argue against being in the system, but I firmly believe they’re wrong because their alternative assumes all will go well with your alternate self-providing plan that unfolds over decades—but what if not? You and your family and your dependents are in the soup.
I am neither an expert nor a professional about this stuff, but I did make a considered judgment 40+ years ago, and I was right. More later.
Bill, I have found a very useful, brief, discussion of the Social Security and Medicare question, with footnotes and references, “Why Opting Out Is Not The Answer” at http://www.guidestone.org. Remember, you aren’t only deciding for yourself, but for your family and dependents as well. And it’s for all the benefits, which are truly considerable, not just a monthly check at age 67 or so.
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Tom, thanks for sharing your story. Like you and your wife, my wife and I were preoccupied with raising 4 kids and saving for their college, along with heavy demands in time and energy from my work. So we likewise didn’t get serious about saving for our own retirement till later.
As your experience attests, that late start requires an extra dose of discipline and sacrifice to overcome, but it can be done.
Glad things worked out for you. As I said, we know we were lucky and we did some stuff well enough.
Congratulations! Congratulations on recognizing you had a problem, and even more for taking action and sticking with it. As I’ve written previously, I didn’t start saving until my late 30s, when it dawned on me that my pension didn’t have a COLA, but then I was able to retire early at 53. I was helped by the pension, retiree medical and paying off my house early. You obviously took some serious hits along the way and still made it. Enjoy the community!
We are grateful every day for being able to achieve our goal.
Amazing story Tom. Thanks for sharing. Your story should be an inspiration for all late starters and those who think it is too late. Blessings.
Thanks, Yes we were focused on saving, but we also were lucky and we had great health care when it was needed.
This story certainly shows determination, but raises a few questions the answers to which may be helpful to others.
Did you put saving for college expenses ahead of saving for retirement?
What have you concluded is the reason preparing for retirement was put on the back burner so to speak?
Lifecare communities are pretty expensive. Did you reach your $1 dollar goal to afford that?
Good questions; thanks for them. Our children covered much of their school expenses through scholarships, work, etc. We helped, of course, but not vast sums. Part of what made it easy to be heedless for so long was our ferociously busy lives, which eased when our kids began to be much more independent. We were able to “come up for air”, as we described it. Raises and bonuses were easy “saves”. We did reach our “entry fee” goal. Two key elements all along were excellent health insurance and hating debt fiercely.