Learn how joining the FIRE movement helped Kathy Lee, Baby Boomer Super Saver, get out of debt and catch up her retirement savings.
- Kathy (founder of Baby Boomer Super Saver) and her husband fell behind in their retirement savings because they prioritized spending to enjoy life. They never got around to saving.
- Her husband was a union carpenter and Kathy is a social worker. He has a pension. Even though Kathy had access to a 401(k) she did not contribute.
- They felt that they had enough time so they didn’t save.
- They not only spent all that they earned but they spent more which landed them in debt.
- They discovered Dave Ramsey which helped them shift their priorities to reduce debt and increased savings. They learned how to use a budget.
- Dave Ramsey talks about saving 15%. Kathy did an analysis that showed it would take 43 years to retire.
- Thanks to Dave Ramsey’s Financial Peace University they learned to live below their means.
- That told her she needed to find a way to save more, faster. She searched the internet where she discovered the FIRE movement.
- She was inspired by stories of people achieving financial independence (FI) in just a few years relatively speaking.
- The first blogger she followed was Millennial Revolution. They were speaking at a conference in the UK. Kathy and her husband saved and attended.
- She learned that it is possible to catch up.
- She made some changes including a new job that offered a pension and a 457 plan which she began contributing to.
- Tax deferred accounts are a great way to catch up retirement savings but they do have maximum contribution levels. So she uses a regular brokerage account to augment her savings.
- Despite having pensions, a paid off mortgage and investments Kathy doesn’t feel that is enough. (She considers them to be Lean FIRE). So she plans to work two more years to increase her pension to get a bigger cushion.
- Her goal is to have a 3-5 year cash cushion which is very important given how the pandemic is affecting the economy and markets.
- When it comes to her blog, she likes to share stories of people like herself who start to catch up their savings later.
- Getting out of debt and starting to save takes action. Being around like-minded people from the FIRE movement really helps.
- She’s not a great planner. But she loves to learn and then take action. She believes in automating action wherever possible like direct deposit.
- Another aspect of planning is seeing opportunities which go by us all the time. Being prepared enables her to take action when she sees an opportunity.
- Kathy manages her own investments. She uses what she’s learned from the FIRE movement as her framework.
- She primarily uses low cost index funds.
- Her work tax deferred savings account offers limited investment choices. She uses a strategy she learned from J L Collins to use those choices in a way that emulates a broader investment such as a total market ETF.
- Without the FIRE movement, she and her husband would not have had the motivation to get out of debt and get their retirement savings on track.
- Every bit of savings helps make your retirement more comfortable.
- Kathy’s advice to people joining the FIRE movement later is to find ways to increase income and sell stuff you don’t need.
- Kathy took night classes on line to become a speech therapy assistant which pays double her regular job as a social worker. She works her new job on Saturdays.
- If you’re looking for a job, try to find a job that offers a deferred savings account.
- Kathy asked if we have any advice for her as a late saving person. Claire said we lived well below our means. We bought our house such that we could pay the mortgage on one income. It’s not just maxing out your retirement accounts, but maximizing your savings. Ted mentioned that he completed a detailed retirement plan that includes a 10% contingency. He also said that relocation is something to consider.
- Kathy wants to move to a state with no state income taxes. Some people like to live on the border of Washington (no state income taxes) and Oregon (no state sales tax).
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Roy tries Elevated IPA from LaCumbre Brewing of Albuquerque and I taste Never Ending Haze from Stone Brewing Escondido CA. One of us was very happy, the other not so much. For more information click on the image of each beer.
To listen click on: FW 010 Hop Spot