Millionaire Interview 424

Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.

If you’d like to be considered for an interview, drop me a note and we can chat about specifics.

This interview took place in July.

My questions are in bold italics and their responses follow in black.

Let’s get started…

OVERVIEW

How old are you (and spouse if applicable, plus how long you’ve been married)?

I am 70 years old. I was divorced from my high school sweetheart after 3 years of marriage and then met and married a man 23 years older. We were married 32 years before he died.

My partner is 68. We met 9 years ago in a support group after both our spouses died.

We have been a committed couple for 6 years. We are living in my home.

Since I am close to RMD age, my partner and I choose to not marry since there are tax and other consequences. We would both incur IRMAA surcharges on our Medicare insurance when I start receiving full disbursements. 

Do you have kids/family (if so, how old are they)?

I have no biological children. My late husband had 2 children, almost the same age as me.

There are 6 adult grandchildren and 12 great-grandchildren through his children that I call my family.

My partner has 3 sons and 1 grandson.

What area of the country do you live in (and urban or rural)?

I live in a suburban area of a large Midwestern city.

What is your current net worth?

All financial figures are for me only.

Current net worth is approximately $2,611,000.

What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?

Much of my retirement assets are invested in stocks, mutual funds, and CD through a brokerage account. This includes large cap, mid cap, small cap, and foreign equity.

Work retirement 403b is an annuity in TIAA-CREF. I am consolidating and rolling over my 403b monies to my IRA over the next 9 years per the contract specified 10-year payout. This will make keeping track easier.

• House: $375,800 estimated.
• Car 2010 Toyota Prius: $5670.
• Personal property/misc.: $20,000.
• RV 2020 Winnebago: $89,100.
• Savings/checking: $23,017.
• 403b: $276,081.
• Traditional IRA: $928,949.
• Roth IRA: $581,784.
• Inherited IRA: $87,898.
• CD 5% IRA: $125,000.
• Liquid brokerage account: $151,185.
• Loan on RV: $61,174.

EARN

What is your job?

I have a BA in Education and an MBA focused on marketing and management information systems. Plus a certificate in Project Management.

I have worked at something most of my life. During high school, I babysat neighbors’ children.

In college, I worked on campus in the foreign student office. I have held temporary jobs utilizing administrative and office skills.

My first full-time job was teaching 6th grade but I realized it wasn’t what I really wanted in the inner city.

After receiving my MBA, I worked for two healthcare information system vendors writing proposals for computer systems. This included a move to a southern city for 3 years.

After returning to the Midwest, I started a job at a major teaching medical center as a systems analyst in the Information Systems department. I remained there with various promotions and supporting multiple systems and electronic interfaces for 31 years.

I retired from there 8 years ago.

What is your annual income?

My income is approximately $95-104,000. It varies with investments and RMD from inherited IRA.

Social Security gross is $43,100 with taxes and Medicare costs deducted from that. I get a small pension of $1126 from my late husband and a pension from my job of $9168.

Approximately $4500-5800 from an inherited IRA from my mother. Rounding out my income is $45,000 from my liquid brokerage account which is not taxable.

I try to keep my modified adjusted gross income (MAGI) below the standard Medicare IRMAA bracket to avoid paying any surcharge on my Medicare Part B & D premiums. I know that when I start receiving the required minimum distributions (RMD) from my IRA and 403b in two years, over time I will pay a surcharge.

I have been working with my financial advisor to convert approximately $30,000-35,000/year for the past 5years from my IRA to my Roth IRA to help try to reduce my future RMD and consequently taxable income. Although I don’t see this income, it shows as a distribution for tax purposes and adds to my MAGI. 

Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?

My first full-time job as a teacher earned $10,000. My last year of employment as a systems analyst my salary was $108,000.

From my Social Security lifetime statement, the 10 years in 1980s income averaged $27,500. 1990s income averaged $57,500. In 2000, my salary was $76,000. 

Getting my MBA degree and a certificate in Project Management helped give me credentials that I was able to apply in my career. Hard work, diligence in learning different computer systems and technology helped advance my career and made me a valuable asset.

I always had an interest in the medical field and was able to combine my teaching background with medical systems in doing my job which included training and working with actual users of the computer such as physicians, nurses, laboratorians.

I retired 8 years ago just before turning 63.

What tips do you have for others who want to grow their career-related income?

Work hard, and get a college degree and/or certificates that can help your career. Alternatively, a trade education and apprenticeship can be a good path.

Join trade organizations or other networking groups that can help you find a mentor or other connections. Keep aware of trends and salary ranges in case you need to ask for additional compensation commensurate with your abilities.

What’s your work-life balance look like?

Given I am retired, travel in our RV, hiking, and family events are primary things for fun. We still have duties and chores to maintain our sticks and bricks home. 

We walk 2-3 miles every day year-round at home as well as when traveling. When my husband was alive, in the last decade of his life I was the primary caregiver.

I didn’t travel much and had to hire staff to help when I was at work. I was able to work remotely part-time which helped.

Job duties also were more than a 40-hour week at times. 

Do you have any sources of income besides your career? If so, can you list them, give a feel for how much you earn with each, and offer some insight into how you developed them?

No additional gigs to bring in extra income.

I wanted no stress or commitments since retirement.

SAVE

What is your annual spending?

$85-90,000 comprised of the following:

• Healthcare:
  • Medicare B and D: $2096
  • Medicare Supplement: $2362
  • Long-term care insurance: $2324
  • Medical & Dental expenses: $2000-2500
• Real estate taxes: $7146
• Insurance auto, home, RV, umbrella: $2830
• RV loan: $7,000
• Travel: $11-18,000
• Timeshare fees: $3,500-4,000
• Charitable Donations: $4,000
• Family gifts for college: $6,000
• Misc (food, utilities, lawn, internet, cell, cable TV, other, auto fuel/maintenance, discretionary): $27,000

What are the main categories (expenses) this spending breaks into?

Primary categories of spending are travel, healthcare, food & home expenses.

Do you have a budget? If so, how do you implement it?

No current budget. I went through that exercise before I retired 6 years ago.

We are both responsible for personal expenses. I pay house/utility expenses, RV loan, timeshare maintenance, and most food since I would have those on my own anyway.

We split travel expenses and those for the RV. When I was married years ago, we made a budget and funded a joint account based on the percentage split of take-home pay. 

What percentage of your gross income do you save and how has that changed over time?

In the early years of employment, I contributed 2-6% which was matched by my employer to my 403b retirement account. I also started with a small IRA when my income was low and there were tax benefits.

Over time, when I started working with my financial advisor, I added a Roth IRA. After age 50, I was earning a good salary and was able to use the catch-up amount saved to the maximum giving me a tax advantage.

Since retirement saving is not as important, I managed to save 5-8%. I don’t have a savings goal.

Enjoying my money and living within my income is important. It took me over a year from when I first retired to switch my brain from saving mode to being able to spend.

What’s your best tip for saving (accumulating) money?

Don’t try to keep up with current trends for accumulating things. Keep big ticket items like cars, appliances, cell phones as long as feasible to avoid incurring new costs.

Pay off credit cards to avoid interest charges. When you receive a raise in pay or unexpected income, save the difference to avoid lifestyle creep.

Live below your means and it will pay off. Maximize benefits your employer offers, including FSA, HSA, 401k/403b, etc. It can also have tax benefits.

Since my late husband and I had no children together to raise, we had more disposable income. This was another reason I was able to add extra to my retirement accounts.

If you have children, read up on tips to help save for them as well as yourself.

What’s your best tip for spending less money?

Look at your spending details and see what you can economize on or eliminate. Look for discounts/coupons.

Shop around for competitive prices on many things, including insurance. Keep your car longer and buy one that has good value and lower maintenance costs.

What is your favorite thing to spend money on/your secret splurge?

Travel is tops since my partner and I have an RV and time to experience the wonders of this country and parts of the world. My mother was a world traveler and I was lucky to experience some exotic travel with her to some places like Antarctica, the Arctic, Bhutan, Scandinavia, and the Cayman Islands.

When I retired, I traveled on bucket list trips such as the Galapagos, New Zealand, Paris, and South America. My partner and I travel to various places in the US and Canada now mostly.

Experiences and spending time with family and my partner are priceless!

INVEST

What is your investment philosophy/plan?

I don’t have one except that I want to ensure I have enough funds and income to last another 20-30 years. I meet with my financial advisor every 6 months and let him help select the best options for stocks and any adjustments he sees to be in my best interest.

We have been working at converting IRA $ to my Roth IRA to be able to have more tax-free income in the future. It is not a high priority to leave an inheritance to those I value in my life.

The reality is that barring a major life event, there will be some funds available at the end of my life. I have also started the 10-year process of moving my 403b funds to consolidate with my brokerage IRA.

What has been your best investment?

I haven’t followed specific stocks or industries to really know. 

What has been your worst investment?

I am sure there have been losers in my portfolio over the years, but none I have picked.

One of my mistakes early in retirement before I knew much about the best methods of allocating from various accounts was a decision to withdraw the same percentage from all my 403b fund types under TIAA-CREF. I didn’t like the TIAA account manager and let things be managed automatically.

My new brokerage account advisor helped me understand the big picture and make changes for my benefit.

What’s been your overall return?

My TIAA 403b annuity is a minimum guaranteed 3%. Some periods earn as much as 5%.

My brokerage accounts 10-year rate of return is 7.36% aggregated for all types.

How often do you monitor/review your portfolio?

Recently I have been looking at the total value of my portfolio daily or several times a week, especially if I hear that markets were strong or took a beating based on national news or events. I don’t get upset at losses since I am in it for the long run.

Values are still on paper so it isn’t as emotional as losing at the casino! I just want to ensure my portfolio values continue to grow.

NET WORTH

How did you accumulate your net worth?

I am an average middle-class citizen. My career choice in IT afforded me a good salary over time.

I took advantage of retirement savings options offered by my employer as well as other options such as IRA, and Roth IRA which had tax-lowering benefits. Kicking up my savings with catch-up provisions after age 50 helped.

I inherited approximately $210,000 when my mother died in the form of $85,000 inherited IRA and the rest in cash from my share of the sale of her house. This was invested in my brokerage account since I didn’t need the extra.

I have been receiving small distributions from the inherited IRA account for 12 years. I was using this extra income to help fund some travel.

Most recently I was using this as an estimated federal income tax payment. When my husband died, I only inherited a very small IRA ($7,000) and the house.

He had no life insurance and had used his 10-year payout from work funds. I am also taking monthly cash distributions from the liquid brokerage account to supplement my monthly spending.

What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?

Saving is my strength. I always had the ethic to save from childhood, things like allowance, babysitting money, etc.

Having a budget and sticking to it without overspending was important. I am from a generation that wanted to come into retirement without long-term debt.

Acquiring a long-term RV loan was not originally in my plan but the interest expense is still able to be itemized in my income tax expenses.

What road bumps did you face along the way to becoming a millionaire and how did you handle them?

I never set out to become a “millionaire” since that seemed too lofty a goal. I knew I needed more than $1M for my retirement pot based on articles I read.

I listened to advice on making changes to increase savings and let my financial advisor help with recommendations while looking at my big picture.

What are you currently doing to maintain/grow your net worth?

I let my financial advisor recommend changes to my funds and allocations based on his experience.

I take a bit less than four percent of funds from my cash brokerage account to add to my income.

Do you have a target net worth you are trying to attain?

No.

How old were you when you made your first million and have you had any significant behavior shifts since then?

I didn’t have a lot of extra time when employed to learn about finances and didn’t look at the big picture of ALL investments at the several companies. I was probably age 62, several years after investing inherited funds and getting ready for my retirement.

One and a half years after becoming a widow, I was experiencing job burnout after dealing with grief and project demands from my job. The thought of having to work until 65 to be able to get Medicare was becoming untenable.

I doubted I would be able to afford to buy health insurance to bridge several year’s time.

I met with the TIAA advisors to discuss my 403b investments. I was told I had enough money invested to be able to start some withdrawals to supplement my widow’s Social Security if I stopped working.

I spent the next 6 months getting retirement info from my employer’s benefits office, learning about retirement financial things such as Medicare, Social Security estimates for myself and ramped-up additional funding retirement savings. This allowed me to create a plan to retire just before my 63rd birthday.

I still had financial challenges to look at for several years but I worked through them and learned a lot. That was 8 years ago. I have no regrets.

I am much more aware of subtle things many retirees don’t think about like Medicare IRMAA surcharges and the 2-year look back. When you are in retirement, you need to be aware of the tax laws also and changes you can make to help keep as much of your money as possible.

What personal habits and/or traits have you developed that have made you successful at growing your net worth?

Trying to educate myself on big-picture financial concepts and learning some of the minutiae of my financial situation in relation to spending and income sources. I don’t want to know the details of various company stocks or market volatility, or allocations.

I trust my financial advisor to evaluate things as his fiduciary responsibilities. I also try to not take more than four percent distribution of funds yearly.

What money mistakes have you made along the way that others can learn from?

Not having a high-yield checking or savings account. There are other benefits as a “senior” such as no maintenance costs and discount on HELOC and safe deposit box.

What advice do you have for ESI Money readers on how to become wealthy?

Learn to delay gratification or instant equity to reach your goals. Educate yourself on financial issues and make goals with achievable steps.

It is ok to slowly accumulate wealth. Seek a mentor or financial advisor if you are not comfortable managing the minutiae of stock, real estate or other accounts.

FUTURE

What are your plans for the future regarding lifestyle?

After going through readjustments from widowhood, I knew I would be able to continue to support myself and not lose a house or other assets due to financial hardship. I want to enjoy life, time with my partner, our families, and “carpe diem”.

I have been helping great-grandchildren with some college funds. I learned that laws for 529 plans and grandparents funds under FAFSA changed this year and I should consider getting a 529 account to earn interest on those funds that I donate to family.

This is under consideration.

What are your retirement plans?

My retirement life is fulfilling with travel experiences and family time. Maintaining a healthy lifestyle includes daily year-round 2-3 mile walks.

When my financial advisor said my funds should last until age 95, I knew I needed to manage my health so my body could last as well.

I started the process to move 403b funds to my brokerage retirement accounts which is a 10 year process. These funds are invested in CD but when it comes due may be replaced by Structured Notes investment which is a hybrid security.

It combines the features of multiple different financial products into one.

Are there any issues in retirement that concern you? If so, how are you planning to address them?

It took me almost a year to switch my frugal life to realize I could spend some funds on myself. I have two long-term healthcare policies to try to keep me as independent and at home as long as possible.

Provisions in the 2017 Tax Cuts and Jobs Act (TCJA) that lowered individual tax rates are set to expire in December 2025 unless Congress acts to extend them. This is one reason to continue to convert some IRA funds to my Roth IRA since I will reach RMD age in 2026.

One great tip from my financial advisor was to open a HELOC account prior to retirement when documenting income was easier, in case I would need funds for major home maintenance projects. I did use it for $25,000 city water and sewer installation but was able to pay it off quickly.

MISCELLANEOUS

How did you learn about finances and at what age did it “click”?

I grew up in a middle-class family and remember saving my allowance for things I wanted. I didn’t have a lot of things handed to me.

I knew I didn’t want to be that woman who didn’t know how to manage finances or be at the mercy of others, or would lose the house if there were extreme financial changes in the household.

Who inspired you to excel in life? Who are your heroes?

I have been blessed with a good aptitude for academic excellence work ethic to excel in whatever I do.

My mother was my influence and biggest supporter. She learned later in life about finances and made up for lost time after her divorce.

Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?

Getting ready for retirement, Social Security, and Medicare, I spent a year reading various books I found at the library.

Laurence Kotlikoff and Ed Slott are authors who I have read. Kotlikoff’s book Getting What’s Yours: The Secrets to Maxing Out Your Social Security was excellent source to understanding decisions to be made.

I also signed up for various retirement strategy seminars and receive a daily Morningstar.

Morning Digest with articles by Christine Benz, plus Ed Slott and Company’s Monthly IRA Updates.

For those approaching RMD age the latest Ed Slott book “The Retirement Savings Time Bomb Ticks Louder: How to Avoid Unnecessary Tax Landmines, Defuse The Latest Threats to Your Retirement Savings, and Ignite Your Financial Freedom” sheds light on important things to know.

Do you give to charity? Why or why not? If you do, what percent of time/money do you give?

I have been supporting environmental and wildlife organizations for many years. I also have donated to Heifer International after learning about that organization from my mom.

As I have achieved more disposable income, I added a few more charities that benefit medical advances/patient advocacy, world hunger, or specific charities for support in world conflict locations. This year I reached the age to donate to them through the Qualified Charitable Deduction (QCD) option using funds from my inherited IRA.

I was also able to add a few more foundations to my list as well as increase my donation amounts. I plan to give 4-4.5% of my gross income this year.

I also spend time advocating with a pancreatic cancer research and patient support organization and have gone to Washington D.C. 13 times with them to meet with Congressional and Senatorial representatives. I have included that organization in my will.

Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?

I have left directives in my trust and will for leftover funds to go to my late husband’s family that I consider mine, as well as providing for my partner and his sons/grandchildren who I also consider family. It is not a priority to leave a large inheritance for anyone though.

Advice on putting retirement plan into action. Once I learned I had enough money to be able to retire, I spent 9 months getting the financial details and estimates from my employer, Social Security, financial brokerage, and retirement investment company.

Also learning about decisions about when to take Social Security, Medicare & healthcare decisions and costs, taxes, lump sum vs monthly work annuity decisions. Keep up with tax law changes related to RMD age and distributions.

This period allowed me to make the best decisions at the time which can be modified if needed. I originally planned to wait to age 70 to collect my Social Security but taking it at age 68 allowed me to keep more money in my liquid brokerage account since I was supplementing my income in the early retirement years.

My financial advisor was able to quantify the impact especially since the market investment rate of return was good in those years.

It is also important to have a vision of what your non-working life will be like and what activities you want to do. Pre-Covid, I had a job that was partly remote but I had a social life with work friends.

Missing that social interaction can be a big change. I started walking with a group of like-minded new friends 3 times a week. There are a lot of groups on Meetup that you can find to help fill in time.

I am very lucky to have met a new partner late in life to share things with and add new experiences to enrich our retirement years.