Today I have an update for you from a previous millionaire interview.
I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. š
This update was submitted in June.
As usual, my questions are in bold italics and their responses follow…
OVERVIEW
How old are you (and spouse if applicable, plus how long youāve been married)?
I am 52 years old.
I am divorced but was married for over 11 years.
Do you have kids/family (if so, please tell us a bit about them)?
I have one daughter in her twenties who is a dog mom of two adorable golden retrievers. She graduated from college a few years ago and is a creative and brilliant graphic designer.
Though she has a full-time job working remotely for a marketing firm in Chicago; she also started her own business. She set up an LLC, learned all about running her business, and now is looking at bringing on her first employee. I get a front row seat to watch her grow as an individual and a professional.
She purchased her first home in 2020 and that was an incredibly stressful process for her (like many other first-time home buyers). I did (sort of) give her some financial support for that but hereās how I did it…
When she got her first job at age 16 (in 2011), I opened a custodial Roth IRA in her name. Between 2011 and 2012, I contributed $6,400 and invested in a large cap stock index fund (mostly DIA). I never put anything else in after that and wasnāt sure when I would turn the account over to her (I knew she legally had rights to it at age 18).
She saved up for a down payment and got approved for a mortgage just before she turned 24. So that is when I decided it was time. Her 24th birthday gift from me was the Roth IRA, which had grown to $12,000! The look on her face was priceless and I wish I had captured the moment on camera. She was all ears when I explained to her that she could use the contribution portion of the account ($6,400) without tax or penalty, to help with her down payment or anything else, if she wanted. I suggested that she let the rest continue growing but made it clear that this was her money now and she could do whatever she wanted without judgment from me (by the way, she did follow my suggestion).
She didnāt let me get involved as much as I would like but she is a smart, independent person so I knew she would be okay. The things she did ask for my advice on made me feel great as a mom. The truth of the matter is, I learn a ton from her as well (especially from her graphic design and technology tips).
She is financially astute, and she picked up on way more of my money habits than I ever thought she would. As a young adult, sheās certainly made some mistakes but nothing earth shattering. Yes, I wish she would just learn from my mistakes, but I think itās healthy for her growth as a person to make some mistakes on her own (sometimes the lesson just sticks better that way).
Probably the most challenging part for her that I had to witness was navigating the U.S. healthcare system. When she turned 26, she had to get her own health insurance and of course that is when the medical issues seemed to manifest. What started as a simple dental procedure developed into multiple other healthcare issues. Even though she let me help her figure it all out, she is a super empathetic person and still concerned about other young people that donāt have anyone to help educate or guide them through this massive maze.
What area of the country do you live in (and urban or rural)?
I live in a suburban area of Ohio. Itās a low to mid cost of living area and I have been here for over 20 years.
I am considering moving to the southeastern part of the US in the future.
What was your original Millionaire Interview on ESI Money?
Millionaire Interview #99 which was published in November 2018 ( I was 48 at the time).
I was still working my corporate job, but seriously working towards my FI/RE (Financial Independence, Retire Early) plans.
Is there anything else we should know about you?
I am submitting this millionaire questionnaire still in a bit of disbelief because I grew up in poverty and my big dream was just to be middle class. So, to be sharing my story of becoming a millionaire and providing an update three years later is nothing I would have ever dreamed I would ever be doing.
Iām quite transparent about my finances and hope that it will at least serve as a reference for others that may have started in a similar position as me. I want to help normalize conversations around money, and my āwhyā for reaching FI/RE (Financial Independence, Retire Early) was to follow my big dream of creating a financially literate society.
Since my interview in 2018, I officially retired from my corporate job in late 2019 at the age of 49 (just weeks before the pandemic!). I gave my boss a verbal āsoft noticeā earlier in the year and let him know I would give him a formal date in writing later in the year. I gave him that written resignation letter about three months prior to my last day.
In my mind, it was not just the standard āI Quitā letter with a two-weekās notice. This letter was going to change the trajectory of my life, so I rewrote it a hundred times before I finally called it finished. It was awfully hard for me, but I got it down to one page, and hand delivered it to my boss before emailing it to him. Following is a short excerpt from the letterā¦
EXCERPT FROM MY RESIGNATION LETTER (2019)
ā…I know my 40s is a little early to retire and some may even say Iām giving away the Golden Ticket.
Iāve certainly spent many months (maybe even years) imagining such a divergence from the norm and ultimately came to this conclusion:
I could follow a traditional path or blaze my own; I chose the latter.ā
The other huge milestone since my original Millionaire Interview was that I graduated with my masterās degree in May 2022 and managed to maintain a 4.0 GPA throughout the program and graduated with honors. This was a big do-over for me because I almost flunked out of undergrad trying to juggle multiple jobs while paying my way through college as a full-time student.
Something had to giveā¦ and it was my grades. I ended up with a pitiful 2.6 GPA (the minimum to graduate was a 2.5) that I was ashamed of for a long time because I knew I was academically capable of doing much better.
NET WORTH
What is your current net worth and how is that different?
My current net worth is $1.6 million. That is about $400k more than I had in my original interview in 2018. It has grown significantly even though I retired at the end of 2019.
As of June 2022, things are quite shaky with the stock market and that is where most of my net worth still sits. However, I have stuck with my plan of keeping 2-3 years-worth of expenses in cash so the bills will get paid without worry about what the stock market is doing.
Iām not quite as worried about the current market downturn as many others Iāve talked to because I remember how bad it was in 2008.
It was around that time that I started getting serious about my saving and investing. I joined a stock investment club and started maxing out all my tax-advantaged accounts: 401(k), HSA and Roth IRA. The strong momentum of the stock market rebound that followed was certainly part of growing my wealth to millionaire status so quickly.
The big difference for me in this current stock market sell off is that I am not making new contributions like I was back in 2008.
What happened along the way to make these changes?
I downsized from two vehicles (an SUV and a Convertible), to one. My current car is a 2015 luxury sedan that I purchased in late 2018 for $21,000. I just checked the value of this car in June 2022. The trade in value was $20k-22k and private party value was $21k-$23k. The value has remained the same and possibly appreciated after four years of ownership and 30,000 more miles. What a crazy car market!
Housing prices have also skyrocketed over the past few years. Even though I live in a low to mid cost of living area, my home has increased in value by about $50k in the past 2-3 years. As I mentioned in the first interview, I do carry a mortgage on my home because my interest rate is so low (about 3%). Iām still paying that down as agreed and the remaining mortgage balance is $51k with a current home value of about $250k.
I have learned from the pandemic that things can change in a heartbeat! I want to seize every moment and I was so thankful that I retired when I did (and honestly thinking I wish I would have done it sooner).
I have gotten a better handle of what my post-retirement life looks like. I think the biggest variable after retirement was my human capital and ability to earn from my passion projects around financial education. Over the past three years I have been able to fully immerse myself in that world. This is my lifeās work and I have a much higher level of energy and motivation than when I was working my corporate job.
Now I know that there will be many income-generating projects that feed my soul and move me closer to my dream of creating a financially literate society.
What are you currently doing to maintain/grow your net worth?
Since I am retired, my main concern is maintaining or at least not depleting my net worth too soon.
The one expense that I thought would be a drag on my net worth was health insurance. Turns out, that has been very reasonable because of using the ACA marketplace in my state and qualifying for subsidies. I know this may not always be the case but for now, this expense has been minimized.
I have changed my mind around what to do with the small pension from my previous company, which has a lump sum value of $65k. I was initially going to just take the lump sum and roll it over to an IRA.
Then I thought about going with the ā75% Joint and Survivor Annuity with 2% Indexingā. That would give me a payment of about $500/month starting at 55, with my daughter as the beneficiary. She would continue collecting 75% of my benefit amount for the rest of her life after Iām gone. Itās unusual to allow anyone other than a spouse to be the beneficiary, but this was an available option.
I think I have finally settled on using an option I had never heard of before called the āAge 62 Level Income Annuityā. Basically, this will give me an increased payout of $1,600/month from 55 to 62 and then go down to a very small amount (about $50/month) after that since I would be eligible for social security at that point. Taking this option does a few things that attracted me to it:
- It allows more of my other funds to remain invested in the market.
- It allows me to tap an additional income prior to 59.5 without penalty.
- It is a monthly fixed amount and gives me a little more diversification.
- I consider this sort of an alternative to setting up a 72(t) Substantially Equal Periodic Payment (SEPP) plan.
I’ve had a reframe around Social Security, which I did not include in my FI/RE plans. Now I do see it as a powerful backstop in my older years that is:
- A secure passive stream of income from a system I was required to pay into.
- Adjusted for inflation.
- Paid to me for the rest of my life.
My numbers at the ssa.gov website shows me a benefit of $1,700/month if I take it at age 62 or $3,100/month if I take it at age 70.
Most Social Security experts begin with explaining the 35 highest earning years that are used to calculate your benefit. But I started looking at it from the opposite side. Focusing on the minimum it takes to qualify which is only 10 years (40 quarters). Anyone that has worked full time for at least 10 years, will likely qualify for about $1,000/month in benefits using the current Social Security formula (average indexed monthly earnings and bend points).
At minimum, itās worth looking at your account and earnings information at ssa.gov. With the updated website, you can change your estimate for future earnings, even to $0 if you are seeking to retire early. Yes, Iāve got my FI/RE people in mind with this perspective.
I also learned that there are spousal, ex-spouse, and survivor Social Security benefits that could help individuals (including myself) that are married or previously married for at least 10 years to an ex-spouse.
I used to be overly pessimistic about the viability of Social Security. I just thought it would go broke and not be there for someone my age or younger. While the Social Security trust fund is scheduled to run out in 2034, there would still be enough to pay 80% of benefits according to the most recent Social Security Trustee Report (June 2022). Many experts on Social Security believe that congress will make adjustments to the program before then, as they have done in the past when the same looming issue existed.
I like to make decisions rooted in facts, and Iāve had much more time to look at certain areas of my finances that I never seemed to have time to do when I was working full time. The educator in me of course wants to share everything Iāve learned. I am working towards a professional credential that focuses on Social Security and this is what really opened my eyes.
EARN
What is your job?
I have taken on more consulting and financial education work now that I am no longer tied to a 9-5 job.
For the past two years I have been in a masterās program and just graduated in May. Even while in school, I continued doing financial education and financial literacy work with businesses, government agencies and nonprofit organizations.
Any income I earned basically meant that I didnāt have to take it from my investments.
What is your annual income?
About $40,000. Approximately $10k-$15k is from contract/consulting work and the rest is from investments.
In 2020 I took a distribution directly from my traditional IRA because the 10% early withdrawal penalty was waived due to the pandemic.
I also liquidated my company stock, investment club funds, and an Acorns account that I originally set up to invest along with my daughter.
How has this changed since your last interview?
In my last interview I was working at my corporate job, averaging about $80,000 annually and very close to retiring early.
In December 2019, I officially retired and started my masterās program in January 2020.
The biggest change was no doubt the pandemic. What a difference a year makes! I donāt know if 2020 felt super weird because it was my first year of early retirement or the pandemic.
In both 2020 and 2021 I received the full stimulus payments which were based on my income while working full time in 2018 and 2019. Both those years I earned a gross income of about $90,000/year but my AGI was only about $65,000 because I contributed the maximum allowed to my HSA (Health Savings Account) and Traditional 401(k). The stimulus payments started to phase out for those with an AGI above $75,000.
Also, in both 2020 and 2021, I was able to stay within a 0% effective tax rate because I had very little earned income. Most of my income came from investments.
Have you added, grown, or lost any additional sources of income besides your career?
Since retiring, I have of course lost the income from that job. I must admit, I do miss the regular, predictable paychecks that were deposited into my bank account every other week. Since I no longer have that, Iāve had to manage my own sources of income to pay my bills and it has been an adjustment.
I have grown my income from consulting/contract work, but the largest part of my income is still from my investments. I can see that shifting a bit since Iām done with school.
SAVE
What is your annual spending and how has it changed since your interview?
My annual spending has been about the same except for college costs. My tuition was primarily paid through my 529 College Savings. The areas which have gone up a bit are some home maintenance expenses — HVAC system replacement, updating flooring and a few other home improvements.
Taxes and health insurance expenses went down. I qualified for tax subsidies for ACA premiums. I currently have a plan with a $550 deductible and $550 max out of pocket (Iām the only one on the plan). My MAGI was about $19k for 2020 and 2021. In 2022, Iām projecting to have a higher MAGI and probably wonāt qualify for the same level of subsidies.
Though I am a huge advocate of HSAs, I canāt make contributions because Iām no longer on a qualified high deductible health plan. I can still use my existing HSA funds to pay qualified medical, dental, and vision expenses. I also have about $5k worth of digital receipts for past expenses that I can reimburse myself for at any time, tax-free.
What happened along the way to make these changes?
The main thing that happened along the way to make these changes is retiring and having a major decline in my earned income.
Primarily living off my investments gives me more flexibility with what I show as income than being an employee with W-2 income.
INVEST
What are current investments and how have they changed over the years?
My current investments are still primarily in low fee index funds (about 80%) and some individual stocks (about 15%).
Iām one of the nerds that loves doing the analysis and being a long-term owner of great companies. Currently, my top five individual holdings are: AAPL, ABT, ADBE, BRK-b and CMG. I have owned all of these for more than 4 years within my IRA.
Since retiring, I have become a much more active shareholder of the companies I own. I read and vote my proxies now (I donāt always go along with what the board recommends) and have attended a few annual shareholder meetings.
Here are a few changes Iāve made in my investment picture since my last interview:
- Started adding I bonds to my portfolio, taking advantage of the high rates (9.62% as of May 2022). This is an asset I had not considered before and started reading about them more and more as the rates kept rising along with inflation.
- I dabbled a tiny bit in crypto (Bitcoin and Ethereum) and Iām not near as optimistic about that as I am about the I bonds. Luckily, I only invested about $1,000 just to get a taste of it. That $1,000 investment is now worth about $300 (June 2022). I love learning about new investments, so I donāt regret exploring the cryptocurrency market even though I have lost most of what I invested. I keep newer and speculative type assets like this very small, so it has minimal impact on my overall investing strategy. Though Iām feeling a lot of uncertainty about the long-term future of crypto, I am very optimistic about its underlying technology, Blockchain.
- I have used about half of the money in my 529 College Savings account to help cover the cost of my master’s degree. I still have decided to leave some funds in there to gift to my nieces/nephews to help encourage them to earn their college degree. I was a first-generation college graduate and Iād like to do what I can to make sure Iām not the last. Those funds are invested in a Vanguard S&P 500 Index Fund. I did take out a student loan for a portion of my college expenses because of the 0% interest and it worked out better to get the Lifetime Learning tax credit and then pay back the loan with 529 funds (up to $10k is allowed). The total cost of my program was about $40k (tuition, fees, books, etc.), spread over three years.
What happened along the way to make these changes?
High inflation spurred the increased rates in I bonds, and we all know about the rapid growth of cryptocurrency prior to 2022 (admittedly, I was probably a part of the crypto mania).
I bonds have worked out great with a current rate of 9.62% but crypto is another story. Both represent a very small part of my investable assets. The vast majority is still in low fee index funds and some individual stocks.
The other change was ESG investing. Specifically, the āSā for social justice. As an African American woman, it was so hard to watch the George Floyd video and other displays of similar actions being captured on cameraā¦It was terribly disturbing and painful. The outpouring of individuals and companies speaking up in support of racial justice was meaningful to me. Iāve had close friends show their support and kindness as well, many of them of a different race and culture than I.
I thought about ways I could best demonstrate my support of racial justice and one way was through my investments. I eliminated a few individual stocks that were heavily involved in things that contradict my values. I also added a couple of ETFs dedicated to social justice (JSTC) and minority empowerment (NACP).
MISCELLANEOUS
What other financial challenges or opportunities have you faced since your last interview?
My biggest financial change is transitioning from working as a W-2 employee. I do miss the regular paychecks and all the great perks (paid vacation, 401(k) match, etc.) But the opportunities and legacy building that I have before me far outweighs any of that.
Iām getting better with this but withdrawing from my investment accounts rather than contributing to them has been an adjustment. One of my superpowers was saving and investing, so that part was not a problem for me. Now Iām learning to do the opposite. Like my daughter says, āthatās a rich personās problemā and she is right.
Estate Planning has been on my mind a lot over the past three years so Iām updating beneficiaries, titling of assets, final wishes and estate documents. I didnāt know before that I could name beneficiaries on my bank accounts (payable-on-death) and taxable brokerage accounts (transfer-on-death). I only have one daughter so the bulk of my assets will go to her directly via beneficiary designations. The only items remaining will be real estate and personal property.
The one account I decided to split the beneficiaries is on my HSA because itās an unusually large amount (over $150k) and the funds will be fully taxable the year of my death. I have named multiple individuals on that account and a couple of non-profit organizations to minimize/eliminate the tax hit.
I also must mention the wonderful opportunity I had while in school. It was such a privilege for me not to have to work while pursuing my degree and it allowed me to be involved at a level I never would have been if I was working full time. Being at a traditional university gave me access to great professors, many organizations, and lots of events. Attending the university enhanced my network and I met some amazing people that I will remain connected with.
Probably the most significant part of my graduate school experience was when I made the trip to the commencement ceremony to receive my diploma in person with my daughter.
Overall, what’s better and what’s worse since your last interview?
Better:
- Earned a masterās degree and got my academic do-over
- Being FIREād and controlling my own time and who I work with
- More time for walking and hiking every day
- Made sure all my financial accounts have primary and contingent beneficiaries, including bank and brokerage accounts.
Worse:
- Adjusting to managing my own income flow without a regular paycheck
- Shifting to drawing down my investments
- Being an entrepreneur and having to figure out all the ābusinessā stuff
What are your plans for the future?
I am pursuing multiple financial credentials beyond my masterās degree because I am a life-long learner and will always be working on improving myself and expanding my knowledge. I will be focusing on these over the next few years. Two of them require a rigorous examination that takes many months of study and thousands of experience hours. These will increase my value as an educator and personal financial professional but will also give me more flexibility to choose the projects and organizations I work with.
I have already welcomed many opportunities around financial education that light me up. Itās so exciting to work with organizations that share my vision and passion, and together we are powerful.
At first, I thought I wanted to blog or do one-on-one consulting. While those may be a component of my work, I really prefer group platforms with interaction such as live workshops or speaking engagements.
One emerging model I am attracted to is financial wellness and planning in the workplace as an employer-provided benefit. There are a few startup companies who provide this service to help employees with things like planning and tax services on equity compensation and help with understanding company benefits. I love the idea of helping people at the beginning of their wealth building journey vs. the end when they are ready to retire.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
Know your āwhyā for wanting to reach millionaire status, financial independence, early retirement or any other major goal in your life. It will give you more energy and motivation to reach it. I think the reason I never got tired on my way to reaching FI/RE or millionaire status was because I had a clear picture of what was on the other side.
Over the past three years, I have unquestionably gained a better appreciation for the psychological side of my finances. I think itās a valuable exercise for everyone to explore how past events or experiences have shaped your money thoughts and behaviors.
One of the most powerful assignments while in school was in my last Financial Therapy class where I had to create a money genogram. A genogram is a graphic representation of a family tree that displays relationships. For this one, it focused on money relationships. Simply put, it explained a lot for me. This money genogram also showed the generations below me, including my daughter, nieces and nephews. So, I asked myself, what influences was I having on them?
MJ says
great update! thank u, wow u are not slowing down. You simply pivoted. Dynamic interview back then and dynamic update today . Your new life similarly dynamic and seem to hold more promise than the life you left behind when u retired from corporate America. Love ur commitment to helping others in your community gain financial literacy. You dropped some solid nuggets of wisdom on the many variations of social security benefits. That is an area that I personally need more knowledge and insights on. and your daughter, so young yet set up for her own level of success. Great job having the foresight , and taking action , in setting her up for success. . @esi, I hope to see ur update as well, as I think u were MI-100? Again, great job 99šš¼
ESI says
Hahaha. I’m saving my update for a time when there’s nothing else to post…which isn’t a problem for the next several months. š
MI Update 29 says
Thank you MJ! When I retired I wasnāt sure how things would go at first but Iām loving this post-retirement life. It gave me the time to really dig into things I am curious about and focus on the things that really matter to me.
Randy says
Great follow up interview! See if you can get a free or low cost initial consultation with a property/ estate attorney to see whether a Lady Bird Deed can meet your needs for making your daughter beneficiary on your home without having to pay probate costs and allow minimization of other costs and fees.
I wish you smooth sailing as you move forward on your adventure.
MI Update 29 says
Thank you for bringing this up Randy. I actually did do a little more digging into the possibility of beneficiary designations for real estate. Turns out, my state is one of about 30 other states that allow you to name a beneficiary (via a Transfer on Death Deed). My state also allows you to name a beneficiary on your vehicle.
I had no idea either of those were even possible but as soon as I found out about it (earlier this year), I set up my daughter as the beneficiary for them both.
Aside from avoiding the costs of probate, it is much quicker and easier.
Dean says
Good update , thank u. still going strong. I immediately maxed my HSA after seeing your sizable balance, darn u lol. Youāre so motivating and inspiring. did u get the Tesla u mentioned getting ? sorry about crypto. I got creamed as well. but Iām still holding. Itās only a fraction of my net work . Also I knew the volatility and associated risks prior to investing. Keep moving forward. Great job.
MI Update 29 says
Thank you so much Dean!
Oh the HSA was one of the good decisions I made early on. Though I am no longer on a qualified HDHP, the account is still invested. It hit a high water mark of $150k at the end of 2021 (now itās down to about $125k). Glad to see you started your own HSA.
I havenāt gotten the Tesla yet! I would still like to see better infrastructure around electric vehicles for long distance travel. I was pretty jealous of a friend of mine in Atlanta that just got one. She gave me a grand tour of the vehicle and I just loved it! Iām also keeping my eye on all the other electric vehicles coming on the market now.
Crypto! Well it has been very interesting to watch. And a sobering reminder that it is ok to dabble in speculative investments but keep it smallā¦ really small, because there is so much more risk involved.
MI - 296 says
I find your story inspiring. On many levels. While certainly your positive, upbeat writing style is part of it, I think I am mainly inspired by the authenticity of your voice as you discuss your passions and the environment you have created to pursue them. It is often so completely disorienting for many people who climb this ladder, and you can easily lose touch of what brings you happiness, what makes a difference, and the relationships that fuel you in each phase of your life. Keeping score (and winning!!!) can often overshadow the “why”. Kudos for you to staying grounded and true to yourself.
Thanks for being another authentic voice that inspires. The world needs more and more of them.
MI Update 29 says
Thank MI – 296 for those very kind words!
I really enjoyed your Millionaire interview as well and look forward to reading an update in the future.