Reader Case: It’s Never Too Late to Start

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We are now one whole month in 2022 and I just realized: I haven’t done a reader case yet! Well, we can’t have that, now can we? Into the email bag we go!


Hi!

So I found out about your book in an interesting way.

I was on a Zoom call with my boss during our weekly meeting and he was screen-sharing. At one point I could see some personal files, one of which was called “How to Quit Like a Millionaire“. Hmmm, interesting! I immediately looked up what that was while we were still in our meeting and ordered the hell out of it. I manage the retirement accounts for my work and now it all makes sense why my boss recently started putting a shit ton of their paycheck into their IRA! Also, now I know my boss is trying to quit which is really amusing. 

Anyway, I’m a late starter. I’m almost 49 and didn’t get my financial shit together until like 3 years ago, and guess what- I’m an accountant (hanging head in shame). Director of Finance no less. Director of Bullshit at home obviously. I’m now obsessed with investing and saving but I have questions and I feel like my money is pulled in so many directions- I want to do everything at once! Here’s my financial sitch.

BTW, I’m single (boo hoo) so it’s just my income we’re working with here.

Attached is a spreadsheet with everything on it. Should I sell all the individual stocks and put the money into ETFs (I’m thinking yes)? Especially now when the market is tanking? 

Thanks so much!

LateBloomer


First of all, I rather enjoyed the fact that you found out about our book from you boss’ desktop on a Zoom call. To be honest, in terms of things you could accidentally reveal about yourself during a Zoom call, it could have been a lot worse. At least everyone’s pants were on! This time…

But regardless of how new people stumble on this FIRE stuff, whether it’s through a blog, the media, or their boss’ impeccable taste in books, our reader has been bitten by the FIRE bug and now wants to know whether they, too, can play. They admit that at 49, they’re not the ideal candidate for early retirement, but hey, you never know!

So without further ado, let’s MATH SHIT UP!

The Numbers

LateBloomer attached an Excel spreadsheet to their email with all their spending and earnings. Screenshot is below.

OK so where do we start? First of all, their spending as a single person of $2400 a month is actually pretty reasonable. Especially when you take into account that they live in Northern California, one of the higher cost locales in the US. They also earn $70,000 gross, or about $53,000 net.

But then as we go down the numbers, things start to look quite puzzling. At 49, our reader is still holding $36k worth of student loans. And, inexplicably, a credit card balance!

If we were to collect all these numbers into a net worth summary, it would look like this.

SummaryAmount
Income$70k gross, $53k net
Expenses$2400 monthly, $28,800 annual
Assets$19,749.52 + $12,085 + $10,341 + $3,254 + $2,125 = $47,554.52
Debt$36,239 + $3,767.50 = $40,006.50

Add up LateBloomer’s total assets and their total debt, and you are left with just over $7500. Given that they’re taking home $53,000 a year against $28,800 of annual expense, our reader should be able to save $24,200 each year. Where did all that money go?

Lots of stuff can derail a financial plan, like a sudden illness, job loss or divorce. While it’s true that financial mistakes made in the past can have long-lasting impacts on your future financial health, it’s also true that dwelling on the past does nothing to help you dig yourself out of whatever hole you find yourself in.

We’ve all made financial mistakes, us included. We’ve missed out on years of market gains by leaving cash on the side lines and overspent on stupid Coach purses. But if there’s anything we’ve learned during our journey towards becoming a millionaire and retiring in our 30’s, it doesn’t matter what you did in the past, it only matters what you do going forward.

There’s a Chinese proverb that goes “The best time to plant a tree was 20 years ago. The second best time is now.”

So let’s plant a tree and see how tall it can grow, shall we?

Current Trajectory

OK so let’s take LateBloomer’s numbers at face value and assume that the $24,200 they should be able to save actually gets saved going forward.

We know that their current living expenses are $28,800 per year, so as per the 4% rule, their FI number is $28,800 x 25 = $720,000.

We also know that they have enough money in their savings and investments to completely pay off their loans. With their credit card balance currently compounding at ~20% interest, they should definitely kill that first.

Student loans are a little bit more complicated, because it’s not just the loan’s interest rate that determines what the best decision to do is. If the loan payments were set up on an income-driven repayment plan, they may be approaching eligibility for having their loans forgiven. If the company they work for is a registered charity or a government agency, they might be eligible to have their loans forgiven under the Public Service Loan Forgiveness (PSLF) program.

Unfortunately, our reader didn’t provide any of this information, so we have to assume the safest thing to do is to sell all their investments and pay their loan off. This may result in a more conservative-than-necessary analysis, but it’s better than guessing. Our reader can always look up this info later and update the forecast on their own time.

So if we assume that all loans get paid off now, we are left with a starting balance of $7,548.02.

And with that, we have enough to do our projection. At the current trajectory, they should be able to retire in…

YearBalanceSavingsROITotal
1$7,548.02$24,200.00$452.88$32,200.90
2$32,200.90$24,200.00$1,932.05$58,332.96
3$58,332.96$24,200.00$3,499.98$86,032.93
4$86,032.93$24,200.00$5,161.98$115,394.91
5$115,394.91$24,200.00$6,923.69$146,518.60
6$146,518.60$24,200.00$8,791.12$179,509.72
7$179,509.72$24,200.00$10,770.58$214,480.30
8$214,480.30$24,200.00$12,868.82$251,549.12
9$251,549.12$24,200.00$15,092.95$290,842.07
10$290,842.07$24,200.00$17,450.52$332,492.59
11$332,492.59$24,200.00$19,949.56$376,642.15
12$376,642.15$24,200.00$22,598.53$423,440.68
13$423,440.68$24,200.00$25,406.44$473,047.12
14$473,047.12$24,200.00$28,382.83$525,629.94
15$525,629.94$24,200.00$31,537.80$581,367.74
16$581,367.74$24,200.00$34,882.06$640,449.80
17$640,449.80$24,200.00$38,426.99$703,076.79
18$703,076.79$24,200.00$42,184.61$769,461.40

…18 years.

18 years ain’t too shabby if you’re in your 20’s, but at 49 that means that your “early” retirement will occur at age 67, as known as regular retirement. Let’s see if we can do a little better, shall we?

Upping Your Salary

This was something that jumped out to both FIRECracker and I when we initially read this case, but $70,000 is way too low for a Director of Finance. According to Indeed, the average Director of Finance salary in Northern California is a little over $100,000. LateBloomer is definitely earning below their potential.

So let’s say they switch jobs and starts earning the average salary for their position. How does this affect their numbers?

A $100,000 salary in Northern California would normally result in after-tax earnings of about $71k, but in a Millennial Revolution first, this particular reader can take advantage of the “catch-up contribution” provision of 401(k) plans, which allows you to contribute an extra $6500 per year on top of your normal 401(k) contribution maximum at the age of 50 (LB’s 49 right now, so close enough).

If LB were to change their job and start contributing the maximum toward their 401(k) plan of $19,500, plus the catch-up amount of $6,500, that would mean total deductible contributions of $26,000 and an after-tax income of almost $80,000.

At that level of earnings, their savings rate would jump to $80,000 – $28,800 = $51,200. What does that do to their retirement projections?

1$7,548.02$51,200.00$452.88$59,200.90
2$59,200.90$51,200.00$3,552.05$113,952.96
3$113,952.96$51,200.00$6,837.18$171,990.13
4$171,990.13$51,200.00$10,319.41$233,509.54
5$233,509.54$51,200.00$14,010.57$298,720.11
6$298,720.11$51,200.00$17,923.21$367,843.32
7$367,843.32$51,200.00$22,070.60$441,113.92
8$441,113.92$51,200.00$26,466.84$518,780.75
9$518,780.75$51,200.00$31,126.85$601,107.60
10$601,107.60$51,200.00$36,066.46$688,374.06
11$688,374.06$51,200.00$41,302.44$780,876.50

LateBloomer hits FIRE in 11 years! That is nearly a 40% reduction from her previous time-to-retirement, and all that from switching jobs and start earning what you’re actually worth!

Geographic Arbitrage

There are basically two main knobs when it comes to your finances: Earnings and Spending. We’ve covered the effect of increasing our reader’s earnings, so normally this is where we would suggest ways for them to reduce their expenses, usually through a combination of waste-elimination and geographic arbitrage.

In this case, though, their spending levels aren’t really too bad, even with a leased car. Moving to a lower cost locale might reduce their expenses somewhat, but not enough to justify the move.

What might be more interesting, though, is to use Geographic Arbitrage in a slightly different way. Rather than relocating their home, they might be able to get most of the benefits by relocating their job.

The difference in salaries between Northern California and Southern California is easily 50%. The same job in San Jose pays $150,000 on average. If our reader’s going to look for a new job anyway, why not broaden their search and look south?

Based off the fact that they’re Zooming with their boss, it sounds like LB’s job is already work-from-home friendly. So if LB were to stay where they were and find a job in SoCal paying $150k, they’d be able to stay where they are, keep a low cost of living, and increase their salary!

Running the numbers through a tax calculator, if LB were to increase their salary to $150k and start maxing out their 401(k) (plus catch-up contributions), their after-tax earnings would jump to $110k.

That means LB’s new savings would be $110,000 – $28,800 = $81,200. I’m willing to bet that would have a BIG impact on their FI projections.

YearBalanceSavingsROITotal
1$7,548.02$81,200.00$452.88$89,200.90
2$89,200.90$81,200.00$5,352.05$175,752.96
3$175,752.96$81,200.00$10,545.18$267,498.13
4$267,498.13$81,200.00$16,049.89$364,748.02
5$364,748.02$81,200.00$21,884.88$467,832.90
6$467,832.90$81,200.00$28,069.97$577,102.88
7$577,102.88$81,200.00$34,626.17$692,929.05
8$692,929.05$81,200.00$41,575.74$815,704.79

Now we’re talking. LB would be retired in just 8 years. That’s less time than it took for us to get to FIRE, which was about 9.5 years! Not too shabby!

Take Over For Your Boss

Normally, here’s where we would wrap this reader case up, but I just wanted to point out that LateBloomer is in a rather unique position that most people don’t find themselves.

They knows their boss is planning on retiring early.

If you know your boss is eyeing the exit, that means that they’re also thinking about a succession plan. Someone’s going to have to take over their job once they’re gone, and they’re probably looking to groom someone to be that person.

Hint: That person…can be you!

Now obviously, if LateBloomer hates their current job, then this idea’s a non-starter. But if they like their job, they like their boss, and they want to help their boss out, then it might be possible to up their salary while staying in the same company.

Now might be a good time to start taking on extra responsibilities. Volunteer to sit in with them on meetings. Take a visible interest in learning the skills you need to take your career to the next level.

Your goal should be to impress on your boss’ mind that you would be a natural shoe-in to take over when they leave. If you can do that, then you might be able to get that higher salary without having to change jobs.

At the very least, you’ll be able to upgrade your skills and make yourself more attractive as you search for a higher paying job.

Conclusion

So there you have it. Despite arriving at the FIRE party later, there are still paths LateBloomer can still take to get to FIRE in less just 8 years. Which just goes to show you that when it comes to finances, it doesn’t matter what you did in the past, it only matters that you start making the right moves going forward.

There’s always a way out. You just have to find it.


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24 thoughts on “Reader Case: It’s Never Too Late to Start”

  1. dump the car lease. buy a cheap car. worker does telecommute. frees up 500/month$.

    (I am 60, single and finally tackled Fire, my plan is looking pretty good. took me a year to arrange finances. on track now for work life reducing more in 8 years. good luck.)

  2. Great Breakdown Bryce.

    Just one note, the 401k contribution limit increased from 19,500 (2021) to 20,500 (2022).
    So LB has +1k in addition to your analysis.
    https://www.irs.gov/newsroom/irs-announces-changes-to-retirement-plans-for-2022

    My initial reaction was the same regarding income. I wonder if LB approached her boss and said something like “I found this book called QLAM and after a bunch of analysis, it appears I’m significantly underpaid, which is resulting in a challenging situation with the COL here + inflation”

    I has a suspicion that with the interest in the book being shared, recognition of the COL+inflation, and given the job market is tilted in employee’s favor, this could result in a LARGE increase in pay, almost immediately. (This may put the “take over for the boss” play at risk)

  3. My wife and I started our FIRE journey in 2015 , aged 50. We didn’t actually max our savings out until 2017 but despite that, we are on track to become FI in about 2 more years. At that time we will both be about 60, but that’s ok. Not exactly retired early, but retired none the less.

    Prior to finding the FIRE movement, we figured we would be working our entire lives and maybe eating the good cat food. Here we are now essentially at lean FI, which means we have a measure of security in our lives that we never really had before. Its never too late to start and even if you don’t retire that early, you can still retire with a degree of security that many others don’t have.

    It might also be worth noting in the above analysis that at or after 62 LB might be able to pull social security which may help drop the FI number.

    One of the things I love about the FIRE community and the principles we use is that it doesn’t really matter where you are, who you are, your age or your financial situation, the ideas and concepts can always be applied. Age is not a barrier to FI at least, even if the RE part isn’t there.

  4. Couple of thoughts here:

    The boss “recently started putting a shit ton of their paycheck into their IRA”. It’s curious that a coworker would know about IRA habits — unless it’s an employer-sponsored SIMPLE IRA, which suggests no access to a 401k or 403b or 457b plan. SIMPLE IRAs have lower contribution limits. Could be tricky to tax-shelter maximum dollars that way. But this is all conjecture. If our guy has access to a 401k, that’s fantastic. Which leads to my other thought:

    After 59.5, there’s no early withdrawal penalty or financial gymnastics to avoid it. Since LB is joining the club at almost 49, and is unlikely to retire within the next ten years, I’d heartily recommend shoveling everything possible into an IRA and a 401k plan. Hell, cash out those stocks and open a Vanguard IRA and dump it into VTSAX or whatever. At 42 with a target FIRE date of 2031ish I’m slightly envious of that situation (we’ll have seven figures tucked away within the next five years but no easy way to get at it before 2039).

    Good job reaching out, LB! Plant that tree!

  5. Darn !! I wish we knew a little more about this person. She’s in Northern California ? …..Sacramento-ish ? If so, $70K is crazy insane wayyyyyy low for the job she’s in, at least as the job is described…that sounds more like a bookkeeper’s salary in the Sacramento region. She should be > $100K easily.

    Actually, she’s not too different than myself. I did my FIRE in the Sac area. Started at age 47 and finished at age 55. I really ate sh*t for that seven years to get out of my job. Rented room in a house, used car, drastically cut expenses, etc, etc. I think if she retunes her current situation she could be out in under 10 years…definitely before age 60.

    1. Yes, I’m in Sacramento! Congrats on retiring early(ier than most)!

      I get paid so little because I work for a non-profit. Trust me, I know I could make more elsewhere!

  6. I am so glad they are planting their tree! Now is a perfect time. After addressing my own FIRE journey 8 years ago, and helping a few others to do the same, I have a challenge for this case study participant. Is $2400 truly what you spend a month? Is there anything you are forgetting? I forgot a few categories until I started to track my spend closely for 3 months. Example: I had missed my spend on gifts, and with a large family all catching the marriage bug , that was a significant number not included in my spend. I also noticed if a friend wanted help on their FIRE journey AND had a credit card balance their was a trend towards their monthly spend not being accurately captured when we dug into it.

    Hope this challenge helps, and even better, that you have captured your cost accurately. An accurate analysis, coupled with desire and math, will make all your FIRE dreams come true.

    1. Thank you! $2400 includes all my main expenses, does not include random one-off stuff. It only includes what I pay monthly to survive. My rent is very low for this town because I lucked out and am renting a friends house cheaply.

  7. Great advice and feel this is being not emphasized enough.

    The key to retiring early is to have a massive gap between income and expenses. Too many focus just on spending but it’s so much easier to save 50% plus if your income skyrockets.

    Plus cutting spending extremely might reduce the quality of life. What’s the point of getting to FI and feel like you missed out on the last 10 years which by the way are the best years of your life in terms of quality and health.

  8. I’d love to chime in with some thoughts on what I would do – I actually think the situation is not as dire if she makes a few changes.

    First and most obvious – get rid of the CC debt. I wouldn’t even sell assets to do it. I’d just eat ramen for 2-3 months (and maybe sell a few things around the house) to get rid of it.

    Second, get rid of the car. Leasing is for suckers *who can afford it*. You cannot afford it (no judgment, we’ve all been there). When you go for a new to you car pay no more than 10k. Payments will be under $300.

    Third, and this one is a huge one: for the love do NOT prioritize paying off your student loans, especially at the cost of selling your assets. I cannot emphasize this enough. Student loans charge simple interest, investment interest is compounding. If you struggle with your repayment then get on a income-based repayment plan where payments are capped at 10-15% of your income. If you can do PSLF – go for it. If not – then income-based repayment. Maybe this is just me, but I’ve done both (payed off debt aggressively, and slowly) and I *highly* prefer the slow payoff so I can accumulate assets at the same time (with the exception of high interest debt – get rid of that quickly).

    Fourth, why no retirement investing at work? If it’s offered, get on it. If not, open an IRA and start investing (I’d go pre-tax since you are in a high tax state, but it’s up to you).

    Fifth, I recommend you check out your SS estimate once a year and track how much you your monthly payout will be. It will likely not be enough for US retirement, but more than enough for no frills retirement in a small, safe town in Mexico. Your modest SS will be enough for no frills living, and your investments will cushion you and provide luxuries as you choose.

    Best of luck – you can do this!! So many of us didn’t start until later in life. It is what it is – you can still have an amazing future and wonderful retirement. Keep us posted!

    1. Love all of this! Especially the student loan part! I have $127000 and decided to refinance $40000 in attempts to pay it off. Now after relocating out of the US and using the REPAYE, my payments for the federal loans will drop to $0 next year. Now I wish I hadn’t refinanced, but oh well. The only reason I don’t get depressed with the loans is the fact I contributed so much to my retirement accounts and after tax brokerage for the past two years. Thanks to investing in the market I have a six figure net worth, instead of starting at zero. TBH if I had contributed all extra to student loans I’d prob still be negative since it’s with after tax money and a lot of my contributions were pre-tax.
      Focus on compounding assets!

    2. Hi, thanks for your encouragement and input! To address some of your comments:

      We do have retirement investing at work- that’s what the Vanguard stuff is on my spreadsheet. I have a SIMPLE IRA (through work) and a ROTH IRA on my own.

      Yes, I will definitely be paying off my CC this week. CC debt be gone! I am not touching my student loans at this point. I am not even paying on them at the moment because of Covid and I want to see what happens with them. Because I work for a nonprofit I am doing PSLF- I have 3 years of qualifying payments already towards that.

      I check on my SS pretty regularly and use that in my calculations for what I need to have to live on.

      Car…well yeah that probably needs to go.

      🙂

      1. I just wanted to say, “Good on you for reaching out and being receptive to change. By doing that you’ve already taken the biggest and most important step towards a better future.”

  9. It’s not unusual for an employee to be able to see everyone’s contributions and 401K balances. Generally everyone on the 401K committee can see that, also any loans from the plan. But I’m not sure the fact that the boss is maxing their contributions means he’s on the verge of retiring. I maxed mine every single year and worked for over 30 years. Anyone with enough income should be maxing every retirement account available regardless of their planned exit date.

  10. It’s hard to judge a person based on just a few paragraphs and an Excel spreadsheet. This one raises some questions. How does a “Director of Finance” with decades in the workforce earn only $70k in California? Why would someone with the qualifications to hold that job title carry a balance on a 20% credit card when liquidity exists to pay it off? Possibly most importantly, why would such a person wait until their mid-forties to even try to get their financial house in order?

    I’ll echo the question about leasing a fairly expensive car. Is this person driving so much that plugging in the hybrid for gas savings is worth the price premium of a $500/month lease?

    We’re no one to cast stones at a total stranger, and there may be good answers to these questions, but this person should be asking them to ensure that their planted tree grows as intended.

    I really like the idea of making a plan to take over the retiring boss’ position. The tree planting proverb is one that I like enough that I, getting a late start in a career change myself, have also used it.

    1. Woah, judgey. Trust me, I know I make less than your average “Director of Finance”. The reason I make so little is because I work for a non-profit. I am the 3rd highest paid person there and nobody makes near $100k. People are typically drawn to non-profit work because they believe in the cause and they want to be part of a solution. It hasn’t always been about money for me. But it sure as fuck is now.

      I was going to comment on your other things, but I don’t feel like defending myself. I am here obviously because I am ready and mostly able to make massive changes to my spending and investing for the future. This book changed everything for me and it’s exactly what I needed. Why it took me until my 40s is too personal a thing to share with everyone. I am here and that’s all that matters.

      Re: the car, I work from home but I travel a lot and wanted something a lot more fuel-efficient than what I had.

  11. Love the blog, Love the case study but based on the info provided I think there is a decent sized calculation error.

    Based on the calculation you conclude that a $100k Salary would result in ~$29k in taxes ($71k after tax). Then you use the 401k contribution and catch up to remove $26k in taxable income (say it is $106k – $26k=$80k). LB doesn’t have an after tax income of $80k… They have a pre-tax income of $80k that still needs to be taxed to determine what their after tax income is. The $26k in contributions doesn’t wipe out the $29k in taxes dollar for dollar it just lowers the amount that is taxable. Perhaps I misunderstood what you were trying to say but just wanted to point that out based on how I read the article.

    1. I tried to edit my comment but it wouldn’t save…

      Unless you were saying that the $26k into retirement savings brings LB’s salary back down to roughly what their taxable income was before so the $53k (taxable income) +$26k (401k contributions) =~$80k?

  12. Everyone has fancy job titles. Everyone has fancy ass degrees. Everyone drives fancy cars and lives in fancy houses. Everyone eats out at fancy restaurants. Everyone takes dream vacations all the time. It’s the instagram life, yolo!

    Lots of fake it till you make it out there.

    I hope LateBloomer develops the resolve to achieve the goal of FIRE. I just hope this current obsession is more internally driven than a degree of envy about their boss. If it isn’t, well …

  13. Ignore the judgment Latebloomer – you don’t have to defend yourself. Most of my friends (even in fields such as finance) do not have their financial lives in order. It’s like asking why do doctor’s smoke or eat sugar. Who cares?
    The point is – you are not alone. I got my act together in my late thirties. I’m ahead of my peers yet behind Wanderer. The cool thing is (and this is the good news we should shout from the rooftops): many, many people can completely change their lives and futures with about 10 years of dedicated work/effort. Especially in this country. Even with lots of student loan debt.
    So glad you are going for PSLF! What changed my thoughts about debt was listening to Travis Hornsby (google him). I listen to his podcast all the time and am now a huge fan of simultaneously investing while paying off debt. Best of luck to you!

  14. The unknowns we get to get a glimpse on via Zoom calls or Teams meeting is great. Knowing Boss planning to retire early might be a good time to either do more work and hopefully you get their job when they retire or atleast recommend you for it.

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