3 Smart Decisions Helped Retiree Build $ 1 Million Net Worth
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At 55, Sandy had just ended her third marriage. It was like she was back on the starting line, she wrote on her son’s personal finance blog.
“Alone. The kids are gone. My husband is gone. A small amount of money to live on until I know where to go from here,” wrote Sandy, who uses an online pseudonym but has been verified by Insider. At the time, his goal was not to get rich, let alone retire early.
Less than a decade later, however, just days after her 62nd birthday, Sandy retired from full-time work. Soon after, she reached a net worth of $ 1 million. “I never thought I would reach this milestone, especially with all my steps along the way,” she wrote.
Here is how she did it.
1. She used IRAs
Sandy has decided to save for her retirement. She and her second husband, whom she married in their mid-twenties, owned a graphic arts business. It was successful, she told Insider, but the tax burden was staggering and she became determined to find ways to legitimately reduce it.
One solution, she discovered during visits to the library and discussions with her accountant, was a SEP IRA – a pre-tax retirement account for the self-employed. The couple began to set aside some of their IRA winnings and Sandy was amazed at the double benefit.
“Then the IRAs just kept building and I was like, ‘Wow. So not only do I save this money instead of paying taxes, but I take this amount of money – it’s not like it’s out of my pocket, it would’ve gone to taxes – and I stick it in an ARI and then every year it builds and grows, ”she said.
The couple then divorced and Sandy received approximately $ 80,000 of their combined IRA savings. She continued to save what she could in her own IRA and again used a SEP IRA while running a business in her third marriage. Today, his IRAs total over $ 760,000.
2. She stayed away from credit card debt later in life
Following her divorce, Sandy turned to credit cards to get by.
“I had two kids in high school, one driving, a house to pay and absolutely no income,” she told Insider. “So for months, until I could find a job and pay lawyers, I lived with credit cards, and they flourished.” Sandy remembers her credit card debt peaking at around $ 24,000.
Eventually she got back to work and was able to do a cash refinance on her house. She paid off the credit cards and took out a home equity loan to access credit at a lower interest rate until she could replenish her emergency savings.
“It got me to say never, never again. I’m never going to be put in this position where I’m sitting at night saying, ‘How am I going to pay for this? How will I pay for the groceries? “” She mentioned. “It was horrible and it was a bad time anyway, emotionally, to have this financial burden.”
Sandy couldn’t stay away from credit cards once they started offering attractive rewards and signup bonuses. But she implemented a rule that she still follows to this day: only charge what she can afford in cash and pay off the full balance each month.
3. She kept her real estate until the housing market recovered
After regaining financial stability, Sandy started a new business and married a third time.
“For years my business has become a gang breaker, generating six-figure revenues,” she wrote in the blog post. “We bought a vacation home in the southwest and shortly thereafter a home to use as rental property. Life was good. If nothing had changed, I would have hit $ 1 million years ago, but nothing lasts forever.
Her business and her marriage fell apart. In the divorce settlement, Sandy received the couple’s three properties. But the day after the Grand
, they were underwater.
“I knew I had to keep them for many years to be able to make a profit from them,” she wrote. “It was a big priority for me – a lot of money was tied up in these houses. But I thought it was a good investment if I could take it.
Sandy rented two of the houses, earning a small income to help pay the bills. She also had a full-time job and various freelance gigs so that she could continue to save money and invest more in mortgage debt. She found it easier to create and maintain wealth as a single woman.
Years later, when the housing market recovered, Sandy unloaded the properties and profited greatly. It was then that she realized she could retire early without taking over Social Security or operating her retirement accounts.
Using tax-free capital gains from one of the home sales, Sandy paid cash for a house in Arizona, which she shared with her third ex-husband, although the two never remarried. Its share of taxes, insurance and association fees is approximately $ 450 per month. She pays these living expenses, as well as health insurance, with the income she earns from a few freelance jobs that she enjoys.