Saving For Retirement: Teacher Gets A Gold Star After Starting Over

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Saving for retirement can be challenging at any age, but what if you haven’t even started? I think it is helpful for baby boomers to hear that it’s possible to catch up retirement savings, from others who have done it.

Learn from others who have used creativity to increase retirement savings via my interview series, Saving for Retirement: Successful Catch-Up Stories. Today I’m excited to share Elizabeth’s story . . .

If you have a retirement catch-up story to share and would like to be considered for an interview, please contact me.

Saving for Retirement: Successful Catch-Up Stories. Interview with Elizabeth Wallace, author of Free College.

I’m very excited to share Elizabeth’s story about saving for retirement. Elizabeth Wallace is the author of Free College: How Graduates Earn the Most Scholarship Money for Families of Pre-K through High School Students. Elizabeth also writes a blog, Road to Free College.

Like me, Elizabeth is a baby boomer who found herself in the uncomfortable position of having too little retirement savings. Find out how she successfully turned her financial situation around by making some strategic changes.

I’ve highlighted my comments and questions for Elizabeth in bold italics. Here we go!

Get To Know Elizabeth

Elizabeth, what would you like to share with readers of the Baby Boomer Super Saver blog, to help us get to know you a little better?

I’m a leading-edge Baby Boomer,  born and raised in Los Angeles, California. I grew up in the San Fernando Valley, and am an original Valley Girl, minus the annoying slang.

My current home isn’t very far from where I grew up. I love the Southern California coast, and live there now.  

My daughter, Ann, and my two grandsons, Mike and Nick, live in the Midwest. They moved due to the high cost of living here. It’s cheaper there, although the weather is often rough.

Have you retired yet, or are you still working and saving for retirement? 

I retired two years earlier than planned. Construction at the high school where I was teaching made breathing difficult. After a couple of trips to the hospital, my doctor recommended I retire early.

Still, I taught for over 35 years. I taught high school German, French, English and AVID.

AVID is a nationwide program available in some schools. It helps “C” students become “A” students. It stands for Advancement Via Individual Determination. The program helps students become self-directed learners, like “A” students. 

I also taught business administration at a local community college, and in the private sector in the U.S. and abroad.

Career Path: Teaching Since Age Seven

Please give an overview of your career path, highlighting what you did or didn’t do along the way when saving for retirement.

I was pretty lucky to have learned about the California State Teachers Retirement System from a teacher who lived down the street when I was a teenager. I babysat for him and his wife for a few years. He explained how it worked. It’s pretty simple.

Ten percent of every dollar a teacher makes goes directly into the retirement system, pretax. This is from their teaching duties and any extra assignments. (Teachers don’t receive bonuses, but if they did, ten percent would go into retirement, too.) The retirement contribution is matched by the school district.

You see, teachers are very practical people. When bargaining for pay and benefits, they often take benefits over pay.

As far as living goes, it’s better to be retired than working (if you worked as long or longer than I did). That’s because you’re no longer paying for retirement, union dues, income protection insurance, state disability, classroom supplies, continuing education, work clothes, or commuting.

The bulk of my life revolved around teaching. Starting in my neighbor’s backyard at about seven, I taught while going to middle school, high school and college. I wasn’t paid to teach, I did it for the experience.

Elizabeth, you started teaching at age seven?!

Several children in the neighborhood were too young for kindergarten and were upset. I offered to teach them what I learned after school. My neighbor set up a chalkboard, and I taught them several days a week, until they were old enough to attend school. The other times I taught, teachers put me in charge of a group of students, and I took over as teacher. 

During college, I worked and paid into Social Security. In retirement, most of my earned Social Security benefits are withheld from me, and many others who work in states where they have what is euphemistically called a “Windfall Provision”.

The Windfall Provision is a penalty for working in the public sector and paying into two systems. I was required to pay into both systems, but that doesn’t seem to matter.

Most teachers do not want to have social security instead of our pensions. We want to stop being penalized unfairly for having a pension. People in the private sector who pay into two systems receive full benefits of both, as they should. 

Saving For Retirement Surprises

What surprises (good or bad) have you encountered in your effort to save for retirement and how have you handled them?

I’ve had my share of glitches in my effort to save for retirement. In the 1990s, I sold my home at a large profit and bought a lovely condominium on the coast in Marina Del Rey. After a few years, homeowners discovered the developer had embezzled much of our ground rent money.

At the same time, the economy shifted, and the value of our condos took a nose dive. Many homeowners lost their homes. I sold mine at a loss of about $200k (profit from the sale of my earlier home I had used to pay down the mortgage, so my daughter and I could afford to live there). Yikes.

In 1997, I quit my job, and moved to South Africa on business. I organized and ran seminars for 20 to 7,000 people, and taught them how to run their own businesses. Due to my success, I received lots of accolades, but my commissions were never paid. The owners of the American company with which I was affiliated didn’t have the level of integrity I believed them to have.

I returned to the U.S. with a major problem. I had used my retirement funds (after the IRS penalty was paid) to live in South Africa and run my business. Back in the U.S. in 1999, I had to find a job, some place to live, a car, and pay my retirement money back into the system, with interest. The total amount due to the state retirement system at that time was $200k.

Developing A Plan To Catch Up Retirement Savings

When did you realize your retirement savings were inadequate? Who or what helped you develop a plan to catch up your retirement savings? 

I knew I had a problem.

A friend invited me to stay in her spare bedroom until I found a teaching position and was back on my feet. My brother had bought his son a used car, but he refused to learn how to drive. He loaned me the car until I didn’t need it anymore.

Within a few weeks, I found a job. I secured an apartment soon thereafter. The school district that hired me refused to pay me according to their own published pay schedule. I knew I wasn’t making enough to repay my retirement savings with such low pay.

After changing jobs a few times, I landed in a school district that paid me properly. I knew then, I would be okay.

The California State Teachers Retirement System helped me and about one hundred other teachers in my position. They negotiated with the IRS to allow us to redeposit our monies. Otherwise, we would have lost everything. From then on, $3,000 was taken from my paycheck monthly to go toward my redeposit and current responsibilities to the retirement system.   

How To Save More Than Half Of Your Income

You’ve shared with me that you lived on 40% of your income for 8 years late in your career to catch up retirement savings. 

What were the major steps you took that helped you successfully save more than half of your income?  How did you modify your life, including your social life and activities?  What went well, and what was challenging?

Once such a large amount of my take-home pay was gone before I even saw it, I needed to find a cheaper place to live. I found a condo in a huge 55+ community a distance from my school. This meant a long daily commute, but included many extras which made it possible for me to socialize without spending money.

Basically, the only money I spent besides food and gas was on rent, a few utilities not included in my rent and credit card payments. I used them when I didn’t have enough for food, gas, medication or other real necessities.

Using credit cards was a strategic plan. I could redeposit my retirement funds or pay off my credit cards. I couldn’t do both.

One afternoon one of my credit card companies called, and told me they wanted to increase my interest rate because I was carrying a large balance. I reminded them I always paid on time, and explained my plan. Luckily they understood, and didn’t increase my rate.

As time went on, I paid as much as possible on the smallest credit card. No, it didn’t have the lowest interest rate, but I knew I could get rid of the balance quickly. Once I paid it off, I added what I had been paying on that card to the card with the next smallest balance. I did this until I only had one card left. Eventually the balance was fairly small.

I lived an uber-frugal life.

Watching television, walking, working out, reading books from the public library and socializing with neighbors was my entertainment for eight years. My new lifestyle went pretty well once I was used to it.

The hardest part of this plan, however, was the commute. I drove forty-five minutes to work and ninety minutes home each day. It wasn’t easy.

Best Strategies For Building Retirement Savings Later In Life

What are the best strategies for building up retirement savings quickly, for someone who didn’t start saving for retirement until later in life?

Saving for retirement or redepositing funds if you’ve raided your retirement savings, isn’t for the faint of heart. It may have been easier for me, since I’m single, or harder. I don’t know. But what I’m sure of is I didn’t have to negotiate with a spouse whenever I made a decision.

I drew up my plan with zero interference. I was stubborn enough to stick to it. Only poor health could stop me, and it almost did.

Thank goodness, my district was trying to cut their budget by buying out experienced teachers (who are paid more). Retiring two years earlier than I had planned left me short in redepositing my retirement funds. The golden parachute (actually it was more like silver), made up the difference.

Here’s my suggestion for those strong enough to follow it:

Find a super inexpensive place to live. Cut out anything that isn’t a necessity. Really. No Starbucks, no parties, no new clothes, no manicures or pedicures. Go longer between haircuts, and have them where’s it’s cheap.

Give your jewelry and other possessions as birthday presents to loved ones. The only new gift I gave during these eight years was to my grandsons. They each received an inexpensive, but unique toy, a book, and a jacket or shirt (bought on clearance) each birthday and Christmas.

Elizabeth Wrote A Book

Elizabeth, in addition to successfully catching up retirement savings, you’ve become an authority on how to save money on college.  Your book, “Free College” helps students and families avoid crushing student loan debt. 

It’s not uncommon for parents to take out loans to cover college tuition for their children, which makes saving for retirement even more difficult.  How did you become interested in writing about college scholarships? Why do you want to educate others about this?

I always encouraged my German and French students to discover their life goals, and also helped them reach for them. For most, that meant college. After a few years, I realized all of my seniors enrolled in college after graduation. I learned what they needed to do, advised them, and it became automatic.

Then I saw college costs had skyrocketed. I urged students to find the college with the lowest price tag. In all my years after graduating college, the only people who asked me where I went to college were my students. No one else cared.

I also pushed them to apply for lots of scholarships, and we figured out what it took to win them. I started teaching this information to students in my classroom at lunchtime. Soon we didn’t have enough room for everyone who wanted to learn this vital information. We moved to the theater on campus and soon filled it up too.

After I mentioned this to my sister, she paused and asked, “So the only students who get to learn how to earn enough scholarships to pay for college are the ones who attend your school? What about all the others? WRITE A BOOK.”

She could be very persuasive and persistent.

That’s why I wrote Free College, How Graduates Earn the Most Scholarship Money.  It’s on Amazon (here’s Elizabeth’s link to purchase her book, Free College).

A semester of college was $65 when I attended. With inflation, it should cost about $300 per semester, but it doesn’t. It’s about $10k per year now.

College is mandatory for many occupations. Post grad is necessary for many as well. This leaves graduates (and those who don’t graduate) with staggering debt. This hurts them, their families, and the economy of the country.

Learning the 16 defining habits of successful scholarships winners from the step-by-step guide in my book, Free College, can make taking out student loans unnecessary.

Why am I helping families learn how to avoid going into debt for college? It’s the same reason I started teaching at age seven. There was a problem. I knew how to solve it. I would have felt awful if I hadn’t tried.

My sister was correct, everyone with children or grandchildren needs the information.

Overcoming Misconceptions About Starting Late

What do you think are the most common misconceptions people have when it comes to being able to pay for college debt-free, and when saving for retirement after a late start?  

This is an excellent question. Most people believe they should start thinking about college when their kids are juniors in high school.

Wrong.

Over half the practices I discovered when researching successful scholarship winners start in elementary school or earlier. No matter how old your child is now, start. Follow the steps in my book. You’ll be glad you did.

This is true when saving for retirement, too. It’s like the old saying, “The best time to plant a tree is 20 years ago. The second best time is today.”

If you haven’t started saving yet, or if something happened, and you need to catch up, start today. It’s not too late.

Devise a plan. Design your budget with saving for retirement the number one priority. Then create a more frugal life than you can imagine living.

Get mad. Be stubborn. Stick to your plan.

It pays off in the end.

Summary: Elizabeth’s Top Tips On Saving For Retirement

Thank you, Elizabeth, for sharing how you were able to successfully catch-up your retirement savings after starting over. It is a message of hope and you are an inspiration! You certainly get a gold star for overcoming so many challenges.

Elizabeth used several strategies for paying back her retirement account and catching up retirement savings, such as:

• Networking to reduce expenses (housing, transportation).
• Seeking out better paying jobs.
• Thinking outside the box regarding gift giving & entertainment.
• Paying off credit card debt.

I like the debt snowball strategy Elizabeth used for paying down credit card debt. It can be very effective and motivating to pay off the smaller debts first, regardless of the interest rate.

Eight years sounds like a long time to commit to living an extremely frugal lifestyle, but in reality, time passes so quickly. Elizabeth’s story shows us that it’s never too late to make a change, take action, or reach for that goal to fund a better retirement.

If you’re behind in saving for retirement, it’s not too late – get started today.

Question: Is it easier or harder to catch up retirement savings when you’re single? Please share your questions or comments below.