As a society, we’re constantly told to save, save, save — but that’s not always possible. For myriad reasons, Jennifer James reached age 50 without any retirement savings to speak of. Like many people, life got in the way of James’ ability to properly prepare for her financial future.
Reaching mid-life without adequate savings is a distressingly common scenario. According to a 2019 Government Accountability Office report, nearly half of households aged 55 and older had no retirement savings.
For those starting late, the mountain to climb can seem daunting, if not impossible. But James’ story proves that, with focus and determination, it’s never too late to turn things around.
Like many people, James found herself starting her 50s without any money set aside for retirement. She was a divorced single mom supporting two kids on an administrative assistant’s salary of $45,000 a year. Between rent, groceries, utilities and child support, there was nothing left to contribute toward the future.
“I knew I had to increase my income, but without a college degree, I felt stuck,” James recalled. “I was living paycheck to paycheck just trying to get by.”
On the advice of mentors, James decided to go back to school nights to complete her bachelor’s degree. It was difficult juggling work, college and family, but James persevered and graduated at age 53. With degree in hand, she secured a new position as an office manager making $65,000 a year — a 50% pay bump.
“Finally finishing my degree opened up new opportunities that changed everything,” she said. “It was a struggle, but well worth the effort.”
With her new higher salary, James committed to saving 20% of her take-home pay. “I set up automatic transfers from my checking account to savings so I paid myself first,” James said. Though living on a tight budget was challenging, her motivation was securing a comfortable retirement someday.
Within two years, James had built an emergency fund equal to three months of living expenses. “Having that cushion reduced my financial stress tremendously,” she said. “I could handle surprises without going into debt.”
At age 55, James took steps to maximize her retirement savings in her 401(k) plan at work. She increased her pre-tax contributions to 15% of her salary, the maximum allowed. Her employer matched 50% of a portion of those contributions, further boosting her savings.
Additionally, since James was over 50 years old, she was eligible for catchup contributions — elective deferrals exceeding the normal limit available to those 50 and older. By fully utilizing her 401(k)’s features, including the catchup contributions, James put herself in a better position for retirement.
James also opened a traditional IRA account and contributed the maximum amount allowed per year.
“It was tempting to spend that money instead, but I kept focused on the future,” she said.
After five years of diligent saving, her retirement accounts topped $100,000.
At age 58, James was ready to become a homeowner for the first time; she purchased a small townhouse in her dream neighborhood. She made a 30% down payment from the savings she had built up. James also began making bi-weekly mortgage payments instead of monthly to accelerate payoff of the loan.
In addition, she continued to save 20% of her income, with half going to max out retirement contributions and the other half toward extra mortgage principal payments. Within eight years, James had the place paid off.
By age 60, James felt ready to start investing in stocks. She educated herself on investing basics and opened a brokerage account.
“I focused on adding money to a mix of strong dividend stocks and low-cost index funds,” James said. “Dollar-cost averaging helped minimize the normal ups and downs of the market.”
Within five years, James’ stock portfolio grew to over $150,000. Combined with her retirement savings and home equity, her net worth now topped $300,000.
At 65, James was ready to retire from her career job. She shifted to part-time office work just three days a week to generate income to help cover living expenses.
“Working part time gave me flexibility and fun money in retirement,” she said.
James also withdrew 4% to 5% from her investment accounts annually while letting the rest continue compounding. By cutting expenses and sticking to a budget, she found she could actually spend less than when working full time.
Reflecting on her journey, James attributes her success to the disciplined savings plan she started in her 50s and maintained diligently until retiring at 65.
“The key was cutting spending to maximize savings once my income increased,” she said.
Though it required sacrifice, James’ net worth grew at around 20% per year through steady savings, debt reduction and smart investing.
“I’m now 68 and loving early retirement,” James said. “It just goes to show, it’s never too late to turn your financial life around if you focus and work a plan.”
Her advice to others is to first believe you can do it, even later in life. Second, craft a realistic but aggressive savings plan — pay yourself first before spending. Finally, be willing to make some sacrifices — it’s only temporary until retirement.
“With determination and a smart plan, you can achieve financial independence, too,” James said. “Don’t give up hope just because you’re starting late.”
