Confessions of an Average Joe: 'I've Saved $60,000 for Retirement on a $40,000 Salary'

Golden nest egg
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Danny Kofke, as told to Penny Wrenn

In our popular Money Mic series, we hand over the podium to people with controversial views about money. People like Danny Kofke, a 38-year-old special education teacher in Georgia who says that anyone can squirrel away a $1 million nest egg for retirement -- regardless of income.

Not convinced? You're not alone. In a recent survey conducted by LearnVest and Chase Blueprint, one in three people said that they didn't feel it was possible to save enough for retirement. So we asked Kofke to divulge how he's managed to sock away $60,000 while supporting a family of four on a $41,000 annual salary.


Want to know my money secret? It's simple: Trick yourself. Put money aside by pretending that you don't have it in the first place.

That's what my wife, Tracy, and I do while raising our daughters Ava, 9, and Ella, 6. And even though we live on my moderate teacher's salary of $41,000, we've managed to save $250 per month since 2002, allowing us to amass about $60,000 for retirement. We're well on our way to cashing out as millionaires by 65.

Investing in Ourselves

We're not like those couples for whom money remains a taboo topic. We're very open and honest about our finances. We discuss our hopes and our dreams -- and then go for it.

I met Tracy, who is four years older, in 1999, when I was working as a student teacher and she was teaching first grade. Our courtship was fast: We started dating in August. We got engaged in December ... and we got married in June.

We spent our first two years as newlyweds working as teachers at an international school in Poland. Any other couple might have gone into debt living abroad, but not us. Despite the fact that we were living on a combined $45,000 income, we consistently set aside $800 each month, which we used to kick-start our retirement savings, save for a down payment for a house and give my grandmother back the $10,000 we borrowed to pay for our wedding.

We're planners. We like to set a goal and then work to accomplish it. Take our plan to live off just my teaching salary, so Tracey could be a stay-at-home mom.

We began talking about starting a family around 2002, which is when we planned to move back to the U.S. But first, we decided that we'd spend the next two years aggressively saving -- and paying off what little debt we had.

We earmarked $800 each month from our paychecks to act on this game plan: We deposited $300 into an emergency fund savings account that would cover our living expenses in case something unforeseen went wrong in the years ahead. Another $250 went toward paying off Tracy's remaining $2,000 in student loans. And we put $250 into a joint retirement account.

Back then, we used a 403(b) -- a tax-sheltered plan that's available to public school employees -- for our retirement savings, and the money was deducted from Tracy's paycheck before taxes. Today, we make contributions to a Roth IRA, which offers tax-free income during retirement, because I'd rather have my money free and clear -- without owing taxes in 30 years.

We were lucky in that we had very little overhead in Poland. We didn't pay for rent or a car -- and food and recreation were very affordable. In those two years, not only did we make a dent in Tracy's student loan, but we also saved up $20,000 in our emergency fund ... and socked away $6,000 into our retirement account. Good thing we put aside that "just in case" emergency money, too.

Jobs are tight and we're in a struggling economy. But most people don't have an income problem -- it's an outgo problem.

In 2004, right after our first daughter was born, two hurricanes hit us in less than a month, and we had to get a new roof and porch. We took about $1,000 from our emergency fund to cover the insurance deductible. We later sold the house for $199,000 -- a nice profit from the $89,000 we originally paid -- and moved to the more weather-neutral town of Hoschton, Ga., about 45 minutes northeast of Atlanta.

That was also the year that Tracy and I began living on one income. We'd worked hard so that we wouldn't feel the pinch when she took the leap to be a stay-at-home mom. And it didn't really impact our finances much because we'd already been covering most of our day-to-day expenses with my paycheck.

We're also smart about keeping those day-to-day expenses in check: I brown bag my lunch every day, instead of making $5-a-day quick runs to grab fast food. That probably saves me $1,200 a year -- in 18 years, when I retire, that would add up to about $21,600! Each Sunday, I also buy a newspaper so Tracy can clip coupons. She's not into extreme couponing, but she takes 15 or 20 minutes to look for worthwhile deals.

Last Halloween, my wife made our kids' costumes, as she does every year. One was a skeleton, so she bought a $5 black T-shirt to which she applied Velcro in the shape of bones. The next day, I found her peeling off the Velcro from the shirt. When I asked her what she was doing, she said, "This is a perfectly good shirt!" And I was like, "Honey, we can afford to buy another $5 shirt."

The goal of our super-savings plan isn't just to put away money for emergencies and retirement -- it's also to put aside money for opportunities to invest in ourselves. For example, I used $4,000 from our emergency fund to self-publish a book. Bottom line: I believe that anyone can do what we do. Yes, jobs are tight, and we're in the middle of a struggling economy. But the reality is that most people don't have an income problem -- it's an outgo problem.

What Our Dream Future Holds

It's a lot of work to live off one salary, but we plan to keep doing it until the girls graduate high school or go off to college. Tracy actually went back to work in August, when she was offered a teaching position that she couldn't pass up -- but we're banking most of her salary.

At the moment, we're not adding additional funds to our retirement savings. Instead, we're putting most of it into a savings account, so that we have options later. One thing we're not vigorously saving for is our children's college educations.
We've earmarked one of the investment accounts in our retirement plan for the kids, but that's it. In Georgia, if you graduate with a 3.0, you'll receive a HOPE scholarship, which assists students with the educational costs of attending an in-state school.

Our house will be paid off in about 10 years, which is around the time that Ava will be graduating from high school, so we'll have some extra money then to put toward her education. Overall, however, I feel that parents need to save for their own retirements before they save for their children's educations. Worst-case scenario, kids can take out student loans -- but there's no such thing as a retirement loan.

Although I am serious about saving money and planning for my future, I still make sure to put some of the money that I earn toward making memorable experiences with my family. Every summer, we vacation for free at the beach in Florida, where my in-laws live. Plus, my uncle has a lake house in Alabama, so we go there, too.

With my current teaching job, I work three days a week even in the summertime, so I think of that extra $1,500 as "family fun" money -- rather than use it to pad our investments or our emergency fund, I plan to take my family to Disney World for Thanksgiving break.

When I picture my retirement, I think of my grandmother, who was in her 50s when she retired! I envision that for Tracy and me. We're simple people, so I'd love to buy an RV and travel around the country, staying in state parks. To me, luxury isn't about accumulating things. It's about living out your passions and living the life you want.


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November 29 2013 at 7:34 AM Report abuse rate up rate down Reply
logicmgmtwebserv

So what, I\'ve saved over $300,000 on annual salaries far less than $40,0000 a year for many years.

October 24 2013 at 10:00 AM Report abuse rate up rate down Reply
createidea

\"People like Danny Kofke, a 38-year-old special education teacher in Georgia who says that anyone can squirrel away a $1 million nest egg for retirement -- regardless of income\".

LOL !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

October 24 2013 at 9:18 AM Report abuse +1 rate up rate down Reply
audioknot1

No rent, no car. Not possible in the United States.

October 24 2013 at 2:59 AM Report abuse +1 rate up rate down Reply
nepenthepod

My wife and I both work, with our current pre-tax earnings ringing in around $56,000. We're both 33. We've saved in the ballpark of $100,000 in different accounts (Roth IRA's, 403(b), 401(k), taxable). I say ballpark because this money isn't sitting in a bank earning 0.1% APY. It's in the market-- so that number could go up 20% or down 20% very easily in the next few months. This money is earmarked for long-term needs such as retirement. This is not including an emergency reserve of roughly $15,000. We just bought our first home-- financed a 30 year fixed at 3.25% with zero down. Why lock up money on a down payment for an illiquid asset when you can keep that money invested and compounding? (The zero down was courtesy of stellar credit coupled with an RD loan, the way we structured the mortgage we walked away from closing with cash in our pocket.) I carry a few thousand dollars in student loan debt.

I gather from reading that we're doing pretty well for ourselves. But we got an early start. I started saving for retirement out of college. We've both always worked, but we've strove to live on a single income as much as possible. Having a child in daycare means we save less money than I'd like. But even with daycare expenses that match our mortgage payment, we still manage to put away between $700 - $800 a month towards retirement. We get another $240/month in employer contributions (they haven't always been this generous).

Now with that being said, we are frugal. We bought a small house that wouldn't stretch our budget. We don't buy new cars. We seldom eat out. We eat simple meals prepared with store-brand ingredients. I buy most of my clothes at second-hand stores. I wasn't raised poor-- but I was raised to seek out value. Why in the world would I pay $40 for a new pair of pants when I can get a used pair (that accomplishes the same thing) for $5? I just don't see value in that new pair of pants. We seldom take vacations-- but that is also related to difficulty in getting time off from work. Could I afford to live more lavishly? Certainly. But I don't want to. I'm not living on a pink cloud-- I am genuinely happy with a simple life. And for me, one of the things that I get the most enjoyment out of is seeing my net worth slowly rise over time.

The irony is...I don't particularly want to retire. I may be "on track" to, but I don't feel like it. My family is probably ahead of 90% of the population that is my age. For me, I just get comfort in seeing that pile of assets slowly grow. I LOVE managing money. I have a complex portfolio that I am constantly analyzing. But I don't really want to ever have to tap that. I'd just as soon die a bit on the young side, and have a legacy to leave behind. Something for my son. Or a trust that could be used to fund charity. I'm probably weird. Oh well.

October 23 2013 at 11:14 PM Report abuse rate up rate down Reply
davefromfwb1

All I know is when everyones 401k goes up....all the big headed people get on here and start bragging about how much money they have. Then when we have a few idiot presidents/congress/house basically run the government into the ground, all the investors start complaining that they are broke/bankrupt.
I can tell you one thing.....when the mass public starts talking about "investing" and "how much money they're making" it's time to get out of the market ASAP!!! I've seen the old pump and dump scheme before and it happened right before the Tech Bubble, Housing Bubble, Gold Bubble and whatever bubble is about to happen again. Suckers brag and losers just fade away.

October 23 2013 at 10:26 PM Report abuse rate up rate down Reply
2 replies to davefromfwb1's comment
merstockgto

I have been investing in the stock market since 1980 and have done very well indeed. We did not make a lot of money around $60 grand a year together and we just saved and invested, US Savings bonds, 401k's. We paid cash for our first home in 2001 and have paid cash for the last 3 cars we have. No debt at all. We are now retired. It is that people need to live below their means not above.

October 24 2013 at 12:10 AM Report abuse +1 rate up rate down Reply
vlady1000

lol......"when others are greedy, be scared. And when others are scared, be greedy"...... Some guy in Omaha said it.

October 24 2013 at 12:38 AM Report abuse +1 rate up rate down Reply
vlady1000

Hopefully, he has a good pension too. Cause $1mil, 27 years from now (when he will finally have it and plans to retire), is not going to be even close to what will be needed. It is questionable if that is even enough today. Also note, his wife and he worked for several years in the beginning to get the account off to a good start. And the seed money has had 13 years to grow compounding. So the " we did it all off one modest salary" is a little screwed.

October 23 2013 at 9:41 PM Report abuse -1 rate up rate down Reply
1 reply to vlady1000's comment
vlady1000

oops...............skewed, not screwed......lol

October 23 2013 at 9:53 PM Report abuse rate up rate down Reply
Tim

Putting your 401k and IRA contributions on automatic has worked really well. I've built up quite a large balance over the years without really thinking about it too much.

October 23 2013 at 9:16 PM Report abuse +1 rate up rate down Reply
1 reply to Tim's comment
merstockgto

It definitely pays off.

October 24 2013 at 12:11 AM Report abuse +1 rate up rate down Reply
smi2476975

sounds great for a 2 person income, but when you've been in and out of work for the last 3 yrs, its IMPOSSIBLE to save anything! even with a $15 an hour job, there is nothing left after bills and mortgage........ ill never be able to retire..........

October 23 2013 at 8:03 PM Report abuse +1 rate up rate down Reply
krazzicraig

To artical makes no sense. If one puts a thousand a month into an account , it will take 75 years to reach 1 million. He also claims he earns $41 thou a year . At the same time he claims he will retire early . Travel around in an RV and while staying in state parks . Where is this land of Oz he is living in.

October 23 2013 at 5:48 PM Report abuse +1 rate up rate down Reply
2 replies to krazzicraig's comment
nad22551

you invest the money and it grows-I have a portfolio of just over one million. I certainly didn't put that much away. Total investment over the years about $250,000. Every time I saved up $2500, I invested it. Had the dividends re-invested. Compounding works wonders. Am now 62, and wish I had started earlier.

October 23 2013 at 5:57 PM Report abuse rate up rate down Reply
merstockgto

You do not leave the thousand a month in cash as it will not grow. Invest Invest Invest

October 24 2013 at 12:12 AM Report abuse -1 rate up rate down Reply
1 reply to merstockgto's comment
audioknot1

And you will lose it all in the next manufactures stock market crash.

October 24 2013 at 3:01 AM Report abuse +2 rate up rate down