Lakisha L. Simmons left her job as an associate professor of analytics at Belmont University in May. She told Insider she wanted a better work-life balance that would allow her to prioritize health and family — a move she was able to make because of a retirement cushion she had accumulated.
She started her career in 2002 but had contributed only about 10% of her salary to her retirement accounts — and not every year. There were also years when she made no contributions. Before 2017, she had $125,000 saved in her retirement accounts, she said. Everything changed that year when she decided to start maxing out her tax-deferred accounts.
"When I started in 2017, the investments just grew so much that it just didn't balance out for me to have to deal with the stressful work environment when I didn't have to do it anymore," Simmons, 42, said.
To date, she has about $903,000 in retirement funds that have continued to grow in the stock market, according to copies of her retirement accounts viewed by Insider. It's a sum Simmons hasn't needed to tap in to because her expenses are low, she said. She also maintains a side hustle coaching women and single moms on investing.
Advertisem*nt
While she had been contributing to a retirement fund throughout her career, her path to financial independence accelerated in the past four years after she began aggressively saving and maxing out her retirement-account limits.
Her desire to become financially free came after a divorce in 2017 took her household from two incomes to one. She also had two children. This made her feel financially insecure, and it prompted her to begin thinking of ways she could grow her wealth, she said.
Her process didn't involve any strategic maneuvers in the stock market like swing or options trading. In fact, she mostly invests in index funds, her accounts showed. But her aggressive saving habits and ability to budget meant she was able to max out her contributions.
Now, she's focused on helping other women find the confidence to do the same through her website and coaching program. It's something she's passionate about because she feels women face more of a mental block when it comes to taking risks, she said.
Advertisem*nt
"We depend on a job. 'I need a job. I have to have a job.' That's ingrained in us," Simmons said. "And then we don't like to take risk with our money because we're afraid we're going to lose it. But here's the thing: What if you actually make a gain, like I did?"
Simmons emphasized that she didn't put over $900,000 into the stock market in a lump sum; it came from gains and time in the market.
3 major steps to financial freedom
"The first one is, as unsexy as it is, you have to have a budget because you have to be able to set aside the most possible for investing," Simmons said. "And if you don't allocate your money into the appropriate buckets, how will you know how much you can put in? Just putting it into a company match, you're blind. You don't know if you're going to reach a goal."
Having a budget also helps you determine how much money you're spending on things you don't necessarily value or that don't make a difference in your life, she added.
Advertisem*nt
She uses free tools such as Personal Capital and the Mint app to budget. Additionally, she has her own Google sheet, provided for free, where she tracks her expenses.
The second key step is you need to max out your tax-deferred accounts, such as a 401(k), 403(b), and 457(b), she said. These have a maximum contribution amount of $20,500 in 2022.
Doing this is a great way to begin growing your money tax-free, she said.
Once you hit those accounts, if you still have funds, Simmons recommends contributing to a Roth IRA. This is an after-tax account with a lower contribution ceiling of about $6,000 annually if you're below 50 years of age.
Advertisem*nt
But the advantage of having this additional pot is that you can withdraw your initial contribution without penalty in the event of an emergency, Simmons noted. This is not the case with tax-deferred accounts.
"The government really doesn't care if you take your contributions out if you need it because you already paid taxes on it. But you can't touch any of the accruals, interest, dividends, or capital gains," Simmons said.
There's also the option of contributing to a brokerage account.
But whether it's a tax-deferred account or a brokerage, Simmons mostly sticks to S&P 500 index funds, such as the Vanguard S&P 500 exchange-traded fund (VOO), Vanguard 500 Index Fund Admiral Shares (VFIAX), and a total-stock-market fund such as the Vanguard Total Stock Market ETF (VTI), she said. This third step gives her diversified exposure and takes the guesswork out of investing.
Advertisem*nt
Additionally, she has some money in bonds, has made small investments in large-cap tech stocks including Apple and Amazon, and keeps a cash buffer on hand.
Simmons said she wanted her story to be an example that anyone could achieve financial freedom. While she did have a professor's salary, she said her average income over the span of her career from 2002 to 2021 was about $77,000.
Even though her income was higher toward the end of her career, she didn't start aggressively saving and investing for retirement until the end of it. She said that if she had started in 2002, she could be even further ahead.
As for the stock market's volatility, Simmons isn't as concerned about that long term.
Advertisem*nt
"The stock market in the past has never gone to zero," Simmons said. "So I feel good knowing that. The stock market is kind of like your blood pressure. Sometimes it's up. Sometimes it's down. And that's life. There's nothing that's always the same. Your job is not always the same. At any given time, we learned that in COVID, you can be laid off. You can be out of there."
Today, she's enjoying free time with her family and her hobbies as she coaches other women to find their financial freedom.
