Starting From Zero at 50: How to Build $1M by 65

0:00What if you're 50 and broke? Is it still possible to build real wealth and become a millionaire by age 65? Today, we are breaking down exactly what it takes to actually build$1 million in 15 years, from how much you need to save and invest to the biggest decisions that can accelerate your progress.

0:23Hello, hello, hello, and welcome to the BiggerPocketsMoney podcast. My name is Mindy Jensen, and with me as always is my loves a good sample financial plan co-host, Scott Trench. Mindy, that was a model intro. Today we're doing our annual update to the Broke at 50, Retired or Millionaire by 65 sample financial plan. And this is a little bit outside of our normal wheelhouse. We are mostly a financial independence podcast, but that goal of trying to build a million, million and a half, two and a half million dollars in net worth in a 15 year period from my early twenties to my thirties or forties translates really well, I think, to catching up to financial independence for folks who are starting later in life, you know, with some real caveats and differences.

1:05So that's what we're trying to do today is provide a realistic, aggressive action plan to get as close as possible to a big number by the time we hit traditional retirement for a late starter. And as part of that, the plan is not going to have any secrets. It's not going to surprise you. It's going to be we're going to live like somebody earning a bottom quintile income in our area. We're going to really cut back our spending. We're going to get a job. We're going to get a side hustle. We're going to invest according to a tax advantaged order of operations. And we're going to consider layering in a few side bets in those future years.

1:36And our favorite side bets are going to be the live-in flip, where I buy a house, fix it up, and sell it. There's a lot of tax advantages to that, and that can be layered on top of working a job. Or the house hack, where I buy a house and rent out extra rooms, or maybe a small multifamily property. Those can be massive accelerants along the journey to financial penance. They're optional builds. But we're going to piece all this together and see just how close we can get to a million dollars, maybe a million and a half, two million dollars over that 10 to 15-year period from age 50 to 65. Sound good, Mindy?

2:07That sounds great, Scott. Let's jump into it. What we've chosen to do here on the show is to create a fictional persona, Barb, who is a divorced former stay-at-home mom starting out and is scared. She's scared because she doesn't have any assets. She hasn't been in the workforce for a long time. She's starting over with zero at age 50, and it's really a challenging and hard situation. And it is hard. We've modeled this out. I went to great lengths to try to put together a realistic model about what can we earn? How much can we save after taxes? How will those investments grow? And what else needs to happen beyond that in order to give us a realistic shot at a million bucks?

2:47And it's hard. It's going to involve a lot of sacrifices. It's going to involve some real planning and hard work at the career because we need to get a couple of raises over the next 10 to 15 years for this to work. And we need a little bit of cooperation from the market. And we maybe even need a side hustle or some side bets. Actually, we do need some side hustles and some side bets. We can get there. There does need to be some cooperation from the market, but we don't need extraordinary events to happen. We just need hard work and sacrifice sustained over a decade and 15 years. And it's going to suck to some degree, but we can get there.

3:21And that's the idea of the show is to provide that plan and let you decide where it applies, where you need to deviate and how you're going to build your personal journey towards this goal. So with that, Mindy, do you want to introduce Barb for us? So this is Barb. She is 50 and broke, like you said. She has no assets, except I'm going to say she does have one asset. She has no debt. So she is starting off at a net worth of$0, which is a better position than a negative net worth. She is significantly behind the curve because she's been a stay-at-home mom for 25 years. She doesn't have any resume with any sort of jobs on it.

3:58She has just been a stay-at-home mom. And I say just, I was a stay-at-home mom too. Please don't send me notes saying it's a really hard job. It is a really hard job. And that's actually going to help her when she goes to apply for her first job. She's going to get an entry-level job. I want her to work in an office. I can see some sort of receptionist or administrative assistant position that will coincide really nicely with her years of managing the household, which is what she was doing as a stay-at-home mom. But she is going to need to add another asset to her pile. And that's a mindset shift.

4:31She needs to understand that the next few years are going to be a lot of hard work. But if she puts the work in now, I fully believe that she'll be able to retire at normal retirement age. We picked this person. We made them very specific so we could model it. So one of the challenges we got, we do this financial plan template, this broke at 50, retired at 60 every year. and last year, I think 500 ,000 people watched us on YouTube and we got some really good feedback. Hey, that's not realistic. Your numbers are incorrect. Well, we've created a very specific person here because I wanted to defend the numbers.

5:04I'm gonna defend every single number in this with the source data for where we got it and you can challenge me on those things but they're gonna be backed by real data. They were last time but we've gone to an even greater level here and built some tools to help you validate them in your situation. What's the core essence of what we're gonna do for Barb here? Well, first, Barb, we're going to live on the bottom quintile in your area. So in Denver, Colorado, a one-person household, the bottom 20 % live on$2 ,943 a month. How do I know that? Well, I went to great trouble to build a data set here, which you can check out for yourself at biggerpocketsmoney.com slash budget.

5:42And what I've done here at biggerpocketsmoney.com slash budget is I have merged several data sets. I've merged the Bureau of Labor Statistics data. I've merged HUD data for housing. I've merged a data set for the Women's Bureau, NDCP. And I've merged regional price parities because food costs are different in various areas. The most of the discrepancy between areas is going to be housing, child care, and then health care are going to be the three big ones. But you do get small differences in food costs and those other things. So in Denver, a couple with kids like my family is going to spend about$8 ,743 a month.

6:18But a single household age 55 to 64 or 45 to 54 is going to spend at the bottom quintile$3 ,089 or in the 55 to 65,$2 ,913. Right. So that's the spending target here. And you're going to look at these numbers with horror, depending if you've come from the middle quintile. You're going to say$988 for housing? No way. $366 for transportation? No way. $400 for food? No way. But that is literally what 20 % of people in the Denver metro area live on as single households. It's a real sacrifice. It is not as fun as living at the median, but I can prove with data that 20 % of people in your area are doing this.

7:02So don't tell me it's unrealistic or it can't be done, because it's being done in your area right now by other people. And that is what it's going to take I believe, to get a head start in this journey. You don't have to do all of this, but if you're not going to do this, you're going to have to make more on the income front to offset it. That's the data. Go to biggerpocketsmoney.com slash budget and correct for the bottom 20th percentile in your area. And you'll know what a realistic, but hard floor of spending looks like. And you're going to know that because that's what people are actually doing in your area right now.

7:31And she's not living in a mansion in Cherry Creek in Denver. She is living in an apartment, probably a two bedroom apartment that she's sharing with someone or maybe even a three-bedroom apartment that she's sharing with two-someones. She's doing whatever it takes to still be able to retire at traditional retirement age. So the first thing is we're gonna live on the bottom quintile in our area for our household type. That's as far as the reasonable assumption can go, right? We can't live way below the bottom quintile in our area. Now we're talking about things that are totally unreasonable in terms of spending, but that is, I think, a defensible floor for an assumption set for somebody who truly wants to resolve the core pit of fear problem in their stomach, hit retirement age, and be left destitute.

8:13If you want to resolve that problem, I believe you should start your analysis at the bottom quintile in your area for spend. Now, the second thing we're going to do is we're going to get a job. And we're actually going to do two things as part of that. One, we're going to get an entry-level job. We're going to assume that Barb is going to get paid entry-level salary, which in the Denver area, there are jobs today available at around$45 ,000 per year with benefits for someone like Barb. That entry-level W-2 needs to grow in 15 years. We need to work hard and attempt to get at least one, two, three promotions over that period.

8:43And the second thing we're going to have to do is we're going to have to get a side hustle and that's where we're going to have to get creative. But I think Barb has some skill sets that are conducive to getting a side hustle. Mindy, what do you think some of those are? Barb has spent the last 25 years as a stay-at-home mom managing the household. She might be really, really well organized. She could start a small business as an organizer, a professional organizer, where you go into someone's home and you help them organize their stuff because they're unable to do this. When I hired a professional organizer, it was$95 an hour.

9:19And she came in for a few hours. She showed me what I need to do. We went through a couple of rooms and it was really a great experience. And I've been able to take that and apply it myself so I'm not paying somebody$95 an hour over and over again. But that's a great side hustle. And the way that you start out is just start networking. Let everybody know I'm super organized and I can do this for you. She can also do the smaller dollar side hustles just to get in the mindset of doing a side hustle, like an Uber Eats or a DoorDash or some sort of driving for Uber if she's got a newer car. She has a lot of skills.

9:58and one of the things if you are in this situation that you need to do is sit down and take an assessment of all of the skills that you have. Yeah, absolutely. And when we've talked about this in the past, there's driving for Uber, there's pet sitting, there's nannying, right? That could also be a full-time gig that pays perhaps as much or more than the numbers we just listed for a very entry-level job. Full-time childcare services. Another one, depending on how far we wanna take this, is night nannying. That's a very lucrative one where the hourly rate can bump past 30,$45 dollars, even$60 an hour in areas like Denver, for example, and that's going to change there.

10:33So Barb has a choice about how much she wants to work and how hard she wants that work to be, but there are opportunities to drive that side hustle income way up with her skill set, specifically in this particular situation. We're going to take these two things, a$45 ,000 a year base job, and we're going to assume that Barb is going to do the work necessary to make an additional$1 ,000 a month from side hustles, whether that's$15 an hour driving for Uber or delivery or after hours babysitting or nannying, or whether that's the night nannying for three or four or five nights a month to easily rack up several thousand, she's gonna find some combination of those two.

11:10And that$45 ,000 base salary plus$12 ,000 in side hustle income is gonna get us$57 ,000 in income in year one. You can go to sidehustlenation.com slash bpmoney. Our friend Nick Loper over at Side Hustle Nation has an AI-assisted side hustle brainstorming worksheet free for you. You just go to that website, sidehustlenation.com slash bpmoney, and download his free worksheet. He gives you kind of a step-by-step on what you need to do to throw this prompt into your favorite AI to give you a list of different side hustles that you can start thinking about. So next up, we've got this income. We've got our spending cuts that we're making to live at the bottom quintile in our area.

11:57And now what are we going to do with the surplus that we're beginning to generate here? Well, first, we're going to build a$1 ,000 starter buffer, right? This is Dave Ramsey's first baby step, and he's completely right. That's exactly what you should do in this situation. You got to build some small buffer between yourself and the world and the everyday expenses. So flat tire doesn't kill you. Then we're going to attack bad debt. We've assumed Barb doesn't have any debt, but we know many people who are listening will have bad debt. We're going to kill bad debt, and bad debt, in our definition, is going to be anything over 7 % interest.

12:24We might as well knock that out before we begin investing, because there's too much risk associated with having high interest rate debt. If Barb has a match from her employer for her 401k plan, we're going to take that match, right? That's going to allow us to defer some income, which is going to reduce our tax bill, and it's going to be a free match to some degree. That's going to be very, very valuable for her on this journey. From there, we've got a decision to make. If Barb wants to go and crush it on the income front at her career and just work her job and side hustle, then we're going to continue to max out the tax deferred accounts in this situation.

12:57And we're going to continue to build wealth in the HSA, then maxing out the 401k. If we get in future years to a point where we have the money left over, we're going to go with the Roth IRA. And why are we doing that? Why are we maxing the deferred instead of the Roth? People are always confused about this. Should I max a 401k? traditionally and pay taxes later? Or should I pay them today? Well, Barb is catching up to retirement. We are very worried about not having enough in the first place. And in that situation, if we're going to be on there, the tax advantage stack, we're going to defer everything we can so we can be sure that we're going to have enough and we're going to pay taxes at the back end.

13:33If Barb is 23 and is trying to reach financial independence early in life, and it's going to be hopefully making hundreds of thousands of dollars in her 30s, 40s, and 50s a year, Now, all of a sudden, the Roth becomes very attractive because we want to reduce lifetime tax burden. In this situation, we want to be sure we have enough defer, defer, defer as the bias, in my view. Yes. Well, she's 50 right now. She's going to be building this wealth over the course of 15 years. She's not most likely going to be able to access this money before 59 and a half anyway. So deferring the taxes now to allow her to save more now is the better choice.

14:11Like you said, if she was younger, we would have a different course of action. The limits on these are very high and they're much higher than the starting income that we're assuming for Barb in this situation. But if Barb was, for example, able to make$150 ,000,$200 ,000 a year, then all of a sudden she should be starting to inform herself, self-education, on the catch-up contribution limits in many of these accounts, right? The limits on a 401k are$24 ,500 here in 2026 for the employee contribution or free direct contribution, plus an$8 ,000 catch up. And that bumps up again, I think to$11 ,250 additional dollars between ages 60 and 63.

14:48So those numbers become very important if Barb is very successful in generating significant income on top of that salary or sees significant career progression. Those rules are there for a reason, for this reason. Now, the other fork here that we can shoes through is, and we're going to talk about the benefits of this, but it may be that Barb decides, you know what, my income and my spending situation are not going to create a large enough buffer for me to be able to catch up to traditional retirement in a timely fashion, just with my job and savings rate. I need to layer in some extra bets. My favorite bet, and I think Mindy, your favorite bet on that is to turn your housing into an asset.

15:24So this is where we talk about the live in flip or the house hack. One of the cheat codes, I think, to building wealth is to buy a small multifamily property like a duplex, triplex, or quadplex, put 5 % down as an owner occupant, move in, fix it up, rent it out, and allow the tenants in that building or roommates, if we're buying a single family house, to pay a substantial portion of or all of the home mortgage. That can be an incredible way to build wealth because we're benefiting from appreciation. We're getting rent from roommates or tenants to help offset the mortgage payment or completely cover our housing costs, significantly reducing cash outlay.

15:59You know, imagine that Barb is spending$988 a month at a bottom quintile spender in the Denver area. If that goes to zero, I mean, that's an amazing boost to her savings rate. $1 ,000 a month times 12 months times 10 years. Huge, huge progress against her financial goals. The other opportunity here is she could do that several times. she could maybe buy three or four such properties over the five to seven year period if she can assemble the down payment and qualify based on her income for these properties. That's a big if, but if she believes she can do that, then I believe that there's a case to be made for foregoing the 401k catch up for the first year or three or a several year period in this journey so that she has cash for those down payments on this property, right?

16:42It could be that if Barb has a house already, even with a small amount of equity, that she could sell that house and reposition it into some kind of house hack. Or, Mindy, you want to tell us about the live-in flip that you've done to build your wealth? Yeah. So the live-in flip is when you buy an unattractive house. I buy unattractive but solid houses. I don't worry about things with foundation issues or things like mold. I want a house that I can move into the day I close. It's just ugly. And then I start to make it look nice. I redo the kitchen. I redo the bathrooms. I probably redo the flooring.

17:17I definitely paint everything. And at the end of two years, I can sell it and pocket all the capital gains into my pocket, pay no taxes on those, up to$250 ,000 per person on title. Since Barb is single, she's probably looking at$250 ,000 as her cap. However, first of all, go ahead and pay taxes. If you can make that much, pay the taxes. That'll be awesome. I have never paid taxes on a flip. I've never made enough to pay taxes on a flip. And I don't think that it would be in her best interest to buy a house that has that much upside. But if she could do that and sell it for$50 ,000 gain or$75 ,000 gain, that's huge.

17:59In two years, that's a lot of money. I built a model to kind of walk through this. It got pretty complicated because I got carried, you know, way overboard with some of this stuff. I actually really like this model, Scott, because it shows the exact numbers. I put together a projection model and I kind of said, like, what's what's realistic here for Barb under these assumptions? Right. And so if we take the assumptions that Barb is going to make forty five thousand dollars a year as a starting base salary and that she's going to experience moderate wage growth across her journey with a couple of promotions and that she's going to start a side hustle earning twelve thousand dollars a year and continue to grow that over the course, the next 10 years.

18:34Then if she saves according to a tax advantaged order of operations, we can get her to about$331 ,000 by age 60 in net worth. And because of the law of compounding, we can get her to about$629 ,000 in net worth at age 65. So that's about 60 % of the way there just from saving and investing on a pretty normal, I think, career trajectory for someone in Barb's situation here. That's not the million dollars that we promised at the beginning of this. And that's the point is this doesn't work unless we also bring in additional bets or extend our timeline to some degree. And I think that's where we think that real estate, a live-in flip in particular, or a set of house hacks can make a big difference.

19:18Let's talk about an example of what that live-in flip looks like for you, Mindy. Can you tell us about the numbers from one of your live-in flips? My very first live-in flip was in 1996, and I bought a condo for$49 ,000. It was kind of ugly. I painted it. I tiled the kitchen floor. I got new appliances, new light fixtures, and I lived there for four years. Then I got married to a man who owned a house, and I decided I didn't want to live in a condo anymore, so I put it on the market. I sold it for$75 ,000. So I made$25 ,000 when I sold this house. I had a very low real estate agent fee, and this was all money that I put into my pocket.

19:58This is my very first. My last live-in flip that I sold, we bought it for$140 ,000. We put about$100 ,000 into it and we sold it for$598 ,000. We popped the top. So we took it from a two-bedroom, one-bath house to a four-bedroom, three-bath house. We made a living room. We made a primary bedroom, bathroom suite that we didn't have before. We redid the entire house. The$100 ,000 comes from a lot of it was us doing the work. So I think after all fees and everything, we made like$275 ,000 that I put in my pocket. I didn't pay any taxes on that. And that is more than my salary. Absolutely. And so you can see there's a spectrum here, right?

20:44Maybe it's not realistic for Barb to buy a house and flip it in today's market in Denver for several years. Some things have to go right on the income front. She have to be able to qualify. I think she can qualify up to 49 % debt to income in some situations, although that's really stretching it. in many cases, but maybe there's a condo that can be done there, right? Maybe there's a two or three bedroom condo or apartment or house that needs a lot of work that she can qualify for in year three, four, five, six, or seven. If she doesn't believe that she can do that, then she's going to have to earn more income.

21:13She's going to have to find some way to drive a side hustle or a business outcome forward, or we're going to have to get lucky with the market to get past that million dollar mark. But this, I think, is one of the more realistic possibilities for many people in this situation is to house hack or live and flip. And you can combine the two, right? If you get that live and flip opportunity and it has extra bedrooms, you can finish those up and rent them out to somebody, to boarders in that situation. If you can get a multifamily property, you can get true tenants. And now all of a sudden the income from those tenants in that duplex qualifies as rental income.

21:45And that will dramatically ease your ability to get future financing on future rentals. So that's one of our favorite opportunities there. If you layer in a handful of live-in flips, even modest successes, and or a handful of house hacks, where we're moving into the property, fixing up, and then keeping it as a rental, we can easily clear the$1 million net worth mark at age 65 and even have a chance to get there by age 60 on the same set of salary and side hustle assumptions. And you can combine those two. Scott, I have access to the MLS because I'm a real estate agent. I went in and searched on Aurora and Thornton up to$450 ,000.

22:23I want to cap it so that she can afford this. I didn't think that there were any properties that were going to be available. There's 144 properties, minimum three bedrooms, two bathrooms in Aurora and Thornton, all the way up to$450 ,000. They start, the lowest priced one is$324 ,000. There are multiple houses for her to choose from. And once she rehabs this house and it's nice on the inside, she can have tenants come in and live with her and help her with that mortgage. And that will help propel her towards the next property that she can purchase because now she's paying less for her mortgage.

23:03Her tenants are on leases. So that money will help qualify her for the next mortgage as additional income. That's the bones of the plan. Let's go into some more practical steps that Barb can take right now to begin moving towards this. So first, I think that Barb can create a personal financial statement. And our favorite tool for doing this is Monarch. Monarch Money is a paid subscription. It's$99 a year, or you can get a half off on your first year with the discount code Pockets, P-O-C-K-E-T-S. And what this app does is it connects all of the investment accounts, all your bank accounts, all your credit cards, and it tracks and monitors your spending, your net worth.

23:44It's like your financial command center. I use this personally and I review it every week with my wife as part of our financial meeting. And we set budgets in this and we largely stick to them and see our net worth grow by looking at the number every single week, every single month in Monarch as a tool. If you prefer a spreadsheet, we've got a free personal financial statement spreadsheet available at biggerpocketsmoney.com slash resources. It's the most popular downloaded artifact on our site. It's built for a more complicated position, someone who might have real estate or private equity interests or those types of things.