An investment club helped this woman retire at 60 - even after her employer cut her pension

By Alessandra Malito

'One thing I always wanted to have was financial freedom'

Eve Lewis grew up on a farm in Michigan. She knew about livestock, but not much about the stock market. Now, the 69-year-old retiree meets with her investment club regularly and uses her portfolio to fund a "very comfortable life" - despite having faced some challenging circumstances along the way.

She began investing 30 years ago and, even after the unexpected death of her husband 15 years ago and the decision by her company to stop contributing to her pension while she was still working, Lewis said, she kept on investing, "through thick and thin." She was able to retire nine years ago, at age 60, thanks in part to her investments.

Lewis started by investing money she was comfortable losing - that is, not money earmarked for retirement or necessary expenses. Over the years, she has used the return on these investments to pay for home repairs, furniture and a golf club initiation fee. It also helped pay for college tuition for her children. While in retirement, she continues to contribute to her investment account, but she occasionally takes money out of it to fund travel, too.

Three decades ago, Lewis read a Cincinnati Enquirer article about investment clubs. Although that article piqued her interest, she didn't join a club until years later, after her husband died. For 14 years now, she's met regularly with a group of women investors to have dinner and discuss their investments. Even during the pandemic, they continued to gather virtually.

The group, which started 25 years ago and now has nine members, assigns different members stocks to watch. Those may be potential new investments or ones that are already in their portfolios. Members present stocks they think are worth considering now or in the future, or stocks they think should be sold. Each member gets one vote, and they're respectful, even during "healthy debates," Lewis said. "The purpose of investment clubs is to learn together."

Lewis's group, like many other investment clubs, uses the resources of BetterInvesting, a nonprofit investment organization founded in 1951 that supports investment clubs. Investors interested in joining a club can use the nonprofit's website to become members and find groups to join. Members get access to various guides, including on how to research stocks and create bylaws for investment clubs.

What investment clubs do

Investment clubs are groups of individuals who pool their experience, education and assets. They may be organized as legal entities, such as partnerships, or they can be informal groups.

Investment clubs are an ideal opportunity for people who want to understand investing and plan for retirement, said Dennis Genord, the director of BetterInvesting's education and chapter development programs. "The way we invest, and the way our clubs invest, is looking for those quality growth companies," he said. Educational efforts are put toward teaching investors how to select stocks, target growth opportunities and build a strong portfolio, he said.

Some members join because they share similar backgrounds or interests, such as a group of women or of MBA students.

According to the Internal Revenue Service, "an investment club is formed when a group of friends, neighbors, business associates or others pool money to invest in stock or other securities. The club may or may not have a written agreement, a charter, or bylaws."

Members may actively participate in the decision-making process, but they aren't day traders, said Lewis, who is a longtime member of BetterInvesting. Instead, these investors focus on "buying the best and holding until there is a compelling reason to sell," she said. "The main purpose is education, but of course we like to be successful, too."

These clubs can teach members how to evaluate companies using financial statements, how to balance investments and how to analyze histories and earnings. They might also avoid certain management fees by collectively investing.

Of course, even an educated investor should be cautious when joining such a group. Decisions are made collectively through voting and could lead to poor investment choices.

The power of an emphasis on investing

Investing is a critical component of many Americans' retirement plans. Workers use investments, such as those in 401(k) plans and IRAs, to build a nest egg for their future, and retirees use investment strategies to simultaneously draw down and preserve their assets. "It is important to continue to have a growth component in your retirement portfolio," Genord said. "You need to keep the value of your portfolio growing."

Lewis was 54 when she became a widow, and her youngest child was a sophomore in college. A number of her friends said they wouldn't have known what to do in the same circumstances, but her planning helped her. "One thing I always wanted to have was financial freedom," she said. "By investing, you have the money work for you."

During her career, Lewis saw the introduction of 401(k) and 403(b) plans, and she used those to her advantage. And even when her company stopped contributing to her pension, she said, "I knew I had some options," thanks to what she'd learned about investing. Instead of taking an annuity payment, which would cease when she died, she took a lump sum and invested it. The money from her pension has remained untouched, and she's using her husband's Social Security benefit and his teacher's retirement benefit to help fund her current expenses. "I am letting that as well as my 401(k) continue on until I have to take [required minimum distributions]," she said.

She and her husband did their best to set themselves up for financial freedom. When they bought their house, they took out a 15-year mortgage and lived frugally. They were able to pay the home loan off in seven years by making double payments. Although it's not possible for everyone, she recommends that people aim to be mortgage-free by the time they get to retirement and to invest the money they're saving.

"From my investments, I had the opportunity to retire at 60, and I did," Lewis said. "And I really am glad I did."

-Alessandra Malito

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