What do I consider to be stupendeliciously rich?!

Holy cow, this is going to be my longest article ever! I’m proud of it so I hope you enjoy 🙂 The other day I wrote about what type of blog I want Punch Debt to be. I got a fun comment from my homeboy Josh. He wrote…

So Ninja,

I see one day you’d like to be ‘stupendeliciously’ rich, nice word by the way 🙂 You also have an action plan to make it happen. How much do you consider is enough? And once you make your Bill Gates like fortune do you just plan to retire early, or you got something else in mind?

Great question Mr. Josh. Everyone has there own definition of the word “wealthy.” For some it might be just enough to pay the bills without having to worry about overdraft fees. For others, it might be the ability to retire and live a comfortable life, for others it might mean gettin’ all Bill Gatesy and making a couple billion each year. Everyone should have goals established for what they want to achieve financially in their life.

To respond to Josh’s first question “How much do I think is enough.” I will be able to rest easy at night when I know that I could lose my job at age 65 and be able to live off my savings until I die at age 123 (that’s right suckas I’m going to outlive my grandkids!). I will know all my hard work has paid off when my annual retirement contributions don’t really affect my overall balance because it is too freakin huge to notice an extra $10k to $20K addition each year. I never want to have to depend on “someone” else to get by in life. I refuse to be that 60 year old cat lady that lives with her children because she can’t afford to live in her own place. I don’t want to be in a position where I am unemployed long enough that I need to collect funding from the government. I want to have enough money in my accounts that the stock market dropping a crazy 50% in one year doesn’t really affect me that much. Those are the things that matter to me, and what I consider “enough”.

I’m gonna quit the vague terminology and throw out my personal retirement goals. By the time I am 65 I plan to have $6.1 million in my retirement accounts. Wanna know how?

Here is my income prediction: In my position with the govt, I will make $70K a year starting at age 25 (I made 40K at 22, now 50K at 23, 60K at 24, etc). Once I reach the $70K my income growth becomes severely limited. I assumed I would make $70K for the rest of my life with a 3% increase each year for inflation. I personally believe my income will go up beyond the $70K as I gain more experience and am able to transition into a career field with a higher potential income, but I like to play things safe so I stuck with more conservative numbers. I then approximated my wife’s income to be $50K a year for eight years with no pay increases. I anticipate my wife will quit working at around 30 so she can be a stay at home mom. She will only contribute to her Roth IRA and 401K accounts during the years in which she works.

My Roth IRA prediction: I currently have $8K in my Roth IRA and I plan to make maximum annual contributions from age 23 to 65 with a rate of return of 8%, to adjust for inflation. I should have $1.87 million waiting for me in my account come age 65.

Wife’s Roth IRA: The Wifey will make maximum annual contributions for eight years with an expected rate of return of 8% as well. This brings her account balance to $700K by the time she turns 65.

My 401K: I currently have $4K in my 401K. I plan to continue making 8% contributions to my 401K through retirement. The government matches the first 5%. Making $70K (plus 3% inflation raises) from age 25 to age 65, my account balance will reach approximately $2.78 Million come retirement time.

Wife 401K: The wifezilla will make 5% contributions from her $50K annual salary for 8 years. Her employer will match 5%. This leaves her account at $817K by her 65th b-day.

Between the two of us, we should have about six million waiting for us to use and abuse. Now some of you haterz out there are going to ridicule my numbers and say that I could lose my job, or have a significant financial issue come up, or even worse I could end up divorced. Let’s say you are right and my numbers are cut in half. Even then I’ll still have a couple million waiting to hang out with me. Don’t bring your negative energy around here, I don’t need it….constructive criticism is always welcome though 🙂

As for what I plan to do in retirement…Whatever the eff I want! I’ll probably still work part time and let the majority of my money continue to grow. I plan to give the majority of it away to organizations and causes I believe in. Think about how fun it would be to drop $30K to a youth group so they could take inner-city school kids to summer camp for free! It’s things like that, that motivate me to save now so I will not only benefit, but can share the love with those around me. I’m not gonna lie though, I’ll probably buy a few houses and maybe and a fighter jet or something else bada$$ 😉

So bloggers, bringing it back to you now. What do you think? Am I crazy? How much do you think you’ll have? What measures are you taking to get there?

Roth IRA: Who said money doesn’t grow on trees?

We have all heard it before, “Money doesn’t grow on trees”. You know what I say to that? Heck yes it does! Young people of the world, I would like to introduce you to the Roth IRA.

What it is:

A way to get awesomely rich with minimal effort. The Roth IRA is most effective for younger people. Definition of young: 20 something, but don’t get me wrong, it’s NEVER too late. Compound interest is your best friend. If you don’t know what that means, don’t worry about it. It basically means your money grows at a crazy quick rate. If you got the discipline to save a little bit of that cash, you STRONGLY need to consider throwing it in to a Roth IRA. The Roth allows you to make contributions with your after tax money (the money you actually get in your paychecks). It then grows tax free for the next umpteen years (until you retire basically) and you get to pull out all the profits without having to pay anyone a dime.

Why is this so cool?

The Roth is epic, because of the tax benefits. If you are young, hopefully your income will only go up from here! If you take all your hard earned cash and put it in a Roth (maximum of $5,000 annually) you will have paid taxes on that amount equal to your current tax rate (probably between 15% to 25%). This is cool for one reason. Chances are you will be making more money when you near retirement and will be in a way higher tax bracket (30% and beyond). When you do retire you get to take all that money out…tax free. Meaning you just saved yourself from having to pay Uncle Sam a crapload of cash. Keeping YOUR money for yourself is what it’s all about.

How it works:

Sticking to the title of this post, the Roth IRA is the closest you will come to “money growing on trees.” You take your seeds (your current savings), bury it deep down in some soil (the bank or company of your choice), and water that sucker each and every year (annual contributions). When you plant a tree, you can’t expect a freaking redwood to be in your yard the next day. The Roth IRA is no different. You gotta be patient and keep feeding it the maxmimum contribution each year. After a good twenty to forty years of adding to your Roth that baby weed you had growing is going to be a full blown beast of a tree. But unlike the redwood, the Roth wont take 200 years to be cool.

I think it’s time for you to make a contribution to your Roth IRA garden. The choice to do it tomorrow could cost ya’ a good chunk of change. The earlier the better suckas. Do it! No seriously, go freakin’ do it!

Roth IRAwesome part UNO!

If you don’t know, I love Roth IRA’s. I’m banking on my Rothizzle to make me filthy stinkin’ rich. You may think I’m a little optimistic, but I call it realistic. My favorite “You’re gonna be loaded calculator” can be found here , but I’ll just walk ya through what I punched in.

I’m 23 years young and currently have a Roth IRA balance of $8K. If I continue to max my Roth contributions through retirement (age 65) I will have about $1,800,000 waiting to be used and abused. I assumed an average rate of return of 8%. Why 8%? The stock market has averaged about 11%, but I wanted to adjust for inflation (3%) to bring me to an overall rate of return of 8%.

Now you skeptics out there are probably thinking “Inflation may be way higher than 3%, or the stock market wont come close to averaging 11%”. Let’s pretend you know what you are talking about. If I only earn a 5% rate of return, either because the stock market sucks or inflation goes through the roof, I still walk away with $794,717….not too shabby if you ask me. Especially when you take in to account I will also have a wifey that will be maxing her Roth out and we will both be contributing to our righteous 401k plans. I’m pretty sure I’ll be a bagillionaire by the time I retire and when that day comes, I can’t wait to give it all away to noble causes!

Tomorrow I’ll get in to the specifics of why Roth IRAs are the coolest thing since teriyaki chicken, but for now head over to that calculator and find out how rich you could be!

Worried about retirement? I’m not.

Is the world as we know it coming to an end? Instead of investing in the stock market, should I begin purchasing adult diapers and a pacemaker? Is retirement going to be hell on earth no matter what I do ? I read an article on Bloomberg (yes contrary to popular belief, I do know how to read) discussing the confidence individuals have when thinking about their retirement. The full article can be found here , but this is the gist of it….

The survey of 1,257 individuals in the U.S. found that 13 percent feel very confident about having enough money to live comfortably in retirement, the lowest level since the Washington-based Employee Benefit Research Institute started asking the question in 1993. Retirees who feel very confident about continuing to be financially secure in retirement also decreased to a new low of 20 percent from 29 percent a year earlier..

Add me to that 13% of “very confident” individuals that believe they will have enough money come retirement days. I have no reason to believe, that over time, long term investing in mutual index funds is a bad choice. We hear some say “Get out of the market while you still can.” While others preach “The stocket market is on sale…buy, buy, buy.” Although I do believe the stock market is at an artificial and very temporary low, I do not plan to drastically change my investment strategies . I am not an emotional investor and I’m in it for the long haul. Like everyone else, I have seen my portofolio cut in half, but I refuse to allow the emotionality of the market affect my long term goals.

I know my opinions mean nothing, in fact I would likely have a different stance if I was 53 instead of 23. Call me an optimist, but I like to think of myself as a realist. I would hope after 40 years of consistent/solid investing, I would have a large enough nest egg to live comfortably. If that strategy doesn’t work, I have no clue what will. There are few strategies that rival the consistency of the S&P 500 over the long term. I guess I could do what the commercials have been telling me to do and liquidate everything so I can buy gold!?…not!

Roth IRA baby,