Future Focused

Future Focused


Take Advantage of Smart Investments

I have been trying to estimate what my Net Worth will be at the age of 50 (5 years from now). I know that when I turn 50 I will be eligible for catch up contributions to my retirement accounts. While I have been looking over my numbers, my employer just sent an email to all employees with great news that has made me shift my investment strategy a little. They are now allowing employees to save up to $55,000/yr in their 401(k) Account whether it is a Traditional 401(k) or a Roth 401(k) like the one I currently invest in. I now have an extra bucket to hold money called an After Tax Account and it is inside of the 401(k) Account. Before I could only contribute a max of $18,000 every year. Now, along with an increase in the company match of $1,000, I can invest an additional $31,500 into this new After Tax Account bucket. There is a catch to be able to invest the full $31,500. I'm only able to deduct up to 50% from my paycheck. For example, I am not allowed to take my entire check and invest 100% of it into my retirement accounts. $55,000 is not 50% of my annual net income. Even with the new tax cuts, I'm not even close.

There are still good things about this opportunity and one is any money that I personally contribute will be tax-free when I withdraw it at retirement. I only have to pay taxes on the gains of the investments, not the initial capital invested. Being in the Roth 401(k), it's a protected retirement account and I don't have to pay the taxes on the dividends every year. For these two reasons, it makes sense for me to try to max out as much as I can towards the $31,500 contribution annually.

I have made the decision to delay my purchasing of Stocks directly in my taxable brokerage account since I want to use my Roth IRA and Roth 401(k) for ETF investments. After I max out my Roth 401(k) and After Tax Contributions, I will buy Stocks with any money that remains. Here is my investment strategy going forward:

Total Capital to be invested over 5 years:

  • Roth 401(k) & After Tax contributions: $152,500
  • Roth 401(k) company match: $25,000
  • Roth IRA contributions: $27,500
  • Current annual dividends: $43,323.70

Investments to be added:
  • 11 ETFs to Roth 401(k) & After Tax Account
  • 2 ETFs to Roth IRA

Items not accounted for:
  • Stock Price Appreciation
  • Additional Individual Stock Buys
  • Dividends From New Buys
  • Dividend Growth of All Dividends
  • Employment Raises & Bonuses
  • Limit Increases To Retirement Account Contributions
  • Financial Gifts & Inheritance

Total Invested Over the next 5 years: $248,323.70
Total Including Current Net Worth: $714,324.98

When I turn 50 years old, my Net Worth should be a minimum of $714,324.98. Stay tuned as I progress towards my new goal!