The Weekly Investment

Dividend Investing

Roth IRA Conversion Ladder

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I read some recent blog posts about something called a Roth Conversion Ladder on the Dividend Diplomats and Mad Fientist websites and I think I am going to try this investment method.

I have limited knowledge on the subject so I plan to research further but understand that the Roth Conversion Ladder basically allows access to the money placed in pre tax accounts BEFORE age 59 1/2.

I began contributing the full $18,000 into my 403b account in 2013 but then at the beginning of this year, 2016, decided to forgo adding the maximum contribution limit so that I could concentrate building up my dividend investments in my brokerage account.  The reason for my decision to stop maxing out my 403b was because I wanted to be able to access my money before 59 1/2 because my plan is to retire EARLY.

I felt hesitant about ignoring my 403b since contributing to it allows me to pay less taxes.  I actually felt guilty about not taking advantage of this benefit.  But with the recent information I have learned about the Roth Conversion, thanks to fellow bloggers, I think this is a good decision.  And if I decide that I do not like it, I can always change.

Staring at the Future Point Blank

This has also been a beneficial revelation because it has forced me to really think about when I can realistically retire.  In recent months I have been quite burned out so I am more than ready to retire early but retiring now is unrealistic.  However I do have some help!  My brokerage account has now been built up enough to almost pay my monthly bills through its dividend payouts! 🙂  Because of these payouts I now have a money cushion upon which I can rely in case of emergencies.  I believe that these payouts are giving me the flexibility to pursue new methods such as the Roth Conversion Ladder, which, according to Mad Fientist’s analysis, is a good choice since I will save more money through a pre tax account than solely saving in a taxable account.

As of today my portfolio has grown roughly $38,000 since the beginning of the year.  I hope to see these types of returns with my 403b but if I am unhappy with the decision I can always revert to just focusing on dividend investing if I choose.

Target Retirement Age

Since I have been forced to really think about when I want to retire, I have finally come upon an age, which is… 50!  Unfortunately this means that I have to face the fact that I will be 50 someday.  I felt a feeling of dread when I decided upon this age because it is not a pleasant thought; I believe this might be a reason why a lot of people avoid retirement planning because they do not like to face the fact that they will be 50, or 60, someday.

I really do not like thinking about getting older.  I fight it with every fiber of my being, it is not pleasant, and is a hard pill to swallow, but it has to be acknowledged otherwise I cannot plan accordingly.  I think that it would be less painful to plan for retirement if I retired in my 30’s but honestly I did not even like to think about turning 40 when I was 30.  I do not think anyone likes to get older.  Before the age of 40 a person’s assets are in their youth, after the age of 40 a persons assets are in the good choices that they made in their youth.  Through this endeavor I hope to invest in, as I begrudgingly consider, the 50 year old future me.

I originally wanted to retire before 50 because I wanted to spend more time doing the things I like instead of working.  In reality I do not think this would be a good idea.  If I can make more money now, then I think it is wise to do so.  Fortunately, I was able to recently lower my working hours to 32 hours per week, so, in a way, I am now… partially retired! 🙂

I believe that working 40 hours versus 32 will help me feel better, as if life is not being stolen from me, and give me more flexibility.  This is a win-win situation because I will still be making enough income to max out my 403b and also add to my brokerage.

Income Allotment Plans

For the year 2016 I made a goal to add $24,000 to my portfolio annually.  I will not be able to add $24,00 to my brokerage annually and at the same time max out my 403b, especially since I decreased my work hours.  If my calculations are correct I would only be left with $1200 for living expenses for the entire year.  I have added about $19,000 to my portfolio so far this year so I think I will meet my $24,000 goal in 2016 but I still need to add around $14,000 to my 403b. :\  Luckily it is July so I still have time. At this point in time my Roth Conversion plan is a work in progress and we will see how it goes…

These are some pictures I took on a recent trip.  I was checking out some damage from a tornado and the tornado’s path led me to this small town near my city that is known for lots of antique shops but I did not know that it also has a lot of old houses and buildings from the late 1700’s!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Author: weeklyinvestment

Hi I am 43 years old and started dividend investing in 2015 at the age of 41. This blog provides an example of portfolio changes and dividend growth and compounding. It is very exciting to witness the changes on a weekly basis. My goal is to partially retire within the next three to five years by living frugally and building up my portfolio into a mini pension to supplement and support my frugal lifestyle. I am interested in vegan food, biking, music, exercise, nature, photography, gardening, writing, travel, and investing. I daily wish to be able to have more time to do these things yet I am sadly torn away as I head off to work each day...

One thought on “Roth IRA Conversion Ladder

  1. Pingback: Unalienable Rights | The Weekly Investment

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