The Weekly Investment

Dividend Investing

Category Archives: Roth IRA


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Roth IRA Conversion Ladder

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!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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Conexant and P&G

20120530_182429I opened my Roth IRA on November 8, 1999 and immediately mailed a check for $2000.00 to Fidelity. Aware that I had opened a new account, I took advice from someone I knew who suggested buying a promising technical stock by the name of Conexant because it was quickly growing in value.

Once the funds were available, I bought 32 shares of Conexant stock at $62.50 per share. The value of the stock quickly rose, I checked my Fidelity account on a daily basis, watching it double, increasing to $4000.00. I was pleasantly surprised to witness my new Roth IRA immediately double.   I did not plan to purchase additional shares because the limit for a Roth at that time was $2000.00 annually.  Believing that investing was easy due to the seemingly easy growth filled me with contentment…but only for a short time.

Unfortunately Conexant’s stock value fell drastically a couple of months later. My investment decreased as fast as it increased and I learned immediately as a beginner that one’s money can quickly vaporize in the stock market. The stock’s value plummeted and I was looking at a loss. By the early 2000’s the stock’s value was in the hundreds of dollars. I lost almost all the money I put into the stock. I never sold Conexant but held on and watched it dip into cents per share as well as branching into two new companies, Mindspeed Technologies and Skyworks.

This was a learning experience and I was relieved that it was only $2000.00. I hoped I could recoup the lost money by the many years of investing that I had ahead of me.  Shortly after opening my Roth someone suggested buying stock in P&G since it’s value dipped to near $50.00 per share.  Because it was a new year I was able to invest another $2000.00 into my Roth. Undeterred, I mailed a second check to Fidelity and bought about 38 shares of P&G. Not long after, I watched the value of my minuscule portfolio return to normal as the value of the P&G stock rose, bringing it near $4000.00, my original investment amount. I was happy to break even and planned to continue to invest in the years to come.


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Investment Beginning

I began investing in 1999 when I was 26 years old and worked for a temporary agency.

During that time I often listened to a financial radio program hosted by Bruce Williams who consistently recommended opening a new form of IRA called a Roth IRA because of its tax free benefits. I decided to open an account.

The maximum annual contribution in 1999 was $2000.00. I saved and readied the maximum amount for investing with a nearby broker.  The process was very exciting: planning, selecting a broker, calling, making an appointment, and leaving work to go to the appointment. A moment in time on a cool autumn afternoon remembered to this day.

I was looking forward to opening my Roth IRA. I believed it was a wise decision because I was starting at an early age which would give the investment many years to grow.  Surprisingly, after being seated and speaking with the broker, I quickly grew uncomfortable towards the idea of having someone else involved with my investments plus paying them a fee. The question bore down on me, “Why is a middleman necessary?” I was under the impression that in order to invest one must go through a broker.

Ironically, I was working temporarily at Fidelity Investments. Because of my apprehension during the appointment I began to consider other ways to open an IRA. Knowing little about investing basics, I relied upon my gut instinct, suspecting that Fidelity might possibly provide a more suitable service. This hope alleviated the acute unease that I felt and I told the broker I would forgo opening an account. Later, after a short amount of research, I confirmed that the correct decision had been made. I discovered that investing with Fidelity would enable me to deposit my money directly into my account and manage solely the decisions and transactions of the account.

Having direct control over my future investments, with no middleman, was the best decision for me. I believe my intuition served me well. Looking back, I recall the broker suggested that I start my new account with an investment in a small airline company. The recommended company shut down in 2012. It is understandable that this is the risk one takes when investing but I preferred facing the risk solely on my own.