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!