Investing $199.85 A Month for the Rest of My Life
The other day I decided to go big on my last personal debt, this is a debt owed to my parents and one which will help them have an easier transition into retirement. I have not changed my mind about paying back this debt and still have a goal to make my debt free scream by the end of 2015, which in itself is a Go Big challenge. What I couldn’t get around was my want and need to invest, whether it was $20 month or $200. While I was trying to figure things out after my student loan payoff, the fun article is found over at Budgets are Sexy I decided to take the minimum payment that was formerly going directly to my student loans and put it right in my Vanguard IRA account. Why not invest money while I decided to put the final touches on my plan, but it just felt right to invest, so I decided to invest for the rest of my life.
I am finally going to use the momentum I have created and start investing into my IRA. I know $200 or $199.85 is not a lot of money, but it makes me feel like I’m going be a millionaire. You know what it very well could, think about that for a second, putting $200 into an account could make you a millionaire, feels nice to read at least. Of course this could take some pretty hefty compounding interest using the Smart Asset Calculator, but it’s not inconceivable by any means, if I took $200 each month for 30 years and received a 13.50% return, I would be a millionaire*.
Since I’m a fairly conservative when it comes to projections and numbers, even the $200 monthly contribution and 6% return over 30 years will get you over $200,000 which as I’m sure you can imagine but do not want to experience is better than a swift quick to the baby maker.
The great story in all of these pie charts and bar graphs is just by contributing to your IRA account each year at the current IRA contribution limit of $5,500 you are going to have almost half a million dollars! All great numbers to talk and encourage others about investing and the opportunity to increase your net worth, because let’s face it if you don’t have money coming in you can’t retire early or for that matter at all.
One of the calculator’s that I use for quick investment research is Dave Ramsey’s Investment Calculator which you can say whatever you want about Mr. Ramsey but secretly his calculator wants us all to retire early. What do I mean?
The investment calculator gives you the option to invest for a number of years and then sit back and watch your money grow. Does that sound familiar? Let me give you a hint. Financial Independence Day! In my early retirement blueprint, my plan which is heavily based in real estate makes a leisurely switch to the investment side with the plan for this money to be used almost as supplemental income during my time in early retirement. My rental investment income will be my main source of income in early retirement and my plan is to allow my tax deferred investments like 401K and IRA build up until the government approved retirement age, which if you ask the federal government is anywhere from 59.5 to 67 years of age, either way that’s a long time in your early 30’s. If I put my student loan payment towards my IRA each month for $199.85 for the next 5 years and stop contributing, but allow the money to grow for an additional 25 years I will be rolling in at the age of 63 with an additional $63,799.97. That’s fantastic news, maybe when I’m 63 I will want to buy a boat, help my great nephew with college, or start a small brewery in my garage. It doesn’t really matter at that point because the additional money will be a bonus, just from taking the next 5 years and contributing my student loan payment amount to my IRA.
I don’t plan to stop there, over the next 5 years my individual contributions to my IRA and 401K will increase each year and put me in a great position to use this money as a bonus when I turn “retired age”. There is also well documented ways to use this money in early retirement. I have mentioned the MadFIentist before but recently Retire 29 did a great job explaining the process for those that need a little visual understanding on how it works. The early retirement blueprint is all coming together, piece by piece and I keep track of it all over at Personal Capital and since it’s FREE I think you should to! Personal Capital gives me a great look at the big picture of all my accounts, plus when you are looking at the big picture it becomes easier to invest even it’s just $199.85.
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*Financial Samurai suggests that 3 million is the new 1 million, but I will be happy to have either one in the near future.