Mid-Term Goal: $100,000 Non-Retirement by mid-2007
After setting my Short-Term Goal for this month, I am now setting my Mid-Term Goal. As I have mentioned, I plan to buy a house in an area with insane real estate prices for the long term for family reasons. As we are planning to move in mid-2007, that is the target date. $100,000 in non-retirement accounts will be enough for a good-sized downpayment, as well as other incidental costs.
Let’s check on the current status - If I contribute $14,000 to my wife and I’s Roth IRA in January for 2004/2005, my net worth will look like:
Non-retirement: $23,366
Retirement: $32,384
Thus, I am 23% to my goal, with 2.5 years remaining. That means my required savings and earnings pace will have to amount to $2555/month. That’s going to be tough, the stock and bond markets will hopefully help me out. If I assume a certain earnings rate, then my monthly savings amount may be more reasonable. I will have to consult my economics-trained friends! My other option is to put less into retirement.
December 19th, 2004 at 12:09 pm
Maybe you should contribute to Roth IRA anyway. You can always withdraw your original contribution anytime without any penalty, so this $14,000 can become your non-retirement assets if you need it to be.
BTW, great blog! Keep it up!
December 19th, 2004 at 5:12 pm
Thanks MM!
You’re right, the contribution itself can be taken anytime, I confused the contribution and the earnings, as they are treated separately penalty-wise. That’s good, it gives me a fallback plan.
December 20th, 2004 at 4:37 am
I don’t suggest taking money outta retirement plans for any thing. Let’ say that you want to buy a $150,000 house and you take 20% ($30,000) out of your IRA. Let’s say you roth IRA is generating 10% a year. After 40 years that $30,000 would have become $1,500,000.
Please correct my math if it is wrong.
December 20th, 2004 at 9:13 am
I totally agree, but it’s nice to know that it’s an option. That’s why I’m trying to keep everything non-retirement. I also think 10% return is going to be very unlikely if you diversify at all - and the numbers are a little bit more down to earth if you use something less.
But I like the way you think - that’s how I justify saving ten bucks here and there - compound interest rocks!