What Do Speed-bumps and Social Security Have in Common?

Speed BumpsWith an election looming in the USA, our airwaves are saturated with attack ads and rampant hyperbole. Among other things, the candidates and talking heads keep rattling on about entitlements and the role of the government versus the private sector. I’ve already voted and I don’t wish to turn Interesting Money into a political blog, so just allow me to create a simple analogy for you by way of a bizarre question: What do speed-bumps and Social Security have in common? Continue reading

My Tax-Advantaged Investment Portfolio – August 2012

Previously I posted the content of my taxable investment portfolio. In that same spirit, it’s now time to sneak a peek inside my tax-advantaged accounts. Here’s how everything looks as of August 2012.

Roth IRA – Through Schwab

IM Roth IRA, August 2012

Current allocation: 70% Stocks / 30% Bonds

If one uses the age-in-bonds method to derive asset allocation, then the current split of 70% stocks / 30% bonds in my Roth IRA is tilted slightly to the aggressive side (I’m 33 presently). However, I prefer to consider asset allocation on a per-account basis and not worry about the whole. In my mind, if I take care of each gear, then the machine will run smoothly, and I spend little time worrying about my overall asset allocation. Each account has a purpose: my taxable investments must grow and generate enough dividends to augment my early-retirement income up to age 59.5, and my two tax-advantaged accounts will patiently wait to grab the baton and run from there. Continue reading

Steps to Early Retirement – Build Your Income Streams

This is a continuation of our series on Steps to Early Retirement. Please also see Part I – Setting a Budget and Part II – Determine Your Retired Living Expenses.

Small streamCrafting an early retirement plan involves the harmonic interweaving of multiple components. During pre-retirement, we have a long period of asset buildup, which basically involves living frugally and socking as much cash into investments as we can while still drawing a salary. We examined this phase in Part I.

Once that salary ends, a new phase begins. My projected life in early retirement involves an elaborate dance between satisfying necessary expenses while still living a frugal lifestyle and building a few different streams of extra income. In an ideal situation we can continue to earn more than we spend each month, thus continuing to add to our investment war-chest, thus increasing our dividend income, thus reducing any anxiety we might feel at first about major expenses, such as a roof replacement on the house. Continue reading

Steps to Early Retirement – Determine Your Retired Living Expenses

Steps with catsIn a previous article we looked at creating a budget for your pre-retirement life, as it’s the first crucial step in going down the early-retirement path. At this point we’re going to skip ahead a few years. I say a few optimistically, because it sounds emphatically better than saying, Let’s skip ahead 26 years to when you may finally be able to retire early at age 59, you peon.

OK, so let’s play a little game. Go ahead and imagine that you just retired at the ripe old age of 35, 40, 45, or whenever it is that you’re finally able to stop working for The Man. Congratulations! Feels great, doesn’t it? For the sake of this game, let’s also imagine that the mortgage is paid off as well, as I consider the lack of monthly mortgage / rent payments an integral component of our early retirement plan. Continue reading

Steps to Early Retirement – Setting a Budget

Budget road signSince I’m now getting serious about retiring early, the first step is to formulate a master plan on how to get there. Everything I’ve learned so far tells me that there is a simple formula on how to achieve early retirement: Spend less money now + earn more income however you can + invest the difference = NO MORE BOSS. Over time, your savings will compound into a big rolling snowball that will eventually become monstrous and flatten your future expenses.

Sounds simple, right? Yes, it’s such a simple formula, but the discipline to rigidly follow it is ridiculously difficult. Oh well, a journey of a thousand miles begins with a single step. Continue reading

Getting Serious About Early Retirement

Lately, I’ve done a lot of reflecting on the first post I ever wrote for InterestingMoney. In that (short) post, I wrote about my longer-term goals. Specifically, I mentioned that my purpose in founding InterestingMoney was to track progress toward a single, specific goal. Here’s the first paragraph that I wrote here, back in 2007:

Alright, so my goal for this site is to keep track of my journey toward financial freedom. What is financial freedom? Good question. The answer varies, of course, but one answer is the ability to live comfortably off one’s interest earning without touching the principal investment. This is a lofty goal – one that I will not achieve for quite a long time.

Continue reading

Opening a Roth IRA with No Minimum

Empty pocketsSeveral years ago I wrote an article on Opening a Roth IRA on a budget. That article is basically obsolete now, as some of the options either don’t exist or have been updated. So, here’s an update with better options.

You’ve likely heard about all the benefits of having a Roth IRA, and you want to take advantage of that tax-free growth. But what if you’re a college student working part time, or just started your first job and don’t have the thousands of dollars required to open a Vanguard or Fidelity account? Is it possible to open a Roth IRA with no minimum, and are there any decent choices available? Continue reading