What $30K Can Become

 

I’ve had the opportunity to travel a lot over the last few years. But over the next few much hard work lies in store. This doesn’t mean I’ll cut out travel completely, but I may have to sacrifice more trips for reaching my goals.

One of my biggest goals over the next four years as I finish college is my retirement account. I maxed out my contributions last April for the 2017 tax year($5500). This year, though, I hope to do the same. That means, by the end of this year I should have roughly $11K in my Roth IRA.

Imagine what this could turn into over 30, 40 or even fifty years! As I work this summer and during the school year I will see the balance of my Roth gradually rise. Maxing it out (which will be no small task) for the next four years(2018, 2019, 2020 and 2021 will set me up for a fantastic retirement safety net.

Maxing out contributions over five years (2017-2021) is $27500, but most likely it will be a little more by 2021 so there’ll be roughly $30K in there let’s say for simplicity. Compounding that investment over 38 years (2022-2060) at roughly the long term average of the stock market, 10%, leaves me with the following picture:

Screen Shot 2018-07-10 at 7.06.53 AM.png

I got this off Calculator.net, but there are many other tools out there.

When I first looked at it I couldn’t believe how much growth this thing could kick out. However I started to think of ways to improve it like the rate of return and the time horizon. What happens when I wait just five more years to age 65?

Screen Shot 2018-07-10 at 7.09.51 AM.png

The whole amount raises about about $700K!

There are a few things to consider though. For one this totally forgets about inflation, which will eat away at the purchasing power considerably. ¬†Seconded this assumes a 10% compounded rate of return. Although I’m not actually considered about this because stocks tend to do very well over long periods of time.

Altogether the picture this paints is one of optimism and potential. Imagine if I continue to contribute beyond the age of 22!

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