$100,000 by Age 30

$100,000 by Age 30

Well you might have noticed I put a little progress bar on the right hand side of my blog to track my goal of having $100,000 put away in retirement accounts by the time I reach age 30. Well by putting that stupid little chart over on the side of my blog really got me to thinking about this goal, more as in – can I actually achieve that goal. Up till this point I just thought it would be a nice goal to achieve but by having it staring me in the face every time I look at my blog it makes me wonder if I’m going to make a fool out of myself by trying to achieve what appears to be a lofty goal.

Edit: some of the spreadsheet have been changed since original post as I found out my 2004 401k contributions were much lower than I stated and that my 2005 contributions were actually higher. Actually lowered my contributions by $567

I mean I’ve only got 3.5 years to go from $30,000 to $100,000 and my living expenses are constantly going up which will make achieving this goal even harder. Also I had originally planned on having $100,000 in principal put away (ignoring investment returns), but after switching solely to Roth IRA & Roth 401k, both post-tax I think this goal is now out of my grasp. Anyway I need to know more, so I figured I should do some more detailed analysis on this goal to see if it is possible given my current savings rate and what rate of return I need to achieve this goal.First I am just going to look at reaching $100,000 solely on principal

Year

Age

Roth IRAs

Traditional 401k

Roth 401k

Employer Matching Contributions

Total Contributions

2004

24.5

$6,000

$1,146.68

$0

$0

$7,146.68

2005

25.5

$8,000

$8,286.10

$0

$300

$16,586.10

2006

26.5

$8,000

$0

$8,000

$2,000

$18,000

2007

27.5

$8,000

$0

$8,000

$2,000

$18,000

2008

28.5

$10,000

$0

$8,000

$2,000

$20,000

2009

29.5

$10,000

$0

$5,000

$0

$15,000

Totals

30

$40,000

$9,432.78

$21,000

$6,300

$94,732.78

Holy crap, I thought I was going to fall way short. I guess I was assuming I would have to lower my 401k contribution by moving to a Roth from a traditional, but so far I have been able to keep it at the same dollar amount. In fact I have actually considered bumping up my 401k contribution. Well I’m kind of thinking out loud here, but I don’t think this $100,000 by age 30 is going to be very difficult at all if I continue with my current rate of savings, in fact I’m coming so close that I may go ahead and just concentrate on reaching it on just principal payments. Basically I would just need to bump up my savings rate by $1500 a year and I would be able to make it. The only real wildcard in this whole picture is the matching contributions as they are not set it in stone at all, but recently my employer has matched $1 for $1 on contributions. In the past I was told it was usually up to 6%, but lately due to the employee base growing at such a rapid rate it has been closer to 4%. Regardless I should not count on any of this money. Which then leaves me $10k short or almost $3k per year and probably an unachievable goal.

So again thinking out loud here I am going to modify the timeframe slightly and I think it will give me a goal that is slightly out of reach given my current savings rate, but could be attainable under a best case scenario. Instead of requiring that I have the money in hand by my 30th birthday I am going to say by December 31st of the year in which I turn 30. Normally I don’t like making exceptions like this, but I think in this case it will give me a better goal to shoot for. Also because I’m kind of cheating by extending the timeframe I am also going to remove Employer contributions from my total. So here is how I will fair under my current savings plan.

Year

Age

Roth IRAs

Traditional 401k

Roth 401k

Total Contributions

2004

24.5

$6,000

$1,146.68

$0

$7146.68

2005

25.5

$8,000

$8,268.10

$0

$16,268.10

2006

26.5

$8,000

$0

$8,000

$16,000

2007

27.5

$8,000

$0

$8,000

$16,000

2008

28.5

$10,000

$0

$8,000

$18,000

2009

29.5

$10,000

$0

$8,000

$18,000

Totals

30

$50,000

$9,432.78

$32,000

$91,432.78

Here is an altered savings plan to meet the goal

Year

Age

Roth IRAs

Traditional 401k

Roth 401k

Total Contributions

2004

24.5

$6,000

$1,146.68

$0

$7146.68

2005

25.5

$8,000

$8,268.10

$0

$16,268.10

2006

26.5

$8,000

$0

$9,380

$17,380

2007

27.5

$8,000

$0

$11,424

$19,424

2008

28.5

$10,000

$0

$9,710

$19,710

2009

29.5

$10,000

$0

$10,281

$20,281

Totals

30

$50,000

$9,432.78

$40,795

$100,227.78

Changes required:
2006 – Go ahead with proposed increase to 17% for Roth 401k starting next quarter and keeping that in place for the entire year

2007 – Bump Roth 401k percentage up to roughly 20% (could be 19% or lower if I get a raise)

2008 – Roth 401k percentage at 17%, but need to come up with additional $2K for Roth IRAs

2009 – Roth 401k percentage at 18%, and continue to max out Roth IRAs

To be honest the above proposals will hurt financially and I will likely have to come up with ideas for additional revenue streams in order to meet this goal, but I guess that’s what goals are for. If it causes me to think of new ways to bring in money then regardless of whether or not I meet the goal it has served its purpose in my opinion. Anyway wish me luck, I’m pretty sure I am going to need it.


  • You are 24.5. You are organized enough to start planning for your future. You should be able to significantly increase your earnings in the next 5 years.

    I have no idea what you do for a living, but at the age of 24.5, I would imagine you have not done it for very long and don’t have very much experience doing it. This is when you need to be focusing on making sure your on the career track that you want to be.

    You might want to start you own company, work for yourself, etc etc. Make sure you are putting serious effort into growing professionally, because the skills learned and the contacts made now and going forward are important no matter what path you decide to take your career.

    Good luck, and thanks for writing up a well thought out goal.

  • Stephanie Meyer

    How do you live? In that I mean, what do your daily/monthly budget/expenses look like? I ask b/c I marvel at how much you’re able to sock away so…you either make a great deal of money or have very few expenses or both…? =)

  • My Financial Journey

    Well you can see a pretty good breakdown, including what I make per year here

    http://www.myfinancialjourney.com/index.php/archive/what-percentage-of-your-income-to-do-you-live-on/

    I don’t have a formal budget, but my wife and I have very simliar mindset on spending money and are pretty good about only putting money towards things we really need or truly will enjoy. At same time we have a new house, she drives a somewhat newer car 99 Accord, and we still get out and do things. It’s just eliminating all the small useless expenses from our lifestyle that allows us to live like we do.

  • What can you do to make up the difference from saving $91k to $100k in principal? I’m just dying here, because we’re just getting started as well and I’m making stretch goals for next year in my head.

  • My Financial Journey

    All I did to get from 91 to 100 was increase the percentages…in fact right below the last chart is a list of changes I had to make.

    Realistically raises should help me out a little bit each year, but I didn’t want to count on something that was out of my control.

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  • R.G

    Hi,

    Congratulations on your financial planning achievements. I didn’t start my 401k until age 27. From ages 23-27 I had a high income (for my age) of 70-110K p/yr potential. With the down trend lately in the auto industry I suffered about a 15K p/yr loss in income. Now at age 30 I only have about 10K in my 401 and I just got my wife to start one. I work with a guy who is 26 and has about 50K in his 401 already. I also work with guys who are in their 50’s and have no money to their name. Good luck, I am sure you will have a good future.

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  • DP

    If you live in a high income tax State or a city (such as NYC, for example), consider traditional 401K. If you retire in Florida, you will not pay State taxes and thus save 11 – 12% State / City income taxes you would pay on Roth 401K. Don’t know your situation, but Roth 401K is not always better than Traditional one. And of course, keep in mind, 2007 Roth IRA contribution limits are $4,000 per person and 401K (traditinal or Roth) $15,500. Good luck with your goal. Looks like you will get there.

  • Neil Hampshire

    Now that it is 2010, I wonder if your 401k has been hammered and I wonder how close you are to your 100K journey. I want to let you know that at the age of 34, PUMAR made it being a security guard working for less than 14.00 an hour and working overtime. It took him 3 years.

  • MFJ

    @Neil – I made it and actually my investments have been holding up really well. Thanks for the comment.

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