$100,000 in principal by Age 30 – Final Recap

$100,000 in principal by Age 30 – Final Recap

Well 3.5 years ago I wrote this original post where I set a goal for myself to have saved $100,000 in principal by the time I reached age 30. By principal it meant money that was contributed to my retirement accounts only and not the current value of the accounts. This allowed me to have complete control over whether or not I reached my goal as I would not have to worry about market fluctuations (like those ever happen anyway 🙂 ). It seemed like such a steep goal because at the time I barely had $30k put away for retirement at the time.

The whole purpose of the goal was to put me on a solid track for saving for retirement. I understood the power of compound interest at an early age and knew the cost of waiting to save for retirement. $100,000 is really not an important number and there is no science behind it, I just knew that if I had roughly $100k put away by the time I reached age 30 I would be on a very good track where if I were to sluff off on retirement savings to do other things (build dream house, pay for kids college, etc) that it would not hurt my retirement as bad because I had done the grunt work up front and had 30+ years and the power of compound interest on my side.

Over-simplifying things, but if I had $100k in my accounts at age 30 and never saved another penny and it earned 10% annually in the stock market for the next 35 years I would have over $2.8 million in my retirement account at age 65. Again over simplifying things, but that is the general concept. Save as much as you can as early as you can and get time on your side and saving for retirement will seem easy, especially compared to those that wait till they are 40 or older to start saving.

Below are the final results of my goal. I’ll provide more detail after you review the results.

The gameplan

Year Age Roth IRAs Traditional 401k Roth 401k Total Contributions
2004 24.5 $6,000 $1,146 $0 $7146
2005 25.5 $8,000 $8,268 $0 $16,268
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 $40,795 $100,027
The Actuals

Year Age Roth IRAs Traditional 401k Roth 401k Fully Vested Matching Funds Total Contributions
2004 24.5 $6,000 $1,146 $0 $0 $7,146
2005 25.5 $8,000 $8,268 $0 $0 $16,268
2006 26.5 $8,000 $0 $10,592 $0 $18,592
2007 27.5 $4,750 $13,852 $2050 $3,134 $23,786
2008 28.5 $8,700 $14,505 $0 $3,386 $26,591
2009 29.5 $0 $3,867 $0 $2,548 $6,415
Totals 30 $35,450 $41,638 $12,648 $9,068 $98,804

As you can see the first thing you probably noticed is that I fell short of my goal. I will address that in a little bit. The other thing you might have noticed is that there is an additional column where I decided to count all of the matching money that my employer has contributed that is 100% vested. Originally I said I was not going to count on this money, which is good when setting a goal, never count your eggs before they are hatched, but in the end this money was contributed to my retirement accounts and it is 100% mine so its really no different than if I had contributed it myself. I made a conscious decision for taking this job over others and the retirement package was one of the reasons and I think I should be able to count those contributions.

Now to address me falling short. This certainly was not because I couldn’t reach my goal, its sort of that I decided reaching the goal wasn’t as important as saving for our dream house. As much as I like to go on and on about saving for retirement and how buying houses may not be the best financially for some people (wow had some foresight there) as was pointed out to me so eloquently by Doug in this post – you have to balance long-term savings vs spending some money now and enjoying life today. While this may sound goofy as I’m forgoing one savings to save for something else, I sort of view saving for a house as a short-term lets waste money on something and enjoy life now thing versus anything that would be smart financially. We already have a house it suits us fine and there is no reason we could not live here the rest of our lives. We just want something bigger and better and one of us has some crazy ideas on ways to waste money 🙂

So while I fell woefully short of my intended savings for this year – in the last 2 years I’ve been able to save $35,000 for our new house. In fact an automatic deposit today went to our house fund for $1,175 which ironically would have put me right at $100,000 if I had directed it to our retirement savings instead. So all in all while I feel some disappointment for falling just short of my goal – I do feel very good about where we sit financially right now and think our retirement savings is very much on track. The last two caveats I will throw in here are that originally the goal stated Dec 31 of the year in which I turn 30 which I will easily get (I changed the goal about a year ago when I thought the goal was getting too easy) and I also have $8,382 of contributions that I am not counting because they are not 100% vested until Jan of 2010. So I guess depending upon how you look at it I may have actually met my goal. Like I said this wasn’t rocket science I just wanted to make sure I was headed in the right direction and I feel very much so that I am.