hundred dollar bill puzzle

2020 was a crazy year. While a significant number of new individual investors started putting a lot of money into the stock market I ended up spending a significant portion of my free time reading about market fundamentals and researching various personal finance topics. I also ended up opening a Roth IRA account and bought a few stocks, but have been taking a much more conservative approach than some of the other people I’ve been reading about have taken.

One of the most useful articles I read last year is an article on Seeking Alpha called How To Retire With $1.5 Million Starting At 40. If you you haven’t already read it I would argue it is worth your time, and I ended up using a lot of the information in it to put together my own plan to go from not having any money in any retirement accounts to having over a million dollars to retire with by the time I’m in my 60s. I’m currently in my early 40s, so while I probably should have started saving for retirement earlier, I am confident that I’ll be able to get to where I want to be financially by the time I am considering retirement. Once I manage to accumulate at least a million dollars, the plan is to generate $60-$100k in retirement income annually without reducing my principal. This is in contrast to most typical 401k based retirement plans where people build up as much possible into a 401k and then start taking money out of it when they retire. With my plan the idea is to focus on growth at first, and then switch to investments that are less risky and don’t typically see as much growth, but pay out higher dividend payments on a regular basis. Since it is important to diversify and not have all of your eggs in one basket, I’m going to utilize several different sources (which the Seeking Alpha article refers to as buckets) to accumulate wealth.

The Seeking Alpha article recommends a dividend growth bucket, 401k bucket, and high growth bucket. My approach is going to be similar, and I am planning on investing in all of these, however I’d also like to eventually invest in crowdfunded real estate. Municipal bonds also seem appealing to me since there are tax advantages with them and there is less risk associated with them, however with interest rates as low as they are right now I’m currently going to be focusing elsewhere.

For the 401k bucket I’ll be taking advantage of my employer’s 401k match. If you don’t have an employer that does this, it may be time to consider looking for one that does. I say this because I’ve worked for several companies throughout my career, and have found that the good ones typically offer some sort of match. If you are working for an employer that offers a match you should be putting at least as much as the full match amount into your 401k at work. If you aren’t doing this you are leaving free money on the table.

I ended up opening a Roth IRA account with E-Trade for my Roth IRA bucket. This bucket will cover both the dividend growth bucket and the high growth bucket from the Seeking Alpha article. I also opened an individual brokerage account with E-Trade, and will use this for municipal bonds and other miscellaneous investments that I’d rather not put in my Roth IRA.

Finally there’s the crowdfunded real estate bucket. In my opinion real estate is a great alternative to the stock market since it can be less volatile and more reliable during bear markets. As of now I’ve reviewed several different options and really like Realty Mogul, however it may be a while until I begin investing in that bucket and I may end up finding another platform that I like better.

My next posts will cover each of these buckets in greater detail.