What if... to goal question

[MoneyTrev]

What if I saved 30,000/year and my ultimate goal is 1.8 million. Assume the age is around the age that just graduated university with a bachelors. ~ 22 How would I get to the ultimate goal with means of investing, saving and etc.?

How would you try and accomplish the goal?

[faithman1012005@yahoo.com]

I would definately diversify your investment. If it were me I would take a percentage of that 30,000 a year and invest in tax liens. Last I checked Texas was paying up to 50% ROI or if the home owner doesn't pay their taxes you get the property! Of course you need to do a little research before investing in a tax lein but you can see how this could be a win win for investors!

[kork13]

if you consistently have 30k/year to save, it wouldn't be overly difficult at all. $30k/yr at a rate even just 1% above inflation, you'll meet $1.8M in 45 years, right as you're probably looking to retire. That scenario would be sticking it in a high-yield savings account, or some other sort of safe savings vehicle. Do it with investments, average 5% above inflation, you get to $1.8M in 30 years.

If you can be consistent about that $30k/yr, you're in a very good place. Figure out an asset allocation that you're comfortable with, set it in motion, and stick with it. At the same time, put part of that money in a high-yield savings account of some sort, and you'll be growing your money safely but solidly, and you'll be able to hit your goals without a problem.

[disneysteve]

You should end up with far more than $1.8 million.

$30,000/year is $2,500/month.
$2,500/month invested earning 6%/year (a fairly conservative number) will grow to just over $5 million in 40 years when you will be 62. You would hit $1.8 million before you were 50. If your return was better than 6%, your total would be even higher.

[swanson719]

Be very careful looking into tax liens. While they can be very beneficial, they can also be a quicksand pit for your money. Like any other investment, you have to do your research before you get too far into it. I would first max out the Roth IRA for you, and whatever match your company gives you on a 401K, then equally distribute between large cap, mid cap, small cap, foreign, and bonds. 20% into each gives you a pretty diverse, fairly conservative portfolio. Personally, I go 35 large cap/35 foreign/25 mid cap/5 bonds, and I'm also 22. I wouldn't reccomend this for someone in their 30's, because it's a high risk, high reward, or high loss, strategy.

[MoneyTrev]

Thanks for all of your responses. What if I was looking to reach that target in about 8 years when I'm about 30/31? How would I accomplish it?

[noppenbd]

Not a realistic goal IMO. You are talking about investing $30K a year over a 9 year period, and expecting to have $1.8M? A decent return of 8% would double your money over that period, so your $270K might grow to $540K. You would need returns of 35-40% a year to reach $1.8M in 9 years. To get those returns you would have to take extreme risks with your money, which would amount to gambling. Even to get 8% you would need to take some risks.

My advice is to pick a more realistic goal and invest aggressively, assuming a return of 9-10%. Then try to save more than $30K a year. Bumping out the timeline by 5-10 years will help drastically as well. Retiring at a such a young age can be done but requires extraordinary sacrifice and probably a good dose of luck.

[MoneyTrev]

Originally Posted by noppenbd

Not a realistic goal IMO. You are talking about investing $30K a year over a 9 year period, and expecting to have $1.8M? A decent return of 8% would double your money over that period, so your $270K might grow to $540K. You would need returns of 35-40% a year to reach $1.8M in 9 years. To get those returns you would have to take extreme risks with your money, which would amount to gambling. Even to get 8% you would need to take some risks.

My advice is to pick a more realistic goal and invest aggressively, assuming a return of 9-10%. Then try to save more than $30K a year. Bumping out the timeline by 5-10 years will help drastically as well. Retiring at a such a young age can be done but requires extraordinary sacrifice and probably a good dose of luck.

I'm still working after I reach 1.8M. There would be no way to achieve 1.8 million eh?

[LivingAlmostLarge]

Save more?

[noppenbd]

Originally Posted by MoneyTrev

I'm still working after I reach 1.8M. There would be no way to achieve 1.8 million eh?

I have to ask, if you are planning to work after this, what is the purpose of the money?

The ways to reach your goal:
1) Stretch your timeline (more compounding)
2) Save more each year
3) Take on higher risk (potential higher returns with more volatility)

#3 is the most dangerous. The safe return pays about 3-4% a year. Anything above that requires taking on risk. Risk meaning there is a chance in any given year you could lose money. As you approach your goal you can afford to lose money less so you need to reduce risk. Here is a possible plan:

Invest $50K per year for 15 years. Years 1-10 invest very aggressively, tolerating big swings in your portfolio (some years may be like 2008 and you could lose 50% of your portfolio). You might be able to get returns of 12% on average if you could stomach the volatility. Years 11-15 invest more conservatively but with some growth, earning 8% average. That gets you to $1.7 million, give or take.

[watsoninc]

Originally Posted by LivingAlmostLarge

Save more?

I'm with LAL. If you can save/invest more, you will reach your goal faster. It is a very reasonable expectation that somewhere within the next 8 years you will get a raise, increase in income, or unexpected income, even if you can't do more than 30K/year right now. I am also in my 20s and am okay with a little bit of risk since I have longer to recover from a temporary dip. The fact that you still want to work after you reach your big investment goal gives you even more flexibility.

I am curious if you have to have $1.8M in cash, or could it be in real estate. Personally, I would do a split between real estate and cash/index funds. However, not everyone wants the hassle associated with real estate. Regardless, this is a great question.

[swanson719]

Real estate is a great buy in this market, though nothing says we'll see the huge upswing we did before the market crashed. Bubbles like that are great if you get out on top, but it's like the dot com boom of the 90's. There were thousands of sites that made a couple million then went bust, and now only the power players are left. Los Angeles, NYC, Chicago, Dallas, San Francisco, these places will continue to have a real estate market, but still without the huge margins.

The easiest way to turn $30K a year in $1.8M in 8 years would be to become a silent partner in housing rehabs in urban cities. There is a huge risk involved though, as the carrying price of the house lowers margins, and may result in a loss. Real estate is cheap, so buying is great, but selling is difficult.

Turning the equivalent of $240,000 into $1.8M in 8 years is unrealistic at best. It can be done, so not impossible, but you're talking about buying GM at todays price then it going back to $90 a share like the early '90s. Not happening. If you do manage it, post your story for all to see, cause we'd love to see that kind of return.

Realistically, you'll see 500 to 600K after 8 years, in a good, stable market.

[DebbieL]

Original poster is in Vancouver, BC - where real estate is most definitely NOT a great buy in this market. It is outrageously overpriced (think of the worst US bubble cities a few years ago), and is due to correct greatly. I know - I'm a short ferry ride away in Victoria, BC (where we have the same problem - low incomes and ridiculously overinflated real estate market in the past 7 years). We are a couple years behind the US in our correction, and there is a long way to go down.

[MoneyTrev]

First of all, thank you to everyone who is helping me =) Every single piece of advice is great!

Why i'm trying to earn 1.8 million in cash? Its a life's goal for me. I figured if I could earn that amount, I would reach the point in my life where I can say, "This is all I need."

I know that inflation exists and I did factor that into my calculations.

Can anyone give me some hints on very aggressive investments?

[KTP]

Please let me know if you find a way to make $30,000 a year grow to 1.8 million in 8 to 10 years!

We are trying to save $70,000 a year in hopes of retiring early in 8-10 years or so. I would love to have 3.6 million or thereabouts :-)

Still, there is good advice on here about how to achieve your goals. The big trick would be growing the 30k a year into 1.8 million and not having huge tax consequences...

[swanson719]

The best advice of all comes from the tortouise and the hare - "Slow and steady wins the race". You may be able to acheive 1.8M in 8 to 10 years with sly investments and tax breaks, but it's difficult to say the least. Most people work until they are in their mid 50's at earliest, because it's difficult to retire before then knowing the longer you live, the more likely you are to live longer. Meaning if you retire when you're 50, technology improves so fast medically, you're more likely to live to 90 than you are to die at 60. So you need enough income to live for 40 years comfortably.