Benefits Of An Investment Portfolio Essay

1423 Words Apr 26th, 2016 6 Pages
Problem
I am 25, and I look to retire at 65. I have $200,000 already nestled into a Roth IRA (so taxes are not a necessary consideration upon withdrawal); and I need to find the optimal way to build an investment portfolio in order to achieve my goal of retirement. My job’s income is slightly above average at $80,000 per year, and is not completely used to sustain my day-to-day living until retirement, so extra savings will be an accommodation. I am only allowed to contribute $5,500 a year to the Roth IRA, but that will compound with the money that is already invested for an exponential increase. With just contributed money, that will lead to an extra $220,000 available for reinvestment and gains of that kind. Moreover, the Social Security benefits that I will receive based on my retirement at 65 with an estimated average life income of $80,000 will cap at $2,056 a month or $24,672 a year , so much of my expected income for retirement years will have to come from the dividends of the stocks and the coupon rate (interest until maturity) of the bonds in my Roth IRA.

How Much Income?
When looking to retire, the first question a person must ask is: How much money do I need to live out the rest of my life comfortably? Most websites and financial planners, including Vanguard retirement plans , suggest that you have 75% to 85% of your pre-retirement income available each year of your retirement. For this plan, I’m going to allow for 85%, taking into consideration broad travel…

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