Aiming High

Kristine Hayes

BACK IN 2013, I WAS recently divorced, living on my own for the first time and utterly naïve about investing. I was in my late 40s, I’d lost half of my small state pension in the divorce and I was afraid I’d be working well into my 70s if I didn’t get my financial life on track.

I set the ambitious goal of having a net worth of $500,000 by 2022, when I’ll turn 55. Now, every December, I sit down and assess my progress toward that goal.

Employer-funded retirement account: Up. Back in 2013, all the money I had in my primary retirement account was invested very conservatively. I learned I wasn’t atypical. Women tend to have a much lower tolerance for risk than men. By 2014, I felt sufficiently confident in my investing knowledge to move a large portion of the account into more aggressive mutual funds. That decision paid off handsomely in 2017. The value of my employer-funded account, into which my employer currently contributes $567 per month, jumped more than $37,000 over the past 12 months.

Income: Up. After almost 20 years in my job, my salary is still far from six figures. I did, however, receive a 3.5% raise this year, bringing my gross annual salary to just over $68,000. In addition, various freelance writing gigs added $3,000 to my income.

403(b) contributions: Up. In 2017, I contributed $17,400—roughly 26% of my salary—to my 403(b) plan. Though I’m still not close to meeting my maximum allowable contribution of $24,000, I’m pleased I was able to invest more than I did in 2016, when I channeled $16,200 into the account.

Roth IRA earnings: Up. Until recently, my Roth IRA was invested in a fairly aggressive growth fund. I’ve never had the money earmarked for any particular use, so I just let it be. In October, I moved it to a less risky fund, since I decided I might use the money for a house down payment in a few years. My Roth account grew by just over $5,000 in the last year.

Roth IRA contributions: Down. Having seen a decade ago how the Great Recession depleted my retirement account, I know how quickly and dramatically the stock market can drop. Seeking a way to balance my fear of losing money with the confidence to invest more aggressively, I came up with a solution: I decided to take an opportunistic view of stock market declines, seeing them as a temporary “sale.”

During 2016’s brief Brexit downturn, I stashed $4,000 in my Roth and then happily watched my investment begin to grow just days later. This year offered far fewer periods of stock market downtime, so I’ve only invested $3,500 in my Roth so far.

Rent: Up. My rent increased $50 per month in 2017. After years of large rate increases, the rental market in Portland seems to be leveling out. Vacancy rates are beginning to rise, so I’m hopeful future rent increases will eat up less of my income.

Taxes: Stable. Stashing a large percentage of my pretax income in retirement accounts allows me to keep my taxes at a reasonable level. My effective tax rate for 2017 should be the same, or close to, the 11% rate I paid in 2016.

Net worth: Up. Since I’m no longer a homeowner, my net worth is made up entirely of the cash, investments and retirement accounts I hold. Heading into 2018, my current net worth sits at approximately $389,000. That figure puts me in the 81st percentile for net worth in my age group—and far closer to $500,000 than I thought possible when I set that goal just four years ago.

Kristine Hayes is a departmental manager at a small, liberal arts college in Portland, Oregon. Her previous articles include Hidden Gems, Keeping It Private and So Rewarding.

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