Post # 1
There isn’t a money boards on the Not Wedding Related area, and this is sort of “going into a new marriage” related anyway, right? 😀
Short question: I have already contributed a very good amount to my retirement in 2012. I could contribute about 25% more if I fund my Roth IRA, which I do have separate savings set aside for. But part of me feels like that is sacrificing some other goals to overfund retirement. Thoughts?
I have $5000 set aside in savings to possibly fund my Roth IRA for 2012, if I decide to. However, in 2012, I maxed out my 401k ($17,000 + company match), which was a healthy % of my total income – more than “the experts” tell you to put into retirement. So I’m doing well on retirement (not to brag, just to give context), as is Fiance.
I’m debating if I should put that money into my Roth. Part of me wants to because you can never get that time/contribution year back. An over-funded retirement is a good thing.
On the other hand, Fiance and I want to start saving aggressively for a house once we get married, and that would be a nice little starter amount for that fund. My other thought in my head is that my company actually others a Roth 401k, and if I wanted to be contributing more to retirement than I already am, I probably should be switching over to that and upping my contributions, which I’m not doing. An over-funded retirement can slow you down on other financial goals. I worry that I’m kind of “over the top” on how much I put into retirement (I have a HUGE emotional need for financial security), and it might be sacrificing some of my desires.
What would you do?
Post # 3
I would not do the Roth if you are saving for a downpayment.
Post # 4
Keep it in savings. If you are looking at buying a house, and are already overfunded on your 401(k), then for tax reasons, you really won’t get the benefit of tranferring to Roth IRA.
Post # 5
Is your Roth self directed? Are there safer high yield bonds or other investment options? If so, I would put it in Roth and try to capture some of that. With a Roth account, you can withdraw your contributions with no penalty at anytime. You just cannot withdraw your earnings until a certain age.
Post # 6
@NAvery: “I worry that I’m kind of “over the top” on how much I put into retirement.”
I am over the top with my retirement as well. Going to hit 1/2 a million this year.
If you did put it in the ROTH, do you have excess income left for saving for the house? Or are you tapped out? What does both your and FI’s excess $ look like after the ROTH contirubtions? Do you have a separate emergency fund to pull from if needed. Like pinkshoes said, you can take out your personal contributions any time without penalty.
You could divvy it into savings and the ROTH, so essentially doing both, but not in an aggressive way.
Post # 7
@sienna76: Wow, 1/2 a million, and I think you said on another post you were 35. I’m beyond impressed. I thought we were doing pretty good, with each of us at about $100K in retirement accounts (and now, post grad school, both us maxing out 401k and IRA), but apparently we have a ways to go!
OP, I had a huge debate about this myself a few years back, only in my case it was whether I should save for retirement or pay off my grad school loans faster. I opted to put more money into paying off the loans and I now regret that I didn’t start maxing out my 401K sooner (no company match, so I prioritized my Roth IRA). I would sit down and think about when you want to buy a home and approximately how much downpayment plus closing costs you need. Then work backwards to see whether you can contribute to an IRA. You have until April to decide and you also can break it up and put some to a house fund and some to IRA. While I prioritize retirement saving now, remember it’s a huge hassle to try to get at retirement money so if in doubt, don’t put it away.
Post # 8
@kay01: Thanks! I’m 36 and my H is 34. We’re not medical doctors or lawyers either. 🙂
Post # 9
@NAvery: I’m thinking about the same thing right now, and I’m planning on making that contribution to my Roth IRA. As said before, you’re allowed to take out the money you’ve put in with no penalty. You’re not allowed to take out any of the interest you’ve made, and you’re not allowed to replace any money once you’ve taken out.
But let’s say you need some extra money to use for a downpayment of the house. If you find yourself wishing you never put it in your Roth IRA, you’re free to just take it back. And perhaps you will have made some interest on it in the meantime, which is great!
If you don’t make the $5,000 contribution this year, and you’re in your late 20s, you could be walking away from an accrued $100,000 by your retirement age.
Post # 10
Since you are saving for a house I would say to skip the ROTH IRA contribution this year and put money towards that. While I am also all about over contributing to our retirement accounts I am also about securing a roof over our heads. There needs to be a balance between the two. You don’t want to be stuck paying a hefty mortgage when you retire.