Support NeoGAF

[Pimplitosaurio]

'
What kind of savings is this? Does she also contribute to a retirement account? Are you in the US?

The only problem with those is that in the event of an emergency you can't actually access them. Eg you get fired, the money still has to stay there since your wife can't take the money out.

Honestly, seems weird and not something I've ever heard of. I am also assuming this is coming with a (high) cost, so you are just better opening your own accounts.

Basically an emergency fund is 3-6 months of cash that you can access at any time. You take your monthly expenses and x it by a number between 3-6. You should be able to get that money at any time.

Now I put my emergency fund into a few different accounts. Some of it is in an offset account for my mortgage (Australia only account) and the other is in Stocks. In the event something was to happen I could access either of those accounts and get the cash in less then a week. Because really there isn't many scenarios where you would need a large sum of money right away. Plus I have a cc anyways.

So those three "savings funds" don't give you that ability to get that money whenever you please. Unless I am reading it wrong, maybe #1 does.

Thanks Darren for the answer, we are aiming for at least 3 months of income as our emergency fund, we have almost a month of income saved(this should cover a month and a little more of expenses)

-We don't have credit card debt, the CC debt is paid every month without fail.
-We are in Mexico, she contributes a part to her retirement account(known here as "afore") I don't because I'm currently employeed in a diferent scheme so I don't put money in my afore. Hopefully this month this will change and I will get contributions again
-Since we don't have ready access to the money of those savings of my wife, we pretend those don't exist, so when we think of how much we have we ignore those

Hope all explains a little more of our situation, it seems that the afore works a little different than the retirement accounts in the US, I think I will make a different post asking some advice about it later

 

[RuGalz]

Anyone wants to discuss how much you think you may need to retire (normally or early)? I'm looking all over the places and most of the calculations seem low to me. It might have something to do with the fact that I live in SF Bay Area where numbers don't match with national average...

For one, I feel the medical cost will be much higher by the time I retire normally (a bit less than 30 yrs). Also we probably won't have kids so eventually we probably will need to be in nursing homes. (Even with kids, it probably just reduces the length of stay by a few years I'm guessing.) Nursing home is quite expensive! We live in a high cost area; while we do our best to put 20-30% of our salary into savings and retirement, I still feel a bit uneasy. Most likely, we'll move to cheaper area for retirement but I can't be sure that's enough.

 

[TangoAlphaLima]

Anyone wants to discuss how much you think you may need to retire (normally or early)? I'm looking all over the places and most of the calculations seem low to me. It might have something to do with the fact that I live in SF Bay Area where numbers don't match with national average...

For one, I feel the medical cost will be much higher by the time I retire normally (a bit less than 30 yrs). Also we probably won't have kids so eventually we probably will need to be in nursing homes. (Even with kids, it probably just reduces the length of stay by a few years I'm guessing.) Nursing home is quite expensive! We live in a high cost area; while we do our best to put 20-30% of our salary into savings and retirement, I still feel a bit uneasy. Most likely, we'll move to cheaper area for retirement but I can't be sure that's enough.

So long as you aren't planning to retire in 10 or 15 years, and you put those savings in tax-advantaged (i.e. 401k/Traditional IRA or Roth IRA) good growth stock mutual funds, you'll be doing just fine.

Regardless, given the rapidly increasing cost of living in the SF Bay Area, it may still be best to plan to retire in a different location, even if you are sitting on huge retirement savings.

 

[PflargBlarg]

Anyone wants to discuss how much you think you may need to retire (normally or early)? I'm looking all over the places and most of the calculations seem low to me. It might have something to do with the fact that I live in SF Bay Area where numbers don't match with national average...

For one, I feel the medical cost will be much higher by the time I retire normally (a bit less than 30 yrs). Also we probably won't have kids so eventually we probably will need to be in nursing homes. (Even with kids, it probably just reduces the length of stay by a few years I'm guessing.) Nursing home is quite expensive! We live in a high cost area; while we do our best to put 20-30% of our salary into savings and retirement, I still feel a bit uneasy. Most likely, we'll move to cheaper area for retirement but I can't be sure that's enough.

I suppose it depends on where you move to, but I wouldn't want to retire with any less than 1.2 million or so. I'm currently in Vancouver which is fairly expensive (although not SF Bay expensive). Personally, I want to aim significantly higher than 1.2 million, as anything additional means I can retire earlier.

I'd also like to point out that you'll save far more money by not having kids than what you'll spend on a nursing home!

 

[simplayer]

In a roundabout way maybe they are investing, by propping up the price of AAPL. Then they'll be bailed out when mom and dad pass on their inheritance with massive gains from said stock.

An iPhone for every millennial, for their future, for the country's future

 

[Ettie]

This thread seems to be full of folks who know things about money, maybe you guys can help me see the right decision here?

In the not too distant future, I'm considering trying to get a job at the local university. If this happens, my retirement options will be different from what I have now. I'm trying to figure out if one career path is unequivocally better than the other with regard to retirement. I have about 30-35 years left in the workforce.

Current Job: Salary=~50k, future earnings could go to 75k over the next 15 years. They offer a simple 401k plan with a 5% match. I do not currently participate in the plan.

Potential New Job: Salary=~35k, future earnings could go to 50k in 15yrs, 60 in 25yrs. The retirement plan there includes this, a 401(a) Defined Contribution Plan (DCP). In this plan, employer contributes 8% of your base pay over $9,000. You do not contribute. You direct the investment of your account. The amount you receive at retirement depends on how much has accumulated in your account over the years you have participated in the plan. and this, a defined benefit plan. You will contribute mandatory contributions of 7% of your Total Compensation. employer contributes 8.55% of your Total Compensation. Plan is a defined benefit so you earn retirement benefits based on a formula, for which the formula is this: Years of service credit x 2% x average Total Compensation for your five highest-paid years = your retirement benefit. I would have 33 years of service by the time I retired.


Is there a clearly better decision here?

 

[MushroomSamba]

Is there a clearly better decision here?

Do you really intend to retire at either institution? I think the likelihood of having that one job for the next 33 years of your life is probably not very high...

I'd personally go with the first option. I obviously don't know your life situation, but I'd be hard pressed to turn down 50k over 35k. That's a fairly big difference at that stage. And besides, 5% of $50k is still better than 8% of $35k (after $9k base).

 

[Ettie]

Do you really intend to retire at either institution? I think the likelihood of having that one job for the next 33 years of your life is probably not very high...

I'd personally go with the first option. I obviously don't know your life situation, but I'd be hard pressed to turn down 50k over 35k. That's a fairly big difference at that stage. And besides, 5% of $50k is still better than 8% of $35k (after $9k base).

If I move to the Uni the chances are extremely high I would retire there barring a sweet sweet deal somewhere else. The part I'm struggling to get the math on is, will the defined benefit/guaranteed return + the 8% over $9,000, equal more money in the long run than 5% of 50k plus raises?

 

[RuGalz]

So long as you aren't planning to retire in 10 or 15 years, and you put those savings in tax-advantaged (i.e. 401k/Traditional IRA or Roth IRA) good growth stock mutual funds, you'll be doing just fine.

Regardless, given the rapidly increasing cost of living in the SF Bay Area, it may still be best to plan to retire in a different location, even if you are sitting on huge retirement savings.

Yea I pretty much max 401k and IRA every year now. I wish I learned this stuff sooner. If I had done everything I'm doing now sooner, I think my overall asset could be much higher now and far less stressful.

I suppose it depends on where you move to, but I wouldn't want to retire with any less than 1.2 million or so. I'm currently in Vancouver which is fairly expensive (although not SF Bay expensive). Personally, I want to aim significantly higher than 1.2 million, as anything additional means I can retire earlier.

I'd also like to point out that you'll save far more money by not having kids than what you'll spend on a nursing home!

Is that 1.2m for yourself or both of you, assuming you are married? How many years in retirement do you use for your calculation? I sort of fear that we may either live too long or will have some serious health issues later on that will cost a lot of money. I feel if we keep doing what we are currently doing we will be able to retire. But I don't know if we will be able to handle big surprises.

 

[numble]

If I move to the Uni the chances are extremely high I would retire there barring a sweet sweet deal somewhere else. The part I'm struggling to get the math on is, will the defined benefit/guaranteed return + the 8% over $9,000, equal more money in the long run than 5% of 50k plus raises?

With the 7% mandatory contribution, you are foregoing a minimum of a quarter million dollars in compensation over the first 15 years, much more if you get $75k. You probably want to figure in inflation to figure out if the amount you're going to get at retirement from the defined benefit plan is worth it.

 

[PflargBlarg]

Yea I pretty much max 401k and IRA every year now. I wish I learned this stuff sooner. If I had done everything I'm doing now sooner, I think my overall asset could be much higher now and far less stressful.



Is that 1.2m for yourself or both of you, assuming you are married? How many years in retirement do you use for your calculation? I sort of fear that we may either live too long or will have some serious health issues later on that will cost a lot of money. I feel if we keep doing what we are currently doing we will be able to retire. But I don't know if we will be able to handle big surprises.

It's just for me and I'm assuming 20 years of retirement of 65-85. My wife works for the government and will get a pension so she's pretty well sorted for retirement as she'll also have some retirement savings beyond that.
I'm aiming this high as I'd like to keep a similar lifestyle to what I have now and accounting for inflation over my life, I think it's a fairly reasonable yearly amount of money. I'd rather aim too high than too low right? And in case I live longer than expected I'll have enough to stretch it.

 

[tmdorsey]

Just did a quarterly review and fine tuning of my 401K account. In reviewing my account I found that on the stock side I was only in large and mid caps funds. I had 34% in an mid-cap equity fund with an expense ratio of 1.4. I decided to get completely out of that fund and put that 34% into 3 other funds. 50% in a mid cap index fund that has .18 ratio, 30% in a small cap index fund with a .19 ratio and 20% in a REIT fund with a 1.46 ratio but I'm basically gambling a bit with that.

Gonna roll with this setup for a couple of quarters and see how I make out.

 

[RuGalz]

It's just for me and I'm assuming 20 years of retirement of 65-85. My wife works for the government and will get a pension so she's pretty well sorted for retirement as she'll also have some retirement savings beyond that.
I'm aiming this high as I'd like to keep a similar lifestyle to what I have now and accounting for inflation over my life, I think it's a fairly reasonable yearly amount of money. I'd rather aim too high than too low right? And in case I live longer than expected I'll have enough to stretch it.

Ah, I'm calculating based on 30 yrs. If at similar 60k/yr that's 1.8m. Whatever extra my wife has will cover surprises and other things. Nursing home should grow to about 60k/year or more in CA by the time I need it I think. Some states where I'd move to are a bit cheaper but still not in-the-boonies kind of cheap. So yea I'm freaking out a little wondering how much do we really need to be comfortable and what if we don't make it. Most likely, we will be fine but I don't know how to be sure about it if that makes sense.

 

[simplayer]

Ah, I'm calculating based on 30 yrs. If at similar 60k/yr that's 1.8m. Whatever extra my wife has will cover surprises and other things. Nursing home should grow to about 60k/year or more in CA by the time I need it I think. Some states where I'd move to are a bit cheaper but still not in-the-boonies kind of cheap. So yea I'm freaking out a little wondering how much do we really need to be comfortable and what if we don't make it. Most likely, we will be fine but I don't know how to be sure about it if that makes sense.

Your investment can still grow in retirement. You shouldn't expect 0 growth there

 

[RuGalz]

Your investment can still grow in retirement. You shouldn't expect 0 growth there

Probably closer to just keeping up with inflation at that point I imagine.

 

[shindoku21]

Can I contribute to a Roth IRA for the 2014 tax season despite not working in 2014? I started my first job the first week of January and did not work last year. I'm thinking about opening a Roth IRA with Vanguard and putting 1k into a target retirement fund. I'm still working on an emergency fund and I have 12k in student loans, but I keep hearing it's best to start early... It'd be my contribution for the year until I finish saving for my emergency fund and save up for a maximum investment.

 

[Piecake]

Can I contribute to a Roth IRA for the 2014 tax season despite not working in 2014? I started my first job the first week of January and did not work last year. I'm thinking about opening a Roth IRA with Vanguard and putting 1k into a target retirement fund. I'm still working on an emergency fund and I have 12k in student loans, but I keep hearing it's best to start early... It'd be my contribution for the year until I finish saving for my emergency fund and save up for a maximum investment.

No, an ira needs to be funded by earned income earned in that year.

 

[Darkatomz]

So I apparently over-contributed to my Roth IRA for the 2014 year. I know about the backdoor Traditional to Roth method, but does anyone happen to know if I can transfer shares from a Roth IRA to a Traditional IRA... and then back to a Roth IRA? I would need to make this change today obviously.

 

[Randolph Freelander]

So I apparently over-contributed to my Roth IRA for the 2014 year. I know about the backdoor Traditional to Roth method, but does anyone happen to know if I can transfer shares from a Roth IRA to a Traditional IRA... and then back to a Roth IRA? I would need to make this change today obviously.

Define "over-contributed." Did you go over the $5500 maximum? If so, you'll need to withdraw the excess, as the cap applies to traditional, Roth, or any combination thereof. Or is it a case where your Roth eligibility was in the phase out stage based on your income? If so, you might be able to move the excess (up to the aforementioned combined total of $5500) to a traditional account, and then think about converting that back to Roth. In either case, you'll want to contact your broker and sort out the details with them.

 

[Darkatomz]

It's the latter, thanks RF.

 

[SummitAve]

Should I prioritize maxing out my 457(b) over a Roth IRA? Is my understanding correct that there are no penalties for early withdrawal which a Roth would?

 

[GhaleonEB]

Should I prioritize maxing out my 457(b) over a Roth IRA? Is my understanding correct that there are no penalties for early withdrawal which a Roth would?

Everything I know about 457(b) I learned by just reading this Wikipedia article. Two things stand out:

For the most part the plan operates similarly to a 401(k) or 403(b) plan most people are familiar with in the US. The key difference is that unlike with a 401(k) plan, there is no 10% penalty for withdrawal before the age of 59½ (although the withdrawal is subject to ordinary income taxation).

With Roths, you can make withdrawals against the principal without penalty, but it seems you can withdraw the full amount without penalty on the 457 plan.

This also jumped out:

Participants in government-sponsored section 457(b) plans may be given the opportunity to treat elective deferrals as Roth contributions.

That might be worth looking into, depending on your income level.

 

[Cyan]

It's the latter, thanks RF.

I had the same problem a year or two ago. If you do it in a hurry (like, literally today), you can pull the excess cash out of the Roth and not have it count as a withdrawal or be penalized. Though there is a little bit of trickiness with how you report it on your tax return, so you'll probably want to file for an extension.

Edit:
It's possible that filing for an extension would also extend the deadline for fixing your excess contribution, but don't quote me on that.

 

[NoMoreTrolls]

Alright, fellow GAFfers, I survived a round of layoffs and no longer need as much contingency cash on hand. I'm looking to invest anywhere from $7,000 to $10,000. I've heard a lot about robo advisors like Wealthfront and Betterment, and even Charles Schwab's Intelligent Advisor. These have fairly low fees (.25% annually) in the case of WF and BM, while CS has (supposedly) no fees.

As for CS's lack of fees: apparently the tool requires that between 6 to 12 percent of your assets be allocated to cash, which is how I believe they make their money on the tool. This "free" tool effectively leaves up to a tenth of your money at a static value, to "minimize risk," they say. This is money that I'm sure Schwab uses for loans, effectively making money off of you that way. Essentially (and please let me know if I'm just being paranoid), if the market grows by 8 percent and 10 percent of your allocation is to cash, you've effectively paid a "fee" of .8% in the form of unrealized gains. Wouldn't that make this the "most expensive" option among robo advisors? Or am I just being cynical?

I'm not confident in my own ability to invest wisely, and I cannot afford a financial advisor, so algorithm based investing sounded like a viable alternative for me. Does investor GAF have another suggestion, or a recommendation among the different available alternatives?

 

[killertofu]

I'm filing my taxes (I know, super late) and I'm at a part where TurboTax is saying that opening a tax deductible IRA could deduct up to 5,500$ on my taxes

Right now I owe about 2,500$ (was freelancing for a bit but struggling)

Can someone further explain how that can get me a tax break and what I could do?

 

[Walter White Walker]

Alright, fellow GAFfers, I survived a round of layoffs and no longer need as much contingency cash on hand. I'm looking to invest anywhere from $7,000 to $10,000. I've heard a lot about robo advisors like Wealthfront and Betterment, and even Charles Schwab's Intelligent Advisor. These have fairly low fees (.25% annually) in the case of WF and BM, while CS has (supposedly) no fees.

As for CS's lack of fees: apparently the tool requires that between 6 to 12 percent of your assets be allocated to cash, which is how I believe they make their money on the tool. This "free" tool effectively leaves up to a tenth of your money at a static value, to "minimize risk," they say. This is money that I'm sure Schwab uses for loans, effectively making money off of you that way. Essentially (and please let me know if I'm just being paranoid), if the market grows by 8 percent and 10 percent of your allocation is to cash, you've effectively paid a "fee" of .8% in the form of unrealized gains. Wouldn't that make this the "most expensive" option among robo advisors? Or am I just being cynical?

I'm not confident in my own ability to invest wisely, and I cannot afford a financial advisor, so algorithm based investing sounded like a viable alternative for me. Does investor GAF have another suggestion, or a recommendation among the different available alternatives?

I have Schwab accounts and looked at their robo adviser. Like you said, they keep a good percentage in cash, and no doubt that's how they're going to make money off this. I don't see how that's good for me at all, especially when they only currently pay .01% interest (I get 1.05% on cash in my checking account at my credit union so that's where I have cash).

Personally I converted to being a do-it-yourselfer awhile ago, but at least a robo adviser charges a lot less than what a human does. If I were to go with a robo adviser I don't think I'd pick Schwab's because of that cash requirement.

 

[Piecake]

I'm filing my taxes (I know, super late) and I'm at a part where TurboTax is saying that opening a tax deductible IRA could deduct up to 5,500$ on my taxes

Right now I owe about 2,500$ (was freelancing for a bit but struggling)

Can someone further explain how that can get me a tax break and what I could do?

if you contribute 5500 to a traditional IRA then your Adjusted gross income will drop by that amount.

No idea if that will wipe out your 2.5k what you owe, but it will certainly reduce it. You can likely just play around with it as well, put in the 5.5k to a trad IRA on turbo tax and see if is worth it to you.

 

[RumblingRosco]

-

 

[Walter White Walker]

Schwab does have target date funds but they charge too much imho - .75% on the Target 2035 fund for instance. Vanguard's Target 2035 is .18% so sure looks like a lot better.

 

[Walter White Walker]

Also, is that 0.25% fee in addition to any fund fees?\

Those robo fees are on top of the fund fees. I'm not really sure how using a robo is any better than, if you're wanting to be hands off, just sticking it in a Vanguard target fund, accomplishing the same thing, and saving on fees.

 

[killertofu]

if you contribute 5500 to a traditional IRA then your Adjusted gross income will drop by that amount.

No idea if that will wipe out your 2.5k what you owe, but it will certainly reduce it. You can likely just play around with it as well, put in the 5.5k to a trad IRA on turbo tax and see if is worth it to you.

With deductions and gas credit I only had to put in 1000 into a Roth to wipe the rest of the balance.

I was planning on opening up something soon. 2014 was pretty rough starting out as a freelance person out of college, was completely broke. I got hired at a place near the end of the year and told myself when I had 10,000 in my bank account I would open up something. I'm a couple grand from my goal but I guess its time to start reading this thread.

 

[RumblingRosco]

-

 

[Piecake]

With deductions and gas credit I only had to put in 1000 into a Roth to wipe the rest of the balance.

I was planning on opening up something soon. 2014 was pretty rough starting out as a freelance person out of college, was completely broke. I got hired at a place near the end of the year and told myself when I had 10,000 in my bank account I would open up something. I'm a couple grand from my goal but I guess its time to start reading this thread.

A Roth can't do that. Only a traditional IRA can. For a Roth, you get taxed now, but can take money out tax free. For a traditional, you avoid tax now, but pay it later. That is why the traditional IRA lowers your AGI score since that is how you 'avoid' the tax.

 

[Makai]

A Roth can't do that. Only a traditional IRA can. For a Roth, you get taxed now, but can take money out tax free. For a traditional, you avoid tax now, but pay it later. That is why the traditional IRA lowers your AGI score since that is how you 'avoid' the tax.

Savers Credit can be used for Roth. Saved me $1000 on taxes

 

[NoMoreTrolls]

Thanks for the help guys. my 401k is through Vanguard in a target retirement fund, so I may do the same with a taxable account. Also, I did some more digging on the robo advisors, and that fee is indeed in addition to the fund fee.

Thanks again guys.

 

[Walter White Walker]

Thanks for the help guys. my 401k is through Vanguard in a target retirement fund, so I may do the same with a taxable account. Also, I did some more digging on the robo advisors, and that fee is indeed in addition to the fund fee.

Thanks again guys.

If you just have the 401k you'd be better off starting an IRA (traditional or Roth) rather than jumping to a taxable account. You can set up an IRA at Vanguard.

 

[Darkatomz]

I had the same problem a year or two ago. If you do it in a hurry (like, literally today), you can pull the excess cash out of the Roth and not have it count as a withdrawal or be penalized. Though there is a little bit of trickiness with how you report it on your tax return, so you'll probably want to file for an extension.

Edit:
It's possible that filing for an extension would also extend the deadline for fixing your excess contribution, but don't quote me on that.

Checking with a Fidelity adviser earlier today, it is true that an extension also spares me some time on re-characterizing my contributions. I won't be able to do anything for a couple of business days until it processes, but then I'll dump it right back into the Roth once it's cleared.

 

[Sydle]

Need some advice, fellas.

I think the essentials are covered:

• 6 months of living expenses saved
• 401k allocation on track to max out
• Roth IRA maxed out

I have about $1.5K a month left over each month to start putting towards goals. My main interest is saving for a house over the next 2-3 years, but I'm not sure where to put the money.

Should I put that into my bank account with a 0.75% APY or do I invest it into a Vanguard mutual fund that I can draw from when ready? I know it can work harder with Vanguard, but the risk scares me a bit. What would you do?

 

[Piecake]

Need some advice, fellas.

I think the essentials are covered:

• 6 months of living expenses saved
• 401k allocation on track to max out
• Roth IRA maxed out

I have about $1.5K a month left over each month to start putting towards goals. My main interest is saving for a house over the next 2-3 years, but I'm not sure where to put the money.

Should I put that into my bank account with a 0.75% APY or do I invest it into a Vanguard mutual fund that I can draw from when ready? I know it can work harder with Vanguard, but the risk scares me a bit. What would you do?

I think if you are willing to be flexible and either need or want to take the chance to earn more money than short term index investing can work. You simply need to be prepared to stick a year or 3 onto that 2-3 year period if the market is shit then.

If that is something you aren't willing to do, then purchasing a CD is probably your best bet.

 

[Sydle]

I think if you are willing to be flexible and either need or want to take the chance to earn more money than short term index investing can work. You simply need to be prepared to stick a year or 3 onto that 2-3 year period if the market is shit then.

If that is something you aren't willing to do, then purchasing a CD is probably your best bet.

Perfect. Thank you for the quick reply. : )

 

[NoMoreTrolls]

If you just have the 401k you'd be better off starting an IRA (traditional or Roth) rather than jumping to a taxable account. You can set up an IRA at Vanguard.

Already maxed it out, but thanks!

 

[reggieandTFE]

Hey all. My wife and I just paid off some massive credit card debt and we're ready to start some retirement savings and college savings for our incoming kid.

I've got $700 a month to put away right now; it will be up to $1200 by the end of the year when the kid comes.

I was thinking of starting a Roth IRA in my name where I attempt to invest more aggressively, one in hers where I simply invest in one of those Vanguard target funds and then putting the remainder in a 529 in November after the due date. We're both 32. Does that seem sensible?

 

[numble]

With deductions and gas credit I only had to put in 1000 into a Roth to wipe the rest of the balance.

I was planning on opening up something soon. 2014 was pretty rough starting out as a freelance person out of college, was completely broke. I got hired at a place near the end of the year and told myself when I had 10,000 in my bank account I would open up something. I'm a couple grand from my goal but I guess its time to start reading this thread.

Opening a Roth will not effect your current taxes. You cannot deduct the Roth contribution. Unless you use the Saver's credit, but if you had a $2200 tax liability I'm a bit doubtful you'd qualify for it.

 

[Randolph Freelander]

Hey all. My wife and I just paid off some massive credit card debt and we're ready to start some retirement savings and college savings for our incoming kid.

I've got $700 a month to put away right now; it will be up to $1200 by the end of the year when the kid comes.

I was thinking of starting a Roth IRA in my name where I attempt to invest more aggressively, one in hers where I simply invest in one of those Vanguard target funds and then putting the remainder in a 529 in November after the due date. We're both 32. Does that seem sensible?

Do either of you have access to a 401K (or equivalent) employer plan that has an accompanying company match? If so, at minimum, start with securing the full company match that you are eligible for by contributing however many dollars necessary to get it. Then start thinking about whether you want to continue contributing to that plan (up to the legal limit) or putting funds into an IRA. The prioritization strategy often recommended here is

1. 401K up to full employer match
2. (Roth) IRA up to legal limit
3. 401K up to full legal limit

I favor a different prioritization if your income is high enough to put your top marginal rate into the 25 or 28+ percent brackets, which would prioritize a pre-tax 401K over a Roth, with the thought that avoiding high taxes now is better than avoiding lower taxes later, but that's up to you and your tax situation and your expectation of your retirement income and what future Congresses might do with marginal rates.

 

[TangoAlphaLima]

Hey all. My wife and I just paid off some massive credit card debt and we're ready to start some retirement savings and college savings for our incoming kid.

I've got $700 a month to put away right now; it will be up to $1200 by the end of the year when the kid comes.

I was thinking of starting a Roth IRA in my name where I attempt to invest more aggressively, one in hers where I simply invest in one of those Vanguard target funds and then putting the remainder in a 529 in November after the due date. We're both 32. Does that seem sensible?

Do you have an emergency fund set up? Liquid assets of 3 to 6 months of expenses (per Dave Ramsey's advice) or 8 months of expenses (per Suze Orman's advice)? If not, I'd do that first before investing anything. You've got a kid on the way, you want to make sure you have ample emergency funds if you run into any problems.

 

[killertofu]

Opening a Roth will not effect your current taxes. You cannot deduct the Roth contribution. Unless you use the Saver's credit, but if you had a $2200 tax liability I'm a bit doubtful you'd qualify for it.

A Roth can't do that. Only a traditional IRA can. For a Roth, you get taxed now, but can take money out tax free. For a traditional, you avoid tax now, but pay it later. That is why the traditional IRA lowers your AGI score since that is how you 'avoid' the tax.

Shit, I think I just opened up a TD Ameritrade account but didn't actually get the IRA in...

Am I fucked?

 

[Piecake]

Shit, I think I just opened up a TD Ameritrade account but didn't actually get the IRA in...

Am I fucked?

I think you are pretty screwed on getting traditional IRA contributions in for 2014. I think your only real option is filing an amended tax return and pay the 2.2k

 

[killertofu]

I think you are pretty screwed on getting traditional IRA contributions in for 2014. I think your only real option is filing an amended tax return and pay the 2.2k

Weeeell fuck.

 

[reggieandTFE]

Do you have an emergency fund set up? Liquid assets of 3 to 6 months of expenses (per Dave Ramsey's advice) or 8 months of expenses (per Suze Orman's advice)? If not, I'd do that first before investing anything. You've got a kid on the way, you want to make sure you have ample emergency funds if you run into any problems.

Yeah, I've got 15k pocketed away and we could sell our condo out at 100k profit if we both lost our gigs or were disabled somehow.

 

[reggieandTFE]

Do either of you have access to a 401K (or equivalent) employer plan that has an accompanying company match? If so, at minimum, start with securing the full company match that you are eligible for by contributing however many dollars necessary to get it. Then start thinking about whether you want to continue contributing to that plan (up to the legal limit) or putting funds into an IRA. The prioritization strategy often recommended here is

1. 401K up to full employer match
2. (Roth) IRA up to legal limit
3. 401K up to full legal limit

I favor a different prioritization if your income is high enough to put your top marginal rate into the 25 or 28+ percent brackets, which would prioritize a pre-tax 401K over a Roth, with the thought that avoiding high taxes now is better than avoiding lower taxes later, but that's up to you and your tax situation and your expectation of your retirement income and what future Congresses might do with marginal rates.

We both have traditional pensions. My Employer offers a 401(k) but there's no match.