Yes, absolutely. I still think Piecake's highly aggressive allocation isn't for everyone, but the OP is full of great stuff. Really this stuff doesn't exactly change over time.
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How to Invest for Retirement
- Thread starter Piecake
- Start date
Yes, absolutely. I still think Piecake's highly aggressive allocation isn't for everyone, but the OP is full of great stuff. Really this stuff doesn't exactly change over time.
Darren870
Member
I just recently got re-employed and my new employer does not have a 401k. I acutally have money in two separate 401ks already that I never transferred after I left those jobs. Should I do anything with those?
I've also been looking at alternate ways of saving money for the long run and I've been reading about Wealthfront.com and Betterment.com. Are they efficient ways for me to save money? Are they safe? I can't go two steps on the internet without seeing "They're terrible for varous complex reasons!" or "They're perfectly great for new investors with little money!"
So yeah, I'm conflicted. Anything is better than my savings account, right?And I am no financial guru so I'd rather leave managing my funds personally to someone else.
Basically what Randolph said. I would move both of those 401k into an IRA. Your fees will be lower in the long run and the process is fairly simple.
As for the Wealthfront and Betterment. Don't fall for it. Its just the modern-age savvy looking web front that sells it. You are better off saving money and putting it into a Roth IRA or even Index Funds/ETFS with vanguard. No reason to waste the money using those sites.
If you want to save more money the process is fairly simple. Budget and set up an automated withdrawal into a savings account.
What I do is take my monthly expenses and put them into two categories.
Unnecessary Expenses - Eating out, booze, travel, subscriptions
Necessary Expenses - Food, Commuting, Cloths, Health, Rent/Mortgage.
I then group them together within each category. Eg I spent $XX on food, $XX on commuting, $XX on booze, $XX on eating out, $XX on subscriptions (list each one). This way I get the full picture and not small numbers. I then multiply that by 12, to get a full years worth of what I am likely to be spending, obviously its a rough guide.
I do this because I think small numbers people brush over. "Oh its only $15 a month for Hulu, that's nothing". Now I have a full view of what I will likely be spending in the future in two categories with its sub groups. Lets say this is $2000 p/m, and I make $2500 a month. That $500 is automated to go into a savings account. After that $500 has been in there for a month then it gets moved to some sort of investment. The reason I leave it in there for a month is just in case I overspent and my CC bill is higher. I put everything on my CC as it is easier to track what I am spending money on, get points, and other things. Keep in mind I also have my emergency fund still, so really that $500 is pure savings.
From there I want to increase that $500. So I look at my foretasted yearly expenses. I see crap, I spend $150 p/y on Netflix, $150 p/y on Hulu, $1500 p/y on commuting to work, $1560 p/y on eating out lunch. Etc etc. I don't really need Hulu, so cancel that. Don't really need to eat out for lunch every day so I'll bring in food every other day. etc etc. The bigger wins are the ones where you can remove an expense from the necessary expense. For me I got rid of commuting on the tram/train and started biking to work. Saved me $1500 and get exercise (Thanks MMM). Removing an expense from the necessary group is the hardest, but its also like paying yourself.
Anyways, now that $500 is $689.50 just by doing three things, cancelling hulu, biking to work and bringing my lunch every other day. My life style hasn't changed much because I didn't even go into the eating out/booze/travel categories.
Anyways, I've probably gone on a bit of a tangent, but I find that the easiest to do. Its easier to see on a spreadsheet where its all automated, but you get the drift. Maybe I'll share that spreadsheet one day.
Thank you. Been talking to a lot of people (financial advisors, family, friends) about this stuff lately and trying to figure out where to invest saved money into. The OP was very helpful. Thanks for all the hard work.
CapitalismSucks DonkeyBalls
Banned
Looking at updating my Roth 401(k) and NC 457 and I could really use some layman's explanation on the pros and cons of before and after tax elective deferrals. Which, if any, are more beneficial long term? How does each affect my yearly taxes?
Is it recommended that I use both or just one of them? What percentage is recommended? Etc, etc.
After that, I'll need some advice on figuring out where best to invest what I'm putting in. Thanks!
Is it recommended that I use both or just one of them? What percentage is recommended? Etc, etc.
After that, I'll need some advice on figuring out where best to invest what I'm putting in. Thanks!
UpperCaseN
Member
My 401k statement is a bit wacky right now since my company changed the vendors this year, plus I made all sorts of changes to my investments like a month ago (which I got advice in this thread from, moved half from 2045 retirement plan to Index funds). It only reflects 2 months but I lost value since making these changes. I understand 2 months is nothing when we're talking about retiring 30 years from now but my question is how long should I wait before getting worried? 6 months of decline? a year? Just so I know when to reconsider my investments and move things around.
fake edit: I think I answered my own question, I guess it can vary depending on how much loss we're looking at. It's like -1% so nothing crazy
fake edit: I think I answered my own question, I guess it can vary depending on how much loss we're looking at. It's like -1% so nothing crazy
I wouldn't worry too much about that. It's been a rough past few months - nearly every fund available for my company's 401k had a loss for the quarter. The only exceptions were some international funds which had a loss for the year. Total stock market performed better than most, especially when you account for expense ratio.
Personally, I can't help looking from time to time - but don't use the quarterly or yearly returns as a basis for judging. Look at the 5yr or 10yr columns instead, and keep in mind that if you're investing continually, that's the percentage you're more likely to see in the long term. Downturns happen, but they're something to worry about when you're 5 years from retirement and not when you're 30 years from it. That's why people push investments into more reliable vehicles closer to retirement.
Keep in mind that if you sell when things have gone down, you are making a loss permanent. If you stick it out in the long term, you're more likely to see the 10 year annual growth rate, unless things go so bad that the stock market stops growing altogether - at which point your retirement will probably be the least of your worries.
(disclaimer: just effectively restating couch investment strategy as I understand it, pretty new to the investment thing myself)
The stock market is noisy from a volatility standpoint. You really have to keep the long term trajectory in mind and try to tune out the noise. We'll have down days, weeks, months and years. Even a down decade now and then. Just keep to your strategy and keep in mind the long horizon.
CapitalismSucks DonkeyBalls
Banned
So my 401K is through Prudential and I just did some slight adjusting to my portfolio and contributions. Without being too specific, I want to make sure I'm not overdoing my contributions:
Gross salary: $44,400
Pre-tax contribution: 5%
After tax: 3%
Portfolio style: Aggressive
I figured that because I'm only 25 and intend to work until I'm 70, that I can be aggressive with the market and not worry about the downswings over time. I just want to make sure I'm not inflating a value I shouldn't be, you know?
Any tips would be great!
Gross salary: $44,400
Pre-tax contribution: 5%
After tax: 3%
Portfolio style: Aggressive
I figured that because I'm only 25 and intend to work until I'm 70, that I can be aggressive with the market and not worry about the downswings over time. I just want to make sure I'm not inflating a value I shouldn't be, you know?
Any tips would be great!
Just to be clear, I assume when you say "after-tax" you mean "Roth", because it is possible to make non-Roth after-tax 401k contributions. You should not make non-Roth after-tax 401k contributions unless you have already maxed out your tax-advantaged 401k limit ($18K this year) and your IRA limit ($5.5K).
Pre-tax makes sense if:
- You have an employer match, and you are not contributing to the maximum employer match.
- You guess that your current tax rate is considerably higher than it will be when you are withdrawing money.
Roth makes sense if:
- You are maxing out your contributions.
- You guess that your current tax rate is considerably lower than it will be when you are withdrawing money.
- If you are putting the money in an IRA (not a 401k!) and you think you may need to use it as an emergency fund.
If you're not sure, just hedge your bets by splitting the money between them.
CapitalismSucks DonkeyBalls
Banned
I have a separate state employees retirement fund to which 6% of my monthly gross is contributed. I'm guessing that's not employer matching. My best bet, then, would be 5% pre-tax and nothing for after tax? At least for the present.
I wouldnt be so sure that your tax rate will be higher now than when you start withdrawing money considering that you earn 44k a year. We have no idea what the tax rate will be in 30-40 years. It could be higher. It could be lower. We just don't know.
I personally like a balance and think that after tax tax advantaged accounts are quite nice because they are a hedge against tax uncertainty. Like I said before, I have no idea what the tax rate will be in 30-40 years. I don't have to worry about that at all though if I have money in an Roth IRA
Easystride
Member
Where do you guys usually keep your emergency funds? I just purchased a house earlier this year, so I am no longer really saving for anything, just retirement (401k and Roth IRA) and daily expenses. It just needs to be somewhat accessible in the event of emergency (health and car expenses), preferably with a lower risk of losing money.
Walter White Walker
Member
I keep mine in my checking account at my Credit Union. My savings account only pays .1% interest while my checking account currently pays 1.05% if I use my debit card 12 times a month.
We have two buckets of emergency funds. The first is ~6 months of living costs we keep in cash, in our savings account. That's really for smallish household stuff that we don't expect over the course of the year.
The next is what I call our savings funds, which is held in a basket of index funds, specifically Fidelity's 4 in 1 index: 60% US stock index, 25% international stock index, and 15% US bond index. It's still an aggressive allocation, but the bonds make it less swingy than the equity market while still letting them grow. You could do something similar with a US market index and a US bond index, and pick a ratio that reflects the level of volatility you are comfortable with.
I'm not a fan of the typical emergency fund mentality. Emergencies should be rare occurrences, and I believe in the maxim of optimizing for the common case.
These are the lines of emergency defense, in order:
1. Credit cards
2. A a very small "traditional" emergency fund in a checking account - approximately one month's expenses.
3. A large pool of stock/bond holdings (at least 6 months expenses, but this should be the same pool as your non-retirement fund savings, so grow it as big as possible).
4. Some money in retirement funds that could be tapped if absolutely necessary (ideally Roth)
The theory is this: Your average joe has no savings. As a consequence, most big emergency costs - like medical bills, needing to completely replace a vehicle, or making a mistake on your taxes already have built-in mechanisms for repayment over time. More moderate expenses can be put on a credit card; the traditional cash holdings only exist for immediate liquidity to pay bills where credit is not accepted or for the chance that your credit might get temporarily frozen if you are the victim of identity theft. That gives you at least 30 days to liquidate stocks/bonds to pay the bill.
So let's say the stock market crashes and you lose your job. Now you have to sell your stocks at a low price and you are taking a big loss! I mean look at 2008, right? The Dow dropped 50%. Doesn't that mean this strategy sucks?
This comes down to the issue of optimizing for the common case. If you are getting an 8% annual return on money in the stock market compared to keeping it in cash, it will take 9 years to double your money. At that point, if the market drops 50%, you have broken even. Now 8% is a reasonable average return over a 10-year period whereas a market crash happens maybe a couple times per century. You will probably end up ahead by keeping most of the money in investments. But if stocks are really terrible, pull the money out of your IRA (or 401k if the emergency involves losing your job) and eat the potential withdrawal penalty and opportunity cost or live with making minimum payments on the credit cards for a while.
The point is that true emergencies should be rare enough that it is OK to take some form of loss - be it paying interest on a loan, selling stocks at a non-optimal price, or having to take money out of a tax-sheltered account. It reminds me of those signs around fire extinguishers that say "break glass in case of emergency". If fires were breaking out once a month, maybe they would worry about the cost of the broken glass.
These are the lines of emergency defense, in order:
1. Credit cards
2. A a very small "traditional" emergency fund in a checking account - approximately one month's expenses.
3. A large pool of stock/bond holdings (at least 6 months expenses, but this should be the same pool as your non-retirement fund savings, so grow it as big as possible).
4. Some money in retirement funds that could be tapped if absolutely necessary (ideally Roth)
The theory is this: Your average joe has no savings. As a consequence, most big emergency costs - like medical bills, needing to completely replace a vehicle, or making a mistake on your taxes already have built-in mechanisms for repayment over time. More moderate expenses can be put on a credit card; the traditional cash holdings only exist for immediate liquidity to pay bills where credit is not accepted or for the chance that your credit might get temporarily frozen if you are the victim of identity theft. That gives you at least 30 days to liquidate stocks/bonds to pay the bill.
So let's say the stock market crashes and you lose your job. Now you have to sell your stocks at a low price and you are taking a big loss! I mean look at 2008, right? The Dow dropped 50%. Doesn't that mean this strategy sucks?
This comes down to the issue of optimizing for the common case. If you are getting an 8% annual return on money in the stock market compared to keeping it in cash, it will take 9 years to double your money. At that point, if the market drops 50%, you have broken even. Now 8% is a reasonable average return over a 10-year period whereas a market crash happens maybe a couple times per century. You will probably end up ahead by keeping most of the money in investments. But if stocks are really terrible, pull the money out of your IRA (or 401k if the emergency involves losing your job) and eat the potential withdrawal penalty and opportunity cost or live with making minimum payments on the credit cards for a while.
The point is that true emergencies should be rare enough that it is OK to take some form of loss - be it paying interest on a loan, selling stocks at a non-optimal price, or having to take money out of a tax-sheltered account. It reminds me of those signs around fire extinguishers that say "break glass in case of emergency". If fires were breaking out once a month, maybe they would worry about the cost of the broken glass.
Darren870
Member
I'm like you tokkun, my "emergency" funds are in the market. I only have about $300 worth of cash actually I can get in a moments time. Everything goes on the CC though which gets paid off every month from my salary so I find no reason to have a cash savings of 3-6 months. In the event of an "emergency" I have my plastic and if for some reasons the funds are needed in a weeks time I can just sell some stocks or wait for my bi-weekly paycheck.
I can't think of anything that I would need 3-6 months worth of cash instantly to justify just letting it sit there gaining little to no interest.
I can't think of anything that I would need 3-6 months worth of cash instantly to justify just letting it sit there gaining little to no interest.
PflargBlarg
Member
Strange, I would highly recommend using a line of credit before using your credit card, the rates are way better. If you've been keeping decent credit (or have home equity) it should be no problem to get a pretty large line of credit.
I usually do something like
- Month to month revolving costs in my chequing account
- small emergency fund in savings account (it's currently around 7000 but that's because there are wedding costs coming soon)
- everything else is in investments as I don't have any non-retirement related savings
I usually do something like
- Month to month revolving costs in my chequing account
- small emergency fund in savings account (it's currently around 7000 but that's because there are wedding costs coming soon)
- everything else is in investments as I don't have any non-retirement related savings
Easystride
Member
I don't know if I could handle the anxiety of not having any savings in a low risk, readily available fund. Being a single guy living on my own, I wouldn't have some else's income to fall back on if I lost my job. Thanks for the great answers as always guys! I wish this thread had been created 2 or 3 years earlier
Darren870
Member
Well, I don't think the purpose would be to keep a balance on the card. I would cash out stocks if it came to that. But yes, you are right. In the end, it really depends on the emergency and down to the person. For me I can save 60-70% of my income a month so It have to be something pretty big for me not to be able to sort it out right away. A line of credit would be a much better option then a CC if you needed to keep a balance.
I understand a month worth of cash, but everything after that you get to the point of money just sitting there doing nothing.
The purpose of the credit cards is immediate liquidity. They bridge the gap between the emergency occurring and the few days it can take to execute a stock sale or make it to your next pay check. Generally speaking, a credit line is not going to provide that immediacy.
Ideally you never run a balance because the card gives you at least 30 days to get at the less liquid savings. I only mentioned running a balance as an option because people inevitably want some additional contingency plan against a stock market crash.
I don't know if I could handle the anxiety of not having any savings in a low risk, readily available fund. Being a single guy living on my own, I wouldn't have some else's income to fall back on if I lost my job. Thanks for the great answers as always guys! I wish this thread had been created 2 or 3 years earlier
I feel the same but I know my "emergency" fund is getting too large. Considering I'm doing a lot of travel the rest of the year I probably won't make too many changes, but I should likely start a non-retirement investment account considering the losses of just leaving that much in savings.
chaosblade
Unconfirmed Member
This is where I'm at, I have over 6 months worth of income in savings now, and that's on top of the buffer I keep for my checking account.
I'm undecided on either making another tier of savings and investing in this from Vanguard (60/40 stock/bond), or further increasing my 401K contribution. 401K would have the tax advantage, but it would also basically put the money entirely out of my hands if I wanted to put part of it toward a house someday or something.
I think it's worth distinguishing emergency funds from savings funds.
To me, emergency funds are some cash or other liquid investments kept on hand for actual, short-term unforeseen expenses. It's not a lot of money, just a buffer between checking and any funds that are in the market.
Savings funds are what we use for things like buying new cars, down payments on the house, etc. A bucket of money that has a certain set of specific uses in mind, but those uses might be 3-10 years down the road. You don't want it sitting on the sidelines the whole time, nor do you want it locked into a retirement or college account. We invested up to a certain amount, and then just let it go from there, until we need it.
To me, emergency funds are some cash or other liquid investments kept on hand for actual, short-term unforeseen expenses. It's not a lot of money, just a buffer between checking and any funds that are in the market.
Savings funds are what we use for things like buying new cars, down payments on the house, etc. A bucket of money that has a certain set of specific uses in mind, but those uses might be 3-10 years down the road. You don't want it sitting on the sidelines the whole time, nor do you want it locked into a retirement or college account. We invested up to a certain amount, and then just let it go from there, until we need it.
womfalcs3
Banned
I have been working hard over the past few years to save money toward a house and then retirement. Although I have some cash on hand, I'm uncomfortable with it since its value is diminishing over time and it is not contributing to economic development. I have been thinking about ways to wisely use that money to simultaneously increase my wealth and contribute to the economy.
I am highly risk averse. I initially put 10 thousand dollars in a mutual fund that invests in Islamic bonds. The returns are not very attractive, so a few months ago I decided to put an additional 13 thousand in a fund that invests in local equity. It has naturally been more volatile, and although I'm slightly losing money at the moment, I am hoping future appreciation of assets and dividend payments will generate substantially more income than the fund's fees. I would still like to invest more money for income, but I do not feel comfortable investing more in such a volatile stock market. I also do not have enough money to buy real estate for rental income. There is one index fund operating in my country, but its investment firm classifies it as "highly risky", which surprises me. I have also thought about buying silver at its current low price, but its price is also highly volatile and it does not do anything but sit there.
Where I live, I am forced to contribute 10% of my salary to a pension fund (similar to social security in the US). I cannot, however, guarantee that I will benefit from it. For one thing, I have to be in the program for at least 25 years before I am eligible to withdraw pension. Additionally, I can't guarantee the pension program will even have money to spend in 25 to 30 years when I can retire. The pension fund is actively investing the money it gets and I can at least feel good about that.
I am highly risk averse. I initially put 10 thousand dollars in a mutual fund that invests in Islamic bonds. The returns are not very attractive, so a few months ago I decided to put an additional 13 thousand in a fund that invests in local equity. It has naturally been more volatile, and although I'm slightly losing money at the moment, I am hoping future appreciation of assets and dividend payments will generate substantially more income than the fund's fees. I would still like to invest more money for income, but I do not feel comfortable investing more in such a volatile stock market. I also do not have enough money to buy real estate for rental income. There is one index fund operating in my country, but its investment firm classifies it as "highly risky", which surprises me. I have also thought about buying silver at its current low price, but its price is also highly volatile and it does not do anything but sit there.
Where I live, I am forced to contribute 10% of my salary to a pension fund (similar to social security in the US). I cannot, however, guarantee that I will benefit from it. For one thing, I have to be in the program for at least 25 years before I am eligible to withdraw pension. Additionally, I can't guarantee the pension program will even have money to spend in 25 to 30 years when I can retire. The pension fund is actively investing the money it gets and I can at least feel good about that.
womfalcs3
Banned
Saudi Arabia. The high correlation of our economic performance with a volatile source of income is the reason I want my financial plan to be independent of a government-run pension fund.
Even our stock market is correlated with the oil price since many of the listed companies are petrochemicals companies whose revenues move with the oil price.
Even our stock market is correlated with the oil price since many of the listed companies are petrochemicals companies whose revenues move with the oil price.
Darren870
Member
Err, I'd check the Tadawul and look for the ETFs and Indecies that you can buy... Which I think is like 4...
Can you invest in the US markets? You will get hit with tax issues, but not sure if you can.
Don't know much about investing there... Sorry.
As for your investment in the muni fund with bonds. That's no surprise really. They are safe investments so I wouldn't expect large gains.
For your savings funds then is it just a taxable investment account with Vanguard with some mix of index funds with a heavier concentration in a bond fund due to the possible short-term uses?
bucknuticus
Member
So i finally am in a position where I can start saving money. I have just been dumping money into a checking account that get some dividends (better than nothing). I am maxing out my 401k to what my employer will match, reading this it doesnt seem like enough. What else should I be doing with my money?
Assuming that this is money you want to save towards retirement specifically, OP has the standard rule of thumb answer:
bucknuticus
Member
Are the numbers in parentheses what you can max them out at yearly?
Yep! Though the IRA caps will go down if your salary hits a certain level.
*Roth IRA only.
**Even then, you can avoid the income cap by contributing to a traditional IRA and then rolling it into a Roth.
bucknuticus
Member
Thanks for the help fellas, will be a good jumping off point for me!
Yup. Not sure what else to do, really. Interest rate on bonds is too low, and I'm not aware of any kind of tax advantaged way to keep the money liquid without some kind of convoluted evasion strategy.
For something like this, would Betterment be a good value due to tax loss harvesting and it being a little more short term making it something I'd want more attention paid to? (Note: I don't know enough about tax loss harvesting to know if it's something I should care about)
Maybe I'll just get to a certain # and put 60% in a stock fund and 40% in a bond fund or something, I don't know yet... Anything seems smarter than just leaving it in a savings account with 1% interest...
PflargBlarg
Member
Good news, I should be able to drastically cut the time to accumulate my needed retirement funds. Start a new job in 2 weeks that will bring me from 55k to 75k per year.
It's a big boost for me!
It's a big boost for me!
Wellington
BAAAALLLINNN'
That's an over 30% boost! Congrats brother!
Looks like the TSP is going to open itself to allow federal employees to invest in some private mutual funds. The aim was to make it easier for employees who leave federal employment.
I don't know if they will let you roll your investment into, say, a Vanguard fund so that you can continue to contribute to it with a private employer or what. But, it's pretty big news since TSP manages $455 billion (it's no Vanguard, but it's pretty substantial).
I don't know if they will let you roll your investment into, say, a Vanguard fund so that you can continue to contribute to it with a private employer or what. But, it's pretty big news since TSP manages $455 billion (it's no Vanguard, but it's pretty substantial).
If you're making something like over 100k now, isn't it better to do a traditional 401k / ira (rather than Roth), as after you retire you'll be making like 20-40k off of your retirement, so taking the money out and getting taxed at 15% when you're old is a lot better than getting taxed on 28% now?
You are doing something called bucketing, which doesn't actually make financial sense though it is useful and intuitive. Think about it: if you have say 200k invested, but know you might need 30k next year, and the expected return on security a is higher than security b, why put any in security b at all unless it is extremely illiquid or carries a reasonable risk of 85% loss? You can just cash in 30k of security a and be better off.
It's not that simple.
- It's possible that tax rates will increase by the time you are at retirement age.
- It's possible you may be withdrawing more money than you expect in retirement. Maybe you have a lot of medical bills. Maybe you want to help a family member with a downpayment on a house or college tuition. Maybe you figure out that you've saved enough that you can afford to buy that hover car or robot butler.
- If you can afford to max out your contributions, you can actually get ~25-30% "more" money into the Roth 401k / IRA than traditional. This is because they have the same caps, but the Roth is aftertax money. Thus, it may be better for you even if you have a lower tax rate in retirement.
- You can withdraw the principal from a Roth IRA without penalty. If you are making > 100K, maybe you want to retire at 55. Great, start withdrawing from the Roth principal at no extra cost.
hurm never thought about it that way!
Randolph Freelander
Member
The contrary opinion:
With income over 100K, the traditional IRA is by default not for you, since you wouldn't qualify for tax benefits (it phases out early if you have a employer plan available, later if you do not). So the Roth IRA is your friend.
With the 401K, I'm with you. Traditional all the way. You're saving the 28% (or higher) marginal tax rate, and you can direct that savings into regular investment accounts. You do not need to pay the high rate of taxation now just to have funds available to you in a Roth, when you can avoid the taxes now and still have funds available from regular side investments*
It's easy to say tax rates could be higher in the future. Look around, though. Who has the political will to raise taxes? Particularly on the middle class? Is it going to become politically easier in the future to raise taxes? I don't think it will be, and I'm not going to lock in a high tax rate now to avoid some tax rate in the future that may or may not materialize. If my top marginal rate was 15%, sure. 28%? Not in this lifetime.
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*The 2015 personal contribution limit for the 401K is $18,000. To do this after tax for someone in the 28% marginal tax bracket, it takes $25,000 of pre-tax income. You would pay $7000 in taxes and the rest would go into the 401K plan. If you instead invest into a traditional 401K, you invest the $18000 before paying taxes, which leaves you with $7000 gross to be taxed at 28%, for a net of $5040 you can still invest on the side (this amount also almost fully covers your Roth IRA, if you have not already factored it into your budget).
I do use the bucketing strategy, and it does make financial sense, in particular in the space of risk management. I keep $X in my savings account because that's the amount we've decided might be needed for emergencies or for short term savings. If that emergency takes place in a down market, then we have $X less whatever the market is down. While longer term investments have time to generate income (dividends) and has more time to grow, making more likely (but not certain) to grow by the time it's needed. In your situation, selling that $30k in a down market might result in a loss - which is not ideal, especially for short-term needs. In that situation I'd be effectively selling part of my long term savings to meet short term needs.
As an example for savings, we are in the process of building a deck right now, the money for which arrived from bonuses and tax returns in January and February. We tucked that into the savings account because we were going to spend it less than six months later, and as such wanted to make absolutely sure it was there when we did so. If we were going to build the deck in five years, we'd have invested it.
Edit: it's true that that keeping a cash emergency fund does keep money on the sidelines, if you don't need it long term. But I think keeping the fund a very small % of your total investments minimizes the potential loss, while also providing the intended security of not needing to tap into funds in a down market.
Wellington
BAAAALLLINNN'
Like Randolph mentioned, depending on where your salary falls you may not qualify for either IRA. If it's me I try to drive down to the next lowest tax bracket by maxing out my 401k contribution as well as utilizing whatever other tax optimizations apply to you. I am more of the camp of trying to save as much money on taxes now as I can and then doing the same later on in life when I have to take distributions.