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View Poll Results: What do you think is the right decision?

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  • Put as much into Roth/401k as possible

    2 40.00%
  • $100 retirement - everything else to establish 2 yr worth of emergency savings

    1 20.00%
  • $100 retirement - everything else towards purchasing a small cheap home

    0 0%
  • Other.....

    2 40.00%
Results 1 to 6 of 6

Thread: Max out retirement or save?!

  1. Senior Member
    luckycandycane's Avatar
    luckycandycane is offline
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    #1

    Max out retirement or save?!

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    Ok so I am getting very close to having nothing more to pay bill wise and want to plan where to put this money into once that is taken care of:

    I put 100 into a Roth IRA as manditory. Now the spare money I have should I....poll to follow


    I am 27 (28 early next year). Currently not married. Plan on having a child within 2 years (due to fertility problems trying to have a child before 30 but need 2 additional years to be back to a better financial position).

    1. Really want to have my own house. 2. But also really want to make sure I am covered in case of an emergency for a period of 2yrs (just recently experienced medical problems putting me out of work for 1yr and not finding a job for an additional year so want to have that safety net). 3. And also really want to be safe in retirement and know putting in early one = more money later.

    I am not sure what order to start in!?

    How would you ladies do it?
  2. Senior Member
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    #2
    I would build up probably 4-8 months of expenses in a savings account, while keeping your $100 monthly investment. Then I would put all but $100-$150 into retirement while using that leftover money to slowly grow the savings if you truly feel you must have that large a cushion.

    Two years of expenses in savings is way, way more than nearly any expert recommends. And keep in mind that if the shit hit the fan, you could also potentially borrow from the Roth if necessary. (This is not ideal for many reasons, and there can be tax issues, but if you get to the point where you've blown through 6-8 months of savings, then it might make sense). So that money isn't completely lost to you if things get really, truly awful, and I think that is important to keep in mind.

    I think it is more important to get money into retirement so it can be working for you than it is to have a full 2 years of expenses. Also, if that 2 years of money (lets just say thats $25k) is sitting in a savings account, you are actually losing money because a savings account doesn't even pay enough money to keep up with inflation. You can ladder it into CDs (put it in several CDs that are set to expire in 6 month intervals so you'd always have access to some of the money without too long a wait), but even then you are probably barely going to keep up with inflation.

    That's fine to do with maybe 6-9 months of expenses, or *maybe* even a year, but it makes a lot more sense to have the rest of the money in retirement accounts where it will be growing. And again, that still serves as a bit of a safety net if you ever need more than your 6-9 month cushion.

    So I'd do 4-6 months of savings and $100 to investments, then investments for all except $100 which would pad the savings to 9-12 months *if you really feel you must*, and then I'd keep investing most of it (up to the at least the $5k Roth max, if not more) and use the rest to save for a down on a house. That is going to put the house purchase off quite a bit, but I think it is the smartest.
    Science always wins over bullshit. ~Dick Rutkowski
  3. Senior Member
    Irisheyes36's Avatar
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    #3
    savings accounts typically earn less than a roth so i would go with the roth you can also take a $10,000 deduction from the roth without penalty for first time home purchase if you've had the account for over 5 years so that would help too.



    Here we go again.....#3
  4. Senior Member
    bdizzle's Avatar
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    #4
    You're not married? Are you dating and planning on being married by then, or are you wanting to have a child on your own?

    ETA: Oh, and I would build my savings. Once you've got a decent amount in savings you can start putting more into your retirement.


  5. Senior Member
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    #5
    Quote Originally Posted by Irisheyes36 View Post
    savings accounts typically earn less than a roth so i would go with the roth you can also take a $10,000 deduction from the roth without penalty for first time home purchase if you've had the account for over 5 years so that would help too.

    This.
  6. MilitarySOS Jewel
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    #6
    There is a yearly cap on IRA contributions so you might also want to look into long-term mutual fund investments for retirement savings. 6-9 months in savings the usual, I might do 12 months since I have been out of work for 9 months before and for me is cutting it to close to cleaning out the account. As pp's said CD's or a money market account keeps you from losing money as much money at the rate of inflation (2-3% rather than the typical 4%).

    If you would like to purchase a home maybe start looking at what you can afford on your salary and then saving up the 20% down plus closing costs. If having children is important to you I would also consider designating your savings to include for maternity leave expenses. Basically you should do it all imo, retirement, emergency fund, buying a home, you just to toe the line as to what portion or your savings is for what.

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