topic Funding Roth IRA in Personal Finance

Funding Roth IRA

Anonymous — Mon, 08 Apr 2019 02:02:15 GMT

I’ve already maxed my Roth IRA for this year so I’m putting money away for next years.

Im wondering what the community does with their money while waiting for the beginning of the year to fund their Roth IRA..

basically I’m wondering if I should let it sit in my money market account or put it in an account like betterment or something similar to be invested while I wait.

Re: Funding Roth IRA

Ardecko — Mon, 08 Apr 2019 02:15:40 GMT

I changed jobs last year, and the new one doesn't offer retirement accounts for some period of time. That plus the phase-out at our income bracket means I can't do our taxes right now and I have to pull out 500 of my meager IRA contribution because it's "too much". Ok, lesson learned, contribute to your IRA only once you've started doing your taxes.

I also have to figure out how much gain I had on that 500 and pull it out as well.

Re: Funding Roth IRA

brother7 — Mon, 08 Apr 2019 10:02:53 GMT

If you have a taxable Vanguard account, you can leave it in the "settlement fund" which currently yields around 2.35%.

Personally, I prefer to have money invested instead of sitting, so I'd deposit into a taxable Vanguard account and invest 100% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).

Re: Funding Roth IRA

Anonymous — Mon, 08 Apr 2019 18:23:26 GMT

Hi BabyFace. We can advise you better if we know more about your situation. Some questions:

Have you maxxed out your 2018 Roth contribution? You have six more days to do that.

Have you maxxed out your 2019 Roth contribution? You have another 12 months to do that.

The answer to both of the above questions is probably yes, but I am distinguishing the two amounts/years for clarity.

Do you have a 401k, a TSP, or some similar vehicle associated with your job? If so, have you maxxed that out? I believe the max amount for ordinary employees is 19k this year. I hope you have not yet maxxed this out as of today, since you would likely lose some matching money if you have.

Are you over the age of 50? If so you can expand your IRA and 401k limits via the "catch up" rules.

Assuming you still have all these tax-sheltered accounts planned for, how much extra money will you have this year to invest in taxable accounts? Are we talking about 2k? 90k?

Do you have a high-interest savings or checking account? (Something that gets you 2.2% interest or higher.) If you do, how much money is in it? If you lost your job, how much money would you need to draw from a savings account like this each month to cover your expenses?

Do you have existing debt? (CC debt, non-mortage loans, mortgage) If so, what interest do you pay on it? Does it make sense to pay any of this debt off or down?

Are you planning to buy a home or a car in the next couple years? If so, have you placed money in an account specifically for that purpose? (Down payments on a house can take a lot of money.)

Re: Funding Roth IRA

xaximus — Wed, 10 Apr 2019 19:55:48 GMT

One thing I'd like to mention with all of the great info above is CDs. You can deposit the money into a CD and let it grow based on that if you don't feel comfortable in investing. In your case, you can do a 6 month to 12/13 month CD that should work for you, again whatever time period you feel comfortable with.

Re: Funding Roth IRA

iced — Thu, 11 Apr 2019 02:40:46 GMT

@Anonymous wrote:
I’ve already maxed my Roth IRA for this year so I’m putting money away for next years.

Im wondering what the community does with their money while waiting for the beginning of the year to fund their Roth IRA..

basically I’m wondering if I should let it sit in my money market account or put it in an account like betterment or something similar to be invested while I wait.

My SO and I save enough that we're not earmarking money for future Roth contributions; instead, any savings above and beyond capping any accounts (emergency, 401k, etc) goes into personal brokerages and is invested in various equities once we hit our purchase threshold.

Each year we don't qualify for Roth IRA, so what we do instead is take tax refund money, seed a new regular IRA, and then immediately roll those into our Roths. If our tax refund doesn't cover both, we can pull the extra from short-term savings.