Roth IRA: Am I saving too much for retirement?
Roth IRA is important, but aren't there other things to save for, too? Question No. 1 of the reader mailbag takes a look at the Roth IRA dilemma.
What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Am I oversaving for retirement?
2. Same-sex marriage and taxes
3. Pricing of e-books
4. Handling a complex debt snowball
5. The very first step
6. Next steps for young programmer
7. Sharing costs of electronics
8. Calculating cost of bread
9. When should I begin investing?
10. Unexpected retirement funds
The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.
Subscribe Today to the Monitor
Over the last year, my children have absolutely fallen in love with Vincent van Gogh and impressionist and post-impressionist art. Sometime in the next week, they’re going to go to an art museum with a huge impressionist and post-impressionist exhibit.
Of all of the things we’re going to do this summer, a trip to an art museum is easily in the top five for both my five year old son and my three year old daughter. (And, yes, they know what an art musem is and, yes, they know they should be relatively quiet and sedate while there.)
My son says, “I want to get up close and see the brush strokes.” Me, too.
Q1: Am I oversaving for retirement?
I’m 31 years old and have worked in IT at a mid-western university for the last 10 years. I now make $52k/year. My university puts 14% of my income into a retirement fund with no matching required. Many years ago, I started my own Roth IRA and at this point I put aside another $333 into this Roth IRA.
But here’s the catch. I feel like I’m not saving for other things that might be necessary like home improvement projects and emergencies (I do have another $6k as an emergency fund).
I’m mostly looking for some sort of affirmation that maybe I’m putting too much into retirement.
If you’ve been putting 14% of your income away for retirement since you were 21, you’re almost assuredly in very good shape today. By my back of the envelope math, you should have somewhere near twice your annual salary in that account (depending on a lot of factors). That’s a very good amount to have at age 31.
At this point, if you feel your retirement savings is keeping you from other goals, you’re probably okay cutting back on the Roth contributions. Your 14% in your retirement plan is a very good amount for retirement and will leave you in very good shape if you stay in your position for thirty years.
Before you switch, though, I’d make sure that you know why you’re switching. What are your goals with the money if you make a change in your savings? If you can’t identify a clearly stated purpose, leaving the contributions in the Roth is just fine.
Q2: Same-sex marriage and taxes
My partner and I now have the opportunity to marry in the state of New York, but we are confused as to how this will impact things like filing taxes. I know that other states have allowed same-sex marriage before this, but it seems difficult to find firm answers for how this will work. Since Iowa has granted same-sex marriages for the last two years, I wonder if you can speak to it at all?
For example – one particular hurdle that comes to mind is what filing status do we even use on the Federal return? Can we even say that we are married? Or do we file as two single people?