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Build savings or IRA?
1/30/2012 4:56:14 AM
Would it be wiser for me to put my extra money into my IRA (only have 4200 in it now, I'm 33 y/o), or build up savings? I'm paying down my debt (3k CC, 6k on a boat motor) at a reasonable rate, although the credit card debt bothers me.
I've paid off all of my previous loans early but basically don't have any savings. I always figured if things got tough I could sell some of my things (guns, toys). I did that in the past and it didn't bother me too much.
I have a feeling that if I just built up savings, I'd blow it on something, whereas in the IRA I wouldn't touch it.
I've paid off all of my previous loans early but basically don't have any savings. I always figured if things got tough I could sell some of my things (guns, toys). I did that in the past and it didn't bother me too much.
I have a feeling that if I just built up savings, I'd blow it on something, whereas in the IRA I wouldn't touch it.
1/30/2012 5:01:06 AM
I would recommend savings first in foremost. All the money in the world in an IRA won't mean jack if you don't have an accessible emergency fund to cover any number of things that can come up. I subscribe to a Dave Ramsey type of plan where first priority is a rainy day fund, then paying down debt, then investing and rounding our savings even more.
1/30/2012 5:10:24 AM
How many months worth is the general guildeline?
1/30/2012 5:12:51 AM
Originally Posted By inferno715:
How many months worth is the general guildeline?
How many months worth is the general guildeline?
Personally, I use 3 months as my minimum and am currently working toward 12 months.
ETA:
The answer is also highly dependent on your lifestyle. I live much below my means, and my bills reflect it. So 3 months for me is actually not a whole lot of a emergency fund when you start looking at high dollar things such as hospital bills (I have to cover the first $5k before insurance kicks in) as an example. $5k would get me by for months on just bills, but wouldn't cover a bad trip to the hospital.
1/30/2012 9:08:51 AM
I agree on building savings part. It really is a good idea to have some money set aside for those emergent times.
1/30/2012 11:36:51 AM
Do both. It doesn't have to be one or the other.
If you've got $200 a month to put away (for example only) then put $100 into savings and $100 into your IRA. There's something to be said for not putting all your eggs into one basket and making progress on multiple fronts.
As far as being tempted to spend money because it's there, that's a serious problem that you need to deal with. If you've got a checking or savings account that you currently use for daily business then maybe open up a separate one for your "emergency fund" so it is out of sight and out of mind.
If you've got $200 a month to put away (for example only) then put $100 into savings and $100 into your IRA. There's something to be said for not putting all your eggs into one basket and making progress on multiple fronts.
As far as being tempted to spend money because it's there, that's a serious problem that you need to deal with. If you've got a checking or savings account that you currently use for daily business then maybe open up a separate one for your "emergency fund" so it is out of sight and out of mind.
1/30/2012 12:35:04 PM
Originally Posted By woodsie:
Do both. It doesn't have to be one or the other.
If you've got $200 a month to put away (for example only) then put $100 into savings and $100 into your IRA. There's something to be said for not putting all your eggs into one basket and making progress on multiple fronts.
Do both. It doesn't have to be one or the other.
If you've got $200 a month to put away (for example only) then put $100 into savings and $100 into your IRA. There's something to be said for not putting all your eggs into one basket and making progress on multiple fronts.
This is what I do & anything left I enjoy life with or buy stocks.
1/30/2012 1:54:44 PM
I would definitely concentrate HARD on savings.
I would not bother with an IRA or on a 401k unless I got an employer match to make it worthwhile. Going forward, all the various "Mother May I?" accounts in which the Federal Government is your partner in your finances are ill advised IMO. I think you will need total control and flexibility regarding how you can deploy your available financial resources much more than any marginal tax advantages.
I would not bother with an IRA or on a 401k unless I got an employer match to make it worthwhile. Going forward, all the various "Mother May I?" accounts in which the Federal Government is your partner in your finances are ill advised IMO. I think you will need total control and flexibility regarding how you can deploy your available financial resources much more than any marginal tax advantages.
1/30/2012 2:03:25 PM
Doesn't really matter. The coming dollar collapse will wipe out all investments denominated in fiat.
1/31/2012 2:13:39 AM
Originally Posted By woodsie:
Do both. It doesn't have to be one or the other.
If you've got $200 a month to put away (for example only) then put $100 into savings and $100 into your IRA. There's something to be said for not putting all your eggs into one basket and making progress on multiple fronts.
As far as being tempted to spend money because it's there, that's a serious problem that you need to deal with. If you've got a checking or savings account that you currently use for daily business then maybe open up a separate one for your "emergency fund" so it is out of sight and out of mind.
Do both. It doesn't have to be one or the other.
If you've got $200 a month to put away (for example only) then put $100 into savings and $100 into your IRA. There's something to be said for not putting all your eggs into one basket and making progress on multiple fronts.
As far as being tempted to spend money because it's there, that's a serious problem that you need to deal with. If you've got a checking or savings account that you currently use for daily business then maybe open up a separate one for your "emergency fund" so it is out of sight and out of mind.
That's along the lines of what I've been thinking. I could put 10% of my checks in my IRA, and $100 in an account in a different bank.
1/31/2012 4:49:43 AM
Another option may be to open a Roth IRA and fund it. The benefits are twofold over having both a traditional IRA and a savings account: 1) While you fund a Roth IRA with taxed income, the earnings are not taxed when withdrawn at retirement age. The benefit for decades of compounded earnings will be HUGE. 2) If you absolutely need the money, you can withdraw your Roth IRA contributions at any time without penalty.
2/1/2012 2:15:42 AM
Originally Posted By Boomer:
Another option may be to open a Roth IRA and fund it. The benefits are twofold over having both a traditional IRA and a savings account: 1) While you fund a Roth IRA with taxed income, the earnings are not taxed when withdrawn at retirement age. The benefit for decades of compounded earnings will be HUGE. 2) If you absolutely need the money, you can withdraw your Roth IRA contributions at any time without penalty.
Another option may be to open a Roth IRA and fund it. The benefits are twofold over having both a traditional IRA and a savings account: 1) While you fund a Roth IRA with taxed income, the earnings are not taxed when withdrawn at retirement age. The benefit for decades of compounded earnings will be HUGE. 2) If you absolutely need the money, you can withdraw your Roth IRA contributions at any time without penalty.
I have a Roth IRA, just didn't specify which kind of IRA I had.
2/1/2012 1:04:40 PM
Originally Posted By inferno715:
I have a Roth IRA, just didn't specify which kind of IRA I had.
Originally Posted By Boomer:
Another option may be to open a Roth IRA and fund it. The benefits are twofold over having both a traditional IRA and a savings account: 1) While you fund a Roth IRA with taxed income, the earnings are not taxed when withdrawn at retirement age. The benefit for decades of compounded earnings will be HUGE. 2) If you absolutely need the money, you can withdraw your Roth IRA contributions at any time without penalty.
Another option may be to open a Roth IRA and fund it. The benefits are twofold over having both a traditional IRA and a savings account: 1) While you fund a Roth IRA with taxed income, the earnings are not taxed when withdrawn at retirement age. The benefit for decades of compounded earnings will be HUGE. 2) If you absolutely need the money, you can withdraw your Roth IRA contributions at any time without penalty.
I have a Roth IRA, just didn't specify which kind of IRA I had.
I have a number of different types of retirement accounts and personally, I'm concerned about all of them to some degree because I believe there is a pretty good chance that he government will just swoop in and take it all 'for my benefit', of course. I guess I'm not concerned enough to take everything out, or maybe I just figure if it comes to what I kind of fear, I'm screwed anyway. Or maybe things will actually turn around
I'd go along with the others on here saying build up cash savings first. Of course, you have to control yourself and not spend it 
. But it's some interesting times we're moving through. If (when?) the inflation kicks in, your cash loses value. If you are in stocks, you'll at least most likely keep pace and possibly come out ahead, barring poor investments to begin with. I won't even mention physical gold or silver as an option...wait, did I just say that out loud? 
CM
2/2/2012 11:18:51 AM
Originally Posted By Coolio:
Going forward, all the various "Mother May I?" accounts in which the Federal Government is your partner in your finances are ill advised IMO. I think you will need total control and flexibility regarding how you can deploy your available financial resources much more than any marginal tax advantages.
Going forward, all the various "Mother May I?" accounts in which the Federal Government is your partner in your finances are ill advised IMO. I think you will need total control and flexibility regarding how you can deploy your available financial resources much more than any marginal tax advantages.
Originally Posted By sovereign:
Doesn't really matter. The coming dollar collapse will wipe out all investments denominated in fiat.
Doesn't really matter. The coming dollar collapse will wipe out all investments denominated in fiat.
Prime examples of why getting financial advice on arfcom is a bad idea.
2/2/2012 2:02:15 PM
Originally Posted By Slappy600cc:
Prime examples of why getting financial advice on arfcom is a bad idea.
Originally Posted By Coolio:
Going forward, all the various "Mother May I?" accounts in which the Federal Government is your partner in your finances are ill advised IMO. I think you will need total control and flexibility regarding how you can deploy your available financial resources much more than any marginal tax advantages.
Going forward, all the various "Mother May I?" accounts in which the Federal Government is your partner in your finances are ill advised IMO. I think you will need total control and flexibility regarding how you can deploy your available financial resources much more than any marginal tax advantages.
Originally Posted By sovereign:
Doesn't really matter. The coming dollar collapse will wipe out all investments denominated in fiat.
Doesn't really matter. The coming dollar collapse will wipe out all investments denominated in fiat.
Prime examples of why getting financial advice on arfcom is a bad idea.
No shit. That second one is really
.
Is he really suggesting that if the dollar collapses that all of the plants, property, and equipment that your shares represent will be worth nothing? Good lord that is some weapons grade stupid. What you own is a percentage of a business that encompasses a product, a process, and real assets with a real value regardless of currency. It's not a specific pile of dollars waiting in a vault for you with a circus midget walking in each day to add to or take away from the pile whatever you gained or lost that session.
2/2/2012 6:47:07 PM
Inferno,
I would do what you are comfortable with, but I cant say enough great things about the dave ramsey plan if you have no background in personal finance or money management. Personally, I try to max out the roth, which can double as an emergency fund of sorts if you ever had to tap it. You could always stick with some very conservative balanced funds that hold their value better in down markets and also put some cash aside for rainy days in a taxable account or your local bank or credit union. That way if something happened you could use the cash first and then start withdrawing the roth IRA contributions if needed without penalty.
If you are afraid of blowing the cash, you could always build a CD or bond ladder where it would take a little more effort to liquidate for a new toy (i.e. a great deal on a new ar) Dont ask me how I know this feeling!
For me, I have "buckets" consisting of multiple layers of cash equivalents that I will systematically liquidate if I ever get in a real jam. It definitly helps me sleep at night. I had a small period of unemployment and a divorce, so the emergency fund is larger than normal due to my own paranoia...
Good luck!
I would do what you are comfortable with, but I cant say enough great things about the dave ramsey plan if you have no background in personal finance or money management. Personally, I try to max out the roth, which can double as an emergency fund of sorts if you ever had to tap it. You could always stick with some very conservative balanced funds that hold their value better in down markets and also put some cash aside for rainy days in a taxable account or your local bank or credit union. That way if something happened you could use the cash first and then start withdrawing the roth IRA contributions if needed without penalty.
If you are afraid of blowing the cash, you could always build a CD or bond ladder where it would take a little more effort to liquidate for a new toy (i.e. a great deal on a new ar)
Dont ask me how I know this feeling!
For me, I have "buckets" consisting of multiple layers of cash equivalents that I will systematically liquidate if I ever get in a real jam. It definitly helps me sleep at night. I had a small period of unemployment and a divorce, so the emergency fund is larger than normal due to my own paranoia...
Good luck!
2/3/2012 9:12:52 AM
I'm putting money into both a Roth and a savings account. Once I am happy with the amount in my savings account I will shift over to mostly adding to my Roth. I have never really had over 4k in savings and my goal this year is to get that up to 10k to be more comfortable.
2/3/2012 9:58:07 AM
OP, do what you're comfortable with. If you can swing paying off your credit card and shoveling a bit into savings and a bit into your IRA, then do it. You're only allowed to contribute a set amount per year into an IRA so there's a limit to that...
Considering this: your credit card balance has interest... paying it off quickly allows you to have more money to put where you want it to go (like your boat motor loan) then, when those are paid off, you can shovel a lot more into an IRA and savings...
Considering this: your credit card balance has interest... paying it off quickly allows you to have more money to put where you want it to go (like your boat motor loan) then, when those are paid off, you can shovel a lot more into an IRA and savings...
