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re: Moving money out of savings suggestions
Posted on 2/6/15 at 2:15 pm to LSUtoOmaha
Posted on 2/6/15 at 2:15 pm to LSUtoOmaha
quote:
(trips, down-payment on car, etc). Do you save for this, or do you just take it out of your IRA when needed?
I have a short term "high yield" (
) savings account where I put in short term savings goal money Basically any known objective under 3 years or so. Like an Ally, Barclay's etc type account.
Each month I have money that is going to 401k, to ROTH, and then left over money is put into savings for that sort of stuff. I know that I'm taking a trip or buying a car well in advance.
Trips I usually use points for the travel portion, so usually the expenses of the trip just come out of my usual dining out and Misc spending funds. I just don't buy random stuff in a month when I'm going to travel if I can help it.
This post was edited on 2/6/15 at 2:24 pm
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Posted on 2/6/15 at 2:26 pm to LSUtoOmaha
quote:
That makes sense regarding the emergency part. What about for non-emergent things that you will be purchasing that cost a few thousand dollars (trips, down-payment on car, etc). Do you save for this, or do you just take it out of your IRA when needed?
You should be setting aside money for vacation if that is important to you. I'd keep that money in a savings account (or just in your checking if you are disciplined). Then, put it on your credit card and pay it off with your vacation fund.
As for large purchases, put them on card and try to pay it off by living more frugally the rest of the month (or for a couple months).
Posted on 2/6/15 at 2:36 pm to Teddy Ruxpin
If you pull the money out for an emergency do you have to repay taxes on it when redeposited?
Posted on 2/6/15 at 2:50 pm to rhanse1lsu
Not to steal OP's thunder but I have a piggyback question from his.
I have continually on this board heard nothing but excellent things about the VTSMX. I am 29 and as far as investing (or, I guess whatever you would call everything not in a regular savings account) I have my company retirement funds that I contribute to through work, plus a Roth IRA through Edward Jones I opened about a year and a half ago. I don't have A TON of disposable income..I'm single with no debt so I'm comfy but I don't have dollars to just be tossing about willy nilly.
So my question is...should I slightly decrease the amount I put into the Roth and start a VTSMX as well (keeping roughly the equivalent/possibly a bit more overall money contributed monthly), or just continue as is with the Roth? I guess what it boils down to is, would it be better to have money spread about into different retirement funds, or put more money into just one?
I have continually on this board heard nothing but excellent things about the VTSMX. I am 29 and as far as investing (or, I guess whatever you would call everything not in a regular savings account) I have my company retirement funds that I contribute to through work, plus a Roth IRA through Edward Jones I opened about a year and a half ago. I don't have A TON of disposable income..I'm single with no debt so I'm comfy but I don't have dollars to just be tossing about willy nilly.
So my question is...should I slightly decrease the amount I put into the Roth and start a VTSMX as well (keeping roughly the equivalent/possibly a bit more overall money contributed monthly), or just continue as is with the Roth? I guess what it boils down to is, would it be better to have money spread about into different retirement funds, or put more money into just one?
Posted on 2/6/15 at 3:27 pm to LSUtoOmaha
quote:
foshizzle: I know you often advocate keeping emergency funds in an IRA. Just out of curiosity
I'll respond in detail this evening, am a bit slammed at work right now. But I'll try to cover not only my current situation but how this can apply to those with not lots of money lying around either.
Posted on 2/6/15 at 9:12 pm to LSUtoOmaha
OK, I'm back now.
As Ruxpin hinted, it isn't about just savings. It's about being able to raise cash quickly and at low cost. Having savings is certainly one way to do this, but is not the only way. If you can get a 0% APR credit card and pay it off over the offered term, for example. Or if you own a home and have a HELOC.
Early in one's career it's a good idea to put money into some kind of account and invest fairly conservatively, and in the near term Roth vs. taxable savings probably doesn't matter much. But later in life the benefits of having put money in a Roth instead of in a taxable account will start to become apparent, because you'll have a bigger base on which to get tax-free earnings. And today's low-rate environment won't last forever, either.
So 1) it's just as easy to get money out of a Roth as from a savings account, 2) you can only contribute so much in a given year to the Roth, and 3) Roth earnings are tax-free for life. If an "emergency" happens during the first couple of years or so then it probably won't matter but if not the Roth is a clear winner.
Regarding how much "cushion" I keep, when I was younger and had little income I kept quite a bit because my ability to borrow at low cost was not good. Now that I'm well into my mid-career life I have no more than about a month because I can easily tap numerous assets at low cost. But that's because I'm not starving and 25 anymore. I well remember those times, and it sucked.
I don't worry about the ability to borrow quickly, easily and cheaply nearly so much as my ability to pay it back. Having good long-term disability coverage is much more important.
quote:
foshizzle: I know you often advocate keeping emergency funds in an IRA. Just out of curiosity, how much cash do you keep liquid in your bank account? Would you consider say, a transmission failure, or a ER visit (thinking of things that cost 1-3k) emergencies, or do you keep a certain amount as a cushion?
As Ruxpin hinted, it isn't about just savings. It's about being able to raise cash quickly and at low cost. Having savings is certainly one way to do this, but is not the only way. If you can get a 0% APR credit card and pay it off over the offered term, for example. Or if you own a home and have a HELOC.
Early in one's career it's a good idea to put money into some kind of account and invest fairly conservatively, and in the near term Roth vs. taxable savings probably doesn't matter much. But later in life the benefits of having put money in a Roth instead of in a taxable account will start to become apparent, because you'll have a bigger base on which to get tax-free earnings. And today's low-rate environment won't last forever, either.
So 1) it's just as easy to get money out of a Roth as from a savings account, 2) you can only contribute so much in a given year to the Roth, and 3) Roth earnings are tax-free for life. If an "emergency" happens during the first couple of years or so then it probably won't matter but if not the Roth is a clear winner.
Regarding how much "cushion" I keep, when I was younger and had little income I kept quite a bit because my ability to borrow at low cost was not good. Now that I'm well into my mid-career life I have no more than about a month because I can easily tap numerous assets at low cost. But that's because I'm not starving and 25 anymore. I well remember those times, and it sucked.
I don't worry about the ability to borrow quickly, easily and cheaply nearly so much as my ability to pay it back. Having good long-term disability coverage is much more important.
Posted on 2/7/15 at 8:15 am to WG_Dawg
I have no experience with Edward Jones, yet I know they are not necessarily a board favorite. My company uses John Hancock for our 401(k), and all of my other investing is through Vanguard, Roth IRA and taxable (thanks to feedback from the board and other research). For your purposes, you could invest this year's Roth IRA contributions through Vanguard and fund VTSMX, or you could open a taxable account and do the same.
One of the biggest downsides you will face in all of this is having to coordinate multiple accounts. If you are not well organized that could become a nightmare. One of the biggest upsides to investing in Vanguard funds through Vanguard is the low costs.
You need to ask yourself a few questions:
1) Are you intending to invest in VTSMX in your retirement account or a taxable account?
2) Do you want to open more accounts?
3) Does Edward Jones satisfy your long-term needs, or does Vanguard offer something that is advantageous to your plan?
One of the biggest downsides you will face in all of this is having to coordinate multiple accounts. If you are not well organized that could become a nightmare. One of the biggest upsides to investing in Vanguard funds through Vanguard is the low costs.
You need to ask yourself a few questions:
1) Are you intending to invest in VTSMX in your retirement account or a taxable account?
2) Do you want to open more accounts?
3) Does Edward Jones satisfy your long-term needs, or does Vanguard offer something that is advantageous to your plan?
Posted on 2/7/15 at 9:24 am to RickAstley
Another hijack. I have a rollover IRA and two Roth accounts with TDA.
If I want to buy some VTSMX, either for a Roth or taxable acct, would it be wiser (ie fee wise) to open an account with Vanguard or just purchase it through TDA as I normally would?
If I want to buy some VTSMX, either for a Roth or taxable acct, would it be wiser (ie fee wise) to open an account with Vanguard or just purchase it through TDA as I normally would?
Posted on 2/7/15 at 9:30 am to WG_Dawg
quote:
So my question is...should I slightly decrease the amount I put into the Roth and start a VTSMX as well (keeping roughly the equivalent/possibly a bit more overall money contributed monthly), or just continue as is with the Roth? I guess what it boils down to is, would it be better to have money spread about into different retirement funds, or put more money into just one?
You should put as much into the Roth as possible. Based on your explanation above, you seem to be under the impression that a Roth is an investment in and of itself - a Roth IRA is simply an investment account with yearly limits on the amount that can be deposited and no taxes owed on the gains. You can invest the Roth funds in a Vanguard fund or in Apple or in a 3X inverse agriculture ETF if that's where you think it would do best...it doesn't matter what you do with the money once its in a Roth.
Posted on 2/7/15 at 6:03 pm to WG_Dawg
quote:
should I slightly decrease the amount I put into the Roth and start a VTSMX as well
A Roth is an account used to hold assets, such as funds. VTSMX is a fund that can be held inside a Roth.
So you open the Roth and put as much money as you can into it, up to the annual limit. You can then use the money you contribute to buy shares of VTSMX, or any other fund, stock, bond, what have you.
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