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Ratcheting up our Roth IRA Contributions

Written by Nickel - 6 Comments

It’s that time of year again… I’m getting a raise this month, so I’ll once again be increasing my retirement savings. As I’ve noted previously, each year when I get a raise I increase my retirement contributions by 1% of my total salary — after all, if you never see it, you won’t miss it. When I started my job I was contributing the 5% necessary to get the dollar-for-dollar match in my 403(b), as well as an additional 5% for good measure.

After factoring in my annual increases, my ‘additional’ contributions had reached 8% as of this past year. Shortly after tax time, however, I decided that re-directing my additional contributions (i.e., those beyond what’s required to get my employer’s full match) to a Roth IRA would make the most sense. To make a long story short, I’m ratcheting up my retirement contributions such that I’ll be contributing 5% to my 403(b) (plus the 5% match) and an additional 9% to my Roth IRA during the upcoming year. My Roth is actually almost maxed out for the year, so I will soon start diverting these funds into my wife’s Roth. Eventually, when we’re both maxing out our IRAs, I’ll revert to putting future increases into my 403(b). My ultimate goal is to get to the point where both of our IRAs plus my 403(b) are getting maxed out every year. We’re still a little ways off from that, but I’m confident that we’ll eventually get there.

Published on September 9th, 2005
Modified on February 19th, 2008 - 6 Comments
Filed under: Retirement, Saving & Investing

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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6 Responses to “Ratcheting up our Roth IRA Contributions”

  1. 1
    Financial Fruition Says:

    Sounds like a good plan. Good luck.

  2. 2
    SavingAdvice Says:

    You have a good financial plan in place for your retirement savings. Taking part of your raise and putting it toward savings instead of spending into your new income is a great way to increase long term savings

  3. 3
    tdfb Says:

    I commend you both on your raise and your conviction to saving! I will be joining you in 4 or 5 years. ;-)

  4. 4
    Robin Says:

    Great plan! I’ve heard Dave Ramsey go through the math as far as match IRA v. nonmatch regular IRA vs Roth, and he came out with the same conclusion you did: Match first, then roth.

    My husband and I are 21 and 23, and we’re about to start a Roth IRA. We’re still students, but we have some savings and we have a positive cashflow, so we’re going to put small chunk of cash and then deposit a very small (like $50-$100…) amount in every month. You know what they say about the power of compounding interest!

  5. 5
    luckysaver Says:

    Very good advise. It’s important to contribute to your retirement while you’re young and it will grow faster than you think. Never go below the “matching funds” contribution. My wife and I are actually to the point where ours has grown to where we have to reduce ours in order to avoid paying a lot of taxes down the road. We’ve also exceeded the Roth max unfortunately but now have extra cash to just go out and enjoy life or fix up the house some.

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