Ratcheting up our Roth IRA Contributions
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 - 6 Comments
Filed under: Retirement, Saving & Investing
email this article
- add to tip'd - stumble it - digg it - bookmark it
About the author: Nickel 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!
Related articles...
» Roth IRA Income Limits for 2007» Roth IRA Conversion Limits Going Away
» One Year Ago This Week (September 3rd – September 9th)
» Ratcheting Up Our 403(b) Contributions
» Withdrawing Your Roth IRA Contributions (Followup)
» How to Prioritize Your Retirement Accounts
» Tax Credit for Retirement Savings Contributions
» Minimizing Our Taxes with a SEP-IRA, 403(b) and 457(b)
Was this article useful? Please sign up to receive our content via e-mail:
Great deals...
Readers’ choice...
Recent articles...
- Did Congress Make the Homebuyer Tax Credit Retroactive?
- Congress Extends $8000 Homebuyer Tax Credit, Adds New $6500 Credit
- Lending Club Update - October 2009 Performance
- How Much to Budget for Car Maintenance?
- Series I Savings Bonds Now Paying 3.36%
- Use Weight Loss Strategies to Get Out of Debt
- Weekly Roundup - Disney Shanghai Edition
- How to Save Money on Vacations
- Most and Least Reliable Cars - 2009 Edition
- Get 100 Free Trades from OptionsHouse Brokerage
Recent comments...
- Penny: I am about to purchase a new home.. which will be my new residence...
- APRIL DAYS: I FOR ONE HOPE THAT THE FIRST TIME HOMEOWNERS TAX CREDIT IS EXTENDED BECAUSE...
- JB: I drive a 1999 car and save $60 a month for car repairs, oil...
- Greta: My significant other and I bought a house in February 2009. My boyfriend...
- Jay: Don't forget nCleaner 2nd for turning off widows firewall and windows defender...also use the...
- Bryan: @Doug - you said it... if you simply delayed the closing, it would have...
- Sympathetic Dish TSR: @ Bonnie: Is your HD tv a Flatscreen LCD style? If so then a...
- John DeFlumeri Jr: Thanks for explaining the tax credit. Too bad for those who purchase in...
Most talked about...
- Dave Ramsey is Bad at Math
- $8,000 Homebuyer Tax Credit
- Dish Network Customer Service SUCKS
- How to Claim the First-Time Homebuyer Tax Credit
- $15,000 Homebuyer Tax Credit
- Reduced Credit Limits? Share Your Experience
- Would the "Fair Tax" Gut the Economy?
- Tax Stimulus Rebate Payments to Start Early
- Pay Off Mortgage Early? Or Invest?
- The Best Online Savings Accounts (Updated!)
- Life's Too Short to Drink Cheap Beer
- $7500 First Time Homebuyer Tax Credit
Sounds like a good plan. Good luck.
Comment by Financial Fruition — Sep 9th 2005 @ 9:25 amYou 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
Comment by SavingAdvice — Sep 9th 2005 @ 11:44 amI commend you both on your raise and your conviction to saving! I will be joining you in 4 or 5 years.
Comment by tdfb — Sep 9th 2005 @ 9:44 pmGreat 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!
Comment by Robin — Sep 17th 2007 @ 12:18 amVery 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.
Comment by luckysaver — Sep 23rd 2007 @ 12:48 am