What should I do with my 6% raise?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Why don't you max out your 401k contributions?

Because I can't afford to? With my employer automatically putting in 5% I've been focusing on putting some money in college savings while building back up emergency savings (which we had to zero out in order to refinance a few years ago).

That's kind of the point of my question. We do not have enough money to completely max out 401k or college savings, so I'm trying to figure out how to allocate the money in my raise. I am also accounting for the fact that we can sell our condo for at least a $250k profit if we needed to (it is in a very desirable part of DC), and we'll be getting an inheritance of around $100k in the next 5 years.

The rule of thumb is as follows, and to fund in this order:

1. Emergency Savings ( I think you are fine here )
2. Retirement ( I think you are not fine here given your age)
3. Kids college

It is foolish for you to put your kids college ahead of a healthy retirement. You are getting a 100k inheritance. Max out both 401ks and if there is something left, then fund college.

I'm suprised Yiur 401k has not recovered since the crash. Mine has more than recovered. The last few years the market had been on an huge soar upwards. EVERY ONE in a high income bracket should have been maxing it out. I've been making 15% returns per year, which last year was nearly 150k. I have though scaled back my risk in my allocations because I think a storm is brewing.

[Anonymous]

401k is more important than college savings. For one, it's tax advantaged. Secondly, college loans are an option ... as is less expensive state school, or God forbid, working ones way through. However, no one is going to take care of your retirement for you. Not maxing your 401k now - hell, even before the raise - is a boneheaded decision.

[Anonymous]

Anonymous wrote:401k is more important than college savings. For one, it's tax advantaged. Secondly, college loans are an option ... as is less expensive state school, or God forbid, working ones way through. However, no one is going to take care of your retirement for you. Not maxing your 401k now - hell, even before the raise - is a boneheaded decision.

Agree.

[Anonymous]

OK so it's clear most people think I should be putting my whole raise into my 401k. It still won't be maxing it out but if we did that we would have hardly any money left for anything else. We still want to take vacations, have our kids take lessons, etc. I know many of you think savings should be come before that stuff, but that's not our feeling, esp. given the money we have in lucrative DC real estate.

I definitely agree that 401k is more important than college savings, but I wasn't sure how far behind we were with retirement. Apparently further than I thought. The years of two daycares hurt us there.

I'll keep college savings at the level I am currently at until I can max out the retirement contributions. The windfall will go to college savings.

[Anonymous]

Why ask for help if you already have your own plan for want you want to use the additional funds for?

Your emergency fund and retirement savings are scary low. If I were in your position, I would try to build up the emergency fund and take advantage of the tax benefits of the 401K.

[Anonymous]

Anonymous wrote:Why ask for help if you already have your own plan for want you want to use the additional funds for?

Your emergency fund and retirement savings are scary low. If I were in your position, I would try to build up the emergency fund and take advantage of the tax benefits of the 401K.

I didn't already have a plan. I stated that plan once I heard what other people thought, which was that we needed to focus on 401k first and foremost.

I'm really not that concerned with our emergency fund. We have $25k in savings and another $25+k in stocks we can access, plus two stable jobs.

I don't consider my retirement savings "scary" low, given our salaries and the fact that we've had to pay for daycare for the last several years, but we will work on it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Why ask for help if you already have your own plan for want you want to use the additional funds for?

Your emergency fund and retirement savings are scary low. If I were in your position, I would try to build up the emergency fund and take advantage of the tax benefits of the 401K.

I didn't already have a plan. I stated that plan once I heard what other people thought, which was that we needed to focus on 401k first and foremost.

I'm really not that concerned with our emergency fund. We have $25k in savings and another $25+k in stocks we can access, plus two stable jobs.

I don't consider my retirement savings "scary" low, given our salaries and the fact that we've had to pay for daycare for the last several years, but we will work on it.

OK OP again, I was freaking out a bit so I just did a couple of those online retirement savings calendars. I know these are just estimates and they all agreed that we are behind, but not by THAT much. And they don't take into account the real estate. So I feel a little better. But I promise I'm going to put my full raise plus a bit more into my 401k!

[Anonymous]

If you have rental income 401k isn't important. In fact you are betting taxes will be lower.

[Anonymous]

Is the car loan really no interest? I'm can't contain my internal judgy mcjudgerson. Why are you not saving and buying your cars in cash. You've got a good start but get serious man.

[Anonymous]

Anonymous wrote:Is the car loan really no interest? I'm can't contain my internal judgy mcjudgerson. Why are you not saving and buying your cars in cash. You've got a good start but get serious man.

Yes it really was 0% financing up to 60 months. It's a common deal. Our car cost just under $20k and we pay $333/month. There was no reason to wipe out a big chunk of our emergency fund when we could pay monthly at no interest.

[Anonymous]

Anonymous wrote:If you have rental income 401k isn't important. In fact you are betting taxes will be lower.

I don't understand what this means. Tell me more.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Why ask for help if you already have your own plan for want you want to use the additional funds for?

Your emergency fund and retirement savings are scary low. If I were in your position, I would try to build up the emergency fund and take advantage of the tax benefits of the 401K.

I didn't already have a plan. I stated that plan once I heard what other people thought, which was that we needed to focus on 401k first and foremost.

I'm really not that concerned with our emergency fund. We have $25k in savings and another $25+k in stocks we can access, plus two stable jobs.

I don't consider my retirement savings "scary" low, given our salaries and the fact that we've had to pay for daycare for the last several years, but we will work on it.

Given your ages and your HHI, I do think that your retirement is scary low. Forget the vacations, you need to save, save, save.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why ask for help if you already have your own plan for want you want to use the additional funds for?

Your emergency fund and retirement savings are scary low. If I were in your position, I would try to build up the emergency fund and take advantage of the tax benefits of the 401K.

I didn't already have a plan. I stated that plan once I heard what other people thought, which was that we needed to focus on 401k first and foremost.

I'm really not that concerned with our emergency fund. We have $25k in savings and another $25+k in stocks we can access, plus two stable jobs.

I don't consider my retirement savings "scary" low, given our salaries and the fact that we've had to pay for daycare for the last several years, but we will work on it.

Given your ages and your HHI, I do think that your retirement is scary low. Forget the vacations, you need to save, save, save.

Well, the retirement calculators I've read don't agree with you. And by the time we retire we will have paid off two properties that will have at least doubled in value in very stable DC neighborhoods. And no, we're not giving up vacations. We're not extravagant but we're not going to live like paupers either.

[Anonymous]

Anonymous wrote:Is the car loan really no interest? I'm can't contain my internal judgy mcjudgerson. Why are you not saving and buying your cars in cash. You've got a good start but get serious man.

Oh FFS. Only a fool would pay cash for a car when interest rates are like 0.9%.

[Anonymous]

These people telling you your $650,000 in 401k is too low are fucking insane, OP. Ignore them. Especially the ones who are 10 years younger and already have twice that -- who the hell locks up that sort of money in illiquid accounts?