So the contribution limits for Roth IRAs have increased for 2019. The limits have increased for other accounts too, but I'm only discussing Roth IRAs since that is where we put about half of our retirement contributions.
The limit in 2018 was $5,500 per person. The new limit is $6,000. That's a monthly increase of $41.66/mo per person. Or in our case $83.33/mo.
This is the year my husband will turn 50 (late 2019) so he is eligible for the catch up contribution limit which is $7,000 for the year. This additional $1000 would increase our contributions another $83.33/mo.
If we choose to max out that will increase our monthly contributions to $166.66/mo.
As noted in my previous blog post my husband did get a raise. The monthly net increase to his paycheck is $115.49. I originally planned to save this money towards our Big Goal.
Now I could count it as Big Goal money but put it in our Roth IRAs knowing we could redeem some money from them for our downpayment if needed. But it also seems better to keep it all separate.
We've been maximizing our Roth IRAs for quite awhile, but this is just a bigger bump I wasn't really tracking! I have more work to do to figure out the best plan of action. I need to see what the budget can actually absorb.
We should have lower expenses her on base, far less fuel for our vehicles and no utility expenses. But we also have more airline tickets to pay for with two daughters away at college.
Back to the budget...
Are you maximizing your retirement contributions in 2019.
Should We Max Out Roths?
January 5th, 2019 at 06:54 pm
January 5th, 2019 at 07:03 pm 1546714990
January 5th, 2019 at 10:03 pm 1546725802
Assuming you don't qualify for traditional IRA's, I would max the Roths out as well. A house down payment that is a few thousand less because of the Roths will probably not have a material impact on what house you buy or the monthly payment. Save early and save often is my motto!
January 5th, 2019 at 10:08 pm 1546726126
January 5th, 2019 at 10:25 pm 1546727107
I appreciate the idea. And will definitely consider it!
January 6th, 2019 at 01:41 am 1546738880
January 6th, 2019 at 02:45 am 1546742755
January 6th, 2019 at 02:21 pm 1546784482
Thanks Beawealthywarrior, I didn't know that you hadn't been working. I'm glad you found a job!
January 6th, 2019 at 07:26 pm 1546802770
January 6th, 2019 at 08:10 pm 1546805425
CCF- I assume with two kids in college you are in your mid-40's. Your husband is only 12 years away from qualifying. In your shoes, I would start looking at the various calculators to see what he would get under the current program. There will likely be changes, but too many people in this country rely on Social Security for all or the majority of their retirement income for it to disappear.
January 6th, 2019 at 10:17 pm 1546813050
January 6th, 2019 at 10:22 pm 1546813368
January 6th, 2019 at 11:26 pm 1546817163
Be careful when looking at the benefit statement from Social Security - they project your benefit based on the assumption that you will continue working and earning the same amount until you reach retirement age,
January 7th, 2019 at 12:03 am 1546819410
January 7th, 2019 at 01:01 am 1546822913
CCF - One source that is commonly recommended is a book by Kotlikoff. https://www.amazon.com/Get-Whats-Yours-Secrets-Security-ebook/dp/B00LD1OPP6 The library should be able to get it for you. The current version includes recent changes. I haven't read it because my case was simple. If you are married, especially if there are significant income and age differences between the spouses, when to collect is very important, and this book is supposed to help with that.
Social Security represents the largest percentage of retirement income for a big percentage of the population. It would be tough for politicians to reduce the payout and see old people out on the street as a result. I suspect there will be some kind of fix, possibly like the last "crisis" was fixed. Higher retirement age, higher percentage paid in, higher limits on income subject to the tax.
January 7th, 2019 at 03:23 am 1546831388
January 7th, 2019 at 03:24 am 1546831446
Thanks DIdo and Joe, I appreciate the insight.
So one more comment to add to this topic...we are saving 19% of my husband's gross income. Is it ever possible to be saving too much? I mean I would rather save too much than not enough, but is there a threshold that would be too much? My husband is likely to retire in about five years with a pension from the military. Some in the military don't save expecting that the pension will be there, yet not everyone makes it to the full 20 years. Then add on social security...I just wonder if we are putting away too much.
January 7th, 2019 at 03:27 am 1546831662
Vanguard has already adjusted our contribution amounts for the new limit changes. I think I elected they be maxed out each year automatically.
January 7th, 2019 at 11:01 am 1546858908
In your shoes, I would analyze your situation if he were RIF'd out before the pension. He did not go in at 22, so he would have a harder time finding a second career federal job if he left before retirement. Sometimes the reserves are an option for building a pension, but again, age might be a factor.
I'm conservative, but in my opinion 19 percent is not too much in your situation. I would max out the TSP and both IRA's if I were in your shoes.
Doug Nordman, a graduate of the Naval Academy and a retired naval officer, has written extensively about military retirement - check out The Military Guide website. He is extremely knowledgeable about the subject and has helped thousands of people facing the same decisions you are with the articles on the web site and his book.
January 7th, 2019 at 02:25 pm 1546871114
My husband has been in the Army 27 years. He joined as private and was commissioned as an officer in early 2000s. In 2006 he began full time work for the army. We are guaranteed a 20 year pension based on his time in the reserves. That does not start until age 60. That will go away when he gets 20 active federal service years. He is still part of the Army Reserves, just on full time active duty. He will promote to Lt Col in two years...yes the numbers of officers is reduced in the chain going up. He is not likely to get passed over for promotion. He is engaged, very hard working, teaching others along the way. He has never has a bad review or been passed over. I get that it is possible, but it is rare. My husband said last night he still expects to work in some form after military retirement.
We cannot max out the TSP, we have other expenses we are managing. We'll stick to the 19%, which will include maxing out our Roth IRAs.
January 7th, 2019 at 11:35 pm 1546904125
Have you calculated? I think you might be oversaving but I think you need to run the numbers and see how much the pension will replace. How much you have saved which is $500k = $20k conservatively and then SS conservatively. Thus why I think 100% of replaced income is probably in your case.
January 7th, 2019 at 11:51 pm 1546905101
It's been awhile since I calculated...but when I did the amount we would have for retirement was more than plenty. I'm just trying to get the basic budget for 2019 figured out. I'll get to looking closer at the big picture soon and adjust if needed.
January 8th, 2019 at 12:44 am 1546908291
That's what I would consider. For us we have about 50/50% split right now in 401k and Roth IRA. I know the bulk will be in the 401k. However my thoughts are that we will convert the 401k after we "retire" early at say 55 and then move it to the Roth IRA. If we do it for 15 years from age 55 to 70.5 I think we could convert a substantial amount and be fine.
But truthfully does it really matter if you have too much savings
January 8th, 2019 at 08:20 pm 1546978834
January 17th, 2019 at 12:39 am 1547685569