My wife and I have about $95K in retirement accounts (we're 29 and
30). That includes a mix of 401k, Roth and traditional IRA. But our
after-tax savings are pretty small in comparison. Between checking
and savings, we have $23K, $13K of which is about to go toward closing
costs on the new house we're building ($20K has already been put
toward various deposits). Needless to say, we have to rebuild our
savings after closing.
What sort of balance do you all suggest for balancing retirement and
non-retirement savings? Up until now, we had been diligent about
maxing out our 401k and IRA contributions. But since our non-
retirement savings are going to be significantly depleted by the new
house, we've temporarily stopped all those contributions to allow time
for our savings to recover.
I won't lie and say that the house-building project took us by
surprise. We've been working on it for almost a year and could have
diverted money away from our retirement accounts during that time in
preparation. However, it wasn't clear that we were going to get the
lot until a few weeks ago. In addition, this is a fairly unique
opportunity. We weren't planning on building a house unless this lot
came through.
In retrospect, it seems pretty clear that we have contributed too much
to our retirement accounts over the past few years. One possible way
of correcting that would be to withdraw our Roth contributions. We
have $24K in Roth contributions, which is about 1/4 of our total
retirement savings. However, I'm loathe to do that because once done,
it can't be undone. And I kind of like the idea of that money
generating tax-free retirement income.
Another consideration: Large purchases. Certainly the new house
qualifies, but what about things like a new car? My wife's car is 4
years old. It runs perfectly and doesn't have any problems. However,
I suspect she'll be interested in getting a new car in, say, 2-4
years. When that time comes, I'd prefer to pay cash for the car
instead of having a car payment. Of course, that money will have to
come from non-retirement savings. How do you strike that balance?
I have one closing comment, which is really a rant. If Congress
didn't see fit to try and micromanage our financial lives, this
wouldn't be an issue. We would have one unified savings which may or
may not be conceptually partitioned in to retirement and non-
retirement savings. But instead, we have 6 separate retirement
accounts (401k, Roth and IRA times 2), each with its own rules,
regulations and fees. We have to decide upfront if money goes in to
one of the retirement accounts, never to be seen again until age
59.5. Sure, we don't HAVE to use these retirement vehicles, but we
get slapped with higher taxes if we don't. It really seems like a
government-created headache to me.
--Bill
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