Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Last Minute 4/14 Roth IRA Contribution?
Old 04-14-2015, 01:14 AM   #1
Recycles dryer sheets
 
Join Date: May 2008
Location: DFW Metroplex
Posts: 112
Last Minute 4/14 Roth IRA Contribution?

Quick snapshot:
31 years old
$19k in student loans @ 4.25% - want this paid off by August 2016
$14.5k car loans @ 0%
8k 401k
2252 - Roth IRA
$1463 credit card debt

I just got a bonus check direct deposited into my account. Also payday is 4/15. I have a 0 balance $1000 line of credit that I could pull from and pay back tomorrow between my paycheck and another check I have. Would probably pay pennies in interest for the time it actually has a balance.

Is it dumb to focus on putting more money in my Roth at the last possible minute for Tax Year 2014? Or should I continue doing my debt snowball and just focus on maximizing it in the future. I have less than $1k in emergency fund money set aside right now.

In 34 years when I plan to retire that $1k today will be worth $7,652 assuming a 6% average rate of return. All the interest tax free. Not factoring risk into the equation though. What should I do?

Most of my Roth IRA is in a betterment account 90 % stocks / 10% bonds. Quite frankly it's way underfunded for my age. Advice welcome!
__________________

__________________
Anon blogger - Since April 2012 I've been on a mission to rid myself of $45,159.35 of student loan debt. Down to $16,691 on 6/10/15. Plan to have loan paid off in 2016/7.
MBAVisionary is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-14-2015, 06:23 AM   #2
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 660
As a general rule, you will find support on this forum both for paying off debt first and investing first. But I think that your situation - 31 years old with a negative net worth - tilts the decision towards paying off debt first. It's nice to have a goal to pay off your student loans by August of next year, but it's up to you to turn that goal into reality. Making impulsive last minute decisions to divert your money to a different purpose, however laudable in itself, is just distracting you.
__________________

__________________
karluk is offline   Reply With Quote
Old 04-14-2015, 07:23 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,390
If your income is low enough that you qualify for the Retirement Savings Contribution Credit for 2014 then making a retirement contribution to maximize the credit might make sense for you.

Otherwise, generally you want to contribute enough to the 401k to optimize any match, attack any high-interest credit card debt first, then the student loan debt given the 4.25%. Obviously, no need to hurry to pay off the 0% car loan.

Whether tax-deferred (401k or deductible IRA) or tax-free Roth retirement savings is preferable for you depends on you current tax bracket compared to your tax bracket in retirement.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 04-14-2015, 10:16 AM   #4
Recycles dryer sheets
 
Join Date: Jul 2013
Location: Villa Grande
Posts: 259
Wasn't the 2014 Roth IRA deadline 12/31/14? I thought only tIRA contributions could be made until 4/15.
__________________
TimSF is offline   Reply With Quote
Old 04-14-2015, 12:13 PM   #5
Recycles dryer sheets
 
Join Date: Jan 2010
Posts: 183
What is your federal and state marginal tax rate i.e for an additional $100 in ordinary income, how many additional $ will you pay in federal tax and state tax? Do you expect your tax rates to be much higher over the years and in retirement? Based on your income, do you expect to become ineligible for Roth soon? All these are considerations, in addition to 401k Match and tax credits, when deciding whether to contribute to Roth, 401k, etc.
In the low tax brackets, you may not be getting as much advantage in 401k.
What is the rate on your credit card debt?

As others have pointed out, tackling your higher interest debts first may make more sense and then worry about Roth.
__________________
pixelville is offline   Reply With Quote
Old 04-14-2015, 12:14 PM   #6
Recycles dryer sheets
 
Join Date: Jan 2010
Posts: 183
Quote:
Originally Posted by TimSF View Post
Wasn't the 2014 Roth IRA deadline 12/31/14? I thought only tIRA contributions could be made until 4/15.
No, tax filing deadline applies to contributions for IRA, Roth, HSAs
__________________
pixelville is offline   Reply With Quote
Old 04-14-2015, 01:02 PM   #7
Recycles dryer sheets
 
Join Date: May 2008
Location: DFW Metroplex
Posts: 112
Quote:
Originally Posted by pb4uski View Post
If your income is low enough that you qualify for the Retirement Savings Contribution Credit for 2014 then making a retirement contribution to maximize the credit might make sense for you.

Otherwise, generally you want to contribute enough to the 401k to optimize any match, attack any high-interest credit card debt first, then the student loan debt given the 4.25%. Obviously, no need to hurry to pay off the 0% car loan.

Whether tax-deferred (401k or deductible IRA) or tax-free Roth retirement savings is preferable for you depends on you current tax bracket compared to your tax bracket in retirement.
Income is 55k so 25% tax rate. Also make too much for that credit.
__________________
MBAVisionary is offline   Reply With Quote
Old 04-14-2015, 01:06 PM   #8
Recycles dryer sheets
 
Join Date: May 2008
Location: DFW Metroplex
Posts: 112
Quote:
Originally Posted by karluk View Post
As a general rule, you will find support on this forum both for paying off debt first and investing first. But I think that your situation - 31 years old with a negative net worth - tilts the decision towards paying off debt first. It's nice to have a goal to pay off your student loans by August of next year, but it's up to you to turn that goal into reality. Making impulsive last minute decisions to divert your money to a different purpose, however laudable in itself, is just distracting you.
Good point about the negative net worth. I sink a ton of money proportionally to my income into paying debts down each month. I want to be free of it all.

Currently I contribute $400/mo to my Roth IRA and 280 to 401k company matches 140. Maybe I'm trying to do too many things at once?
__________________
MBAVisionary is offline   Reply With Quote
Old 04-14-2015, 01:12 PM   #9
Recycles dryer sheets
 
Join Date: May 2008
Location: DFW Metroplex
Posts: 112
I'm currently yielding about 4% growth in my betterment account since October 2014. Kind of feel like by not contributing as much as possible I'm missing out on my compounding years. On the other hand it's doubtful I will make enough in my investments in the next two years by investing more to offset the interest that accrues the longer I wait.

About $800 in interest with current balance. If I lost my job tomorrow I could pull money out of retirement to pay for bills but I'd rather have bills be a fraction of what they are instead. So that would kind of defeat the point of putting more away now.
__________________
Anon blogger - Since April 2012 I've been on a mission to rid myself of $45,159.35 of student loan debt. Down to $16,691 on 6/10/15. Plan to have loan paid off in 2016/7.
MBAVisionary is offline   Reply With Quote
Old 04-14-2015, 01:20 PM   #10
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 660
Quote:
Originally Posted by MBAVisionary View Post
Currently I contribute $400/mo to my Roth IRA and 280 to 401k company matches 140. Maybe I'm trying to do too many things at once?
Assuming you actually succeed in paying off your student loans by next summer, I think you have hit on a reasonable mixture of saving for your future while liquidating your debt. I would continue doing what you've been doing. My earlier post was directed solely at this last minute plan to throw additional money into your Roth IRA, which I don't think fits in very well with your rather aggressive debt repayment strategy. Part of the reward of making a financial plan is to see it through to the end and experience the satisfaction of knowing that this debt, which has been hanging over your head for most of your adult life, has been eliminated on schedule.
__________________
karluk is offline   Reply With Quote
Old 04-14-2015, 01:23 PM   #11
Recycles dryer sheets
 
Join Date: May 2008
Location: DFW Metroplex
Posts: 112
Thanks for your replies all. I'm going to cut my Roth contributions down to $100/mo and put the $300/mo savings toward student loans. Over the next 14 months that will equate to $4,200 in "extra" money to apply toward my $19k student loan balance. That's about a fifth of what I owe. That combined with an extra $5k coming to me in the coming 3 months or so and my income will allow me to put s big dent in this debt.

I am close to getting a promotion at my job which would boost my salary / bonuses. Not counting that chicken until it's hatched though.
__________________
Anon blogger - Since April 2012 I've been on a mission to rid myself of $45,159.35 of student loan debt. Down to $16,691 on 6/10/15. Plan to have loan paid off in 2016/7.
MBAVisionary is offline   Reply With Quote
Old 04-14-2015, 06:02 PM   #12
Recycles dryer sheets
 
Join Date: Jan 2010
Posts: 183
Good decision to cut down on Roth contributions. With 25% Fed tax bracket, you might be better off not contributing to Roth and increase 401k contribution instead.
Once you have paid off debt, maxed 401k, then contribute to Roth.
As a general rule, a lot of people on this board convert IRA to Roth upto the top of 15% bracket but not in the 25% bracket. Of course, exceptions exist.

Don't forget to get a deduction on taxes for Student Loan Interest (line 33, form 1040)!
__________________
pixelville is offline   Reply With Quote
Old 04-14-2015, 08:58 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
The one nice thing about the Roth in this case is that you can withdraw your contributions penalty free. So you can give it a try and if you end up needing the cash it should be available. With tax form paperwork I'm sure.
__________________

__________________
Animorph is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Who did a last minute IRA for '07? martyb FIRE and Money 18 04-22-2008 07:30 PM
Last minute AMT question outtarentals FIRE and Money 3 12-30-2007 08:32 PM
Last minute filing blues... REWahoo FIRE and Money 25 04-19-2007 07:32 AM
Last Minute IRAs for 2004 Martha FIRE and Money 2 04-04-2005 07:06 AM
last minute tax planning Martha FIRE and Money 5 01-04-2005 03:51 AM

 

 
All times are GMT -6. The time now is 10:19 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.