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My Retirement Update: 401(k) Bumped and Roth IRA Opened
04.10.08 | Retirement | 0 Comments | by Tom Valenti

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In a post a little while ago, I questioned the traditional wisdom that says you should max out on your 401(k) and fully fund a Roth IRA every year.

Here's an update of where I am with that: I did some research, and I realized that I was only contributing 4% to my 401(k), which meant I wasn't even taking full advantage of my employer's match. I brought that up to 6% to get the full match.

Until the last year or so, I probably really needed that extra money in my paycheck, so I don't think I've let too much money slip away by not taking full advantage of the match.

I also opened a Roth IRA, even though I feel my retirement may be well-set without it.

So why did I open it, then? Because maybe I will use it in my retirement, and after more research, I realized I could pull out my contributions at any time if I need it before I turn 59.5. Also, if I ever have children, the contributions and interest earned can be used for their college expense.

It seems like this could work out better than a 529 plan.

I'm looking at the Roth like a miscellaneous fund right now, and I think it's a good idea I start funding it now to put the power of compounding to work earlier.

Tom Valenti is a marketer and project manager who currently works for a financial institution in New Jersey. For more info, visit him at http://tomvalenti.com.
The Retirement Conundrum: Near-Term vs. Long-Term Goals
03.03.08 | Money | 4 Comments | by Tom Valenti

Everything I read tells me the same thing when it comes to saving for retirement: contribute to your 401(k) and start a Roth IRA.

I contribute to my 401(k) so that my employer-match is maximized, but that's it. I don't max out on the overall contributions, nor have I yet opened an IRA.

Many people would tell me I really should either max out the 401(k) and/or start funding a Roth. I totally understand why they'd say that; I realize the benefits of tax-free growth.

But the reality is, I have near-term goals that need addressing, namely purchasing a larger house, getting ready for a family, and saving up for a possible business venture.

Socking away a bunch of money for use when I'm 60 or beyond is the practical, conservative thing to do.

But what happens if I never reach that age? Or what if I do reach that age and do get to my money, yet I realize my "prime years" were spent living in a cramped house, working for someone else, and did not contain any luxuries?

Has it been worth it?

I'm not saying I'm not planning for a retirement, because I am with my 401(k) and other investments, including mutual funds and real estate.

I am planning to use those investments wisely and spread them out over my life. So I'm not so sure the bulk of my savings should go into formal retirement programs.

If anyone has any advice or has been in the same situation, I'd like to hear it.

Tom Valenti is a marketer and project manager who currently works for a financial institution in New Jersey. For more info, visit him at http://tomvalenti.com.
When You're Saving Aggressively, It's Easy to Forget How Well You're Doing
01.29.08 | Money | 1 Comment | by junger

We've got some pretty aggressive savings goals for the near-term future, mostly centered around buying a house while still contributing a lot to my 401(k) and to both of our Roth IRAs.

And we're doing a really successful job, too; we've got automatic transfers going into our housing fund every month (in addition to automatic Roth IRA contributions), we track our spending and live within our means.

But when you have such aggressive savings goals, sometimes your mentality overpowers reality.

I forget sometimes that we are doing a great job saving for a house and for retirement (and have an emergency fund, too). I want to save as much as we can — I think I am going put nearly my entire 2007 bonus toward the housing fund — and succeed.

But there's a line between being a smart and aggressive saver and just being cheap. I try hard not to cross that line — having money is not the goal. Creating a happy life for my family is the goal. Money is just the means to the end.

The next time you think you're being cheap, step back. Think about how well you're doing on your savings goal and how much the situation is going to affect your bottom line.

This isn't an excuse to go out and buy whatever you want; it's a reality check to determine if you're saving for the right reasons.
10 Smart Money Moves We Made in 2007
01.04.08 | Money | 4 Comments | by junger
2007 was a great year for us financially. No, we didn't win the lottery or get any other kind of windfall, but we made a bunch of smart money moves that will pay off well in the long run.

Here are 10 smart money moves we made in 2007, in no particular order.
- We Moved Cities
  It wasn't a cheap move, but by moving to a more affordable area, we're much more prepared to purchase real estate. Moving is not a small change — but it can have big effects on your financial situation.
- We Started a Housing Fund
  In order to meet our home-savings goal, we opened a new online savings account earmarked for housing money. Every month, HSBC automatically pulls money from our checking account and deposits it — paying ourselves first.
- We Started Using Index Funds
  Rather than trying to beat the market (an unsuccessful long-run plan), we transferred our Roth IRAs from Ameriprise to Vanguard, investing in low-cost index funds.
- Increased Monthly Roth IRA Contributions
  In addition to our move to Vanguard for our Roth IRAs, we increased our automatic monthly contributions. Last year, we used a chunk of money from our tax returns to max out our Roth IRAs — this year, we'll be closed to maxing them out without additional funds.
- Got a Promotion
  Earlier this year, I got a promotion at work, leading to more responsibility, more work and, yes, more money. While my paycheck is a bit fatter, our lifestyle isn't. We're spending nearly the same amount of money as we were before the promotion — pocketing the difference for savings.
- Bumped Up 401(k) Contribution to 10%
  At the same time I got a promotion, I upped my 401(k) contributions to 10% of my salary. Because I did it at the same time my pay went up, I never "knew" the difference and questioned its worth.
- Opened an FSA
  As I've said, the smartest $400 I ever spent was on my FSA. With a flexible spending account, the money comes out pre-tax, and with a debit card, purchases are seamless. Since it's not coming from my normal accounts, it's like buying things for free!
- Joined Yodlee to Track Finances
  If you don't know where your money is going, you don't know how to save. Even though we use a written budget, we joined Yodlee for more automatic budgeting and to track all of our accounts and net worth.
- Downgraded Cell Phone Plan
  I wasn't using all of my cell phone features, so why should I pay for them? Earlier this year, I downgraded my cell phone plan, saving money every month on features I don't use. (Even though Spring screwed up my plan change.)
- Automated Our Finances
  Even though we think about our finances daily, we don't worry about when bills are due or if we can pay for them. Nearly all of our bills are paid automatically, our savings are transferred without a key stroke, and our salaries are deposited directly.
Well, you've heard our smart money decisions for last year. Now, we want to hear yours.

What were the smartest money moves you made in 2007?

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