Author Topic: Fund max of 401k or wife's Roth?  (Read 2416 times)

teamzissou00

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Fund max of 401k or wife's Roth?
« on: May 29, 2013, 08:57:52 AM »
Hey all- 

I always have put in 15% to my 401k.  Reading the forums, I've noticed I'm only contributing about 14k each year.  I also fully fund my Roth. 

Two questions-
1) with only the above facts- should I put any extra toward maxing my 401k or funding my wife's Roth? (She earns no income)
2) if I don't have an fully funded emergency stache- should I lower retirement and fund that first?

Thanks

tomk2

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Re: Fund max of 401k or wife's Roth?
« Reply #1 on: May 29, 2013, 09:24:00 AM »
With no other considerations, the Roth account is easier to withdraw contributions (not EARNINGS) from much easier than the 401k. Penalties, tax, loan terms are a hassle.

A rule of thumb people use is make sure you get your match in the 401k, then fund your Roth, then put the rest in the 401k (or other accounts). This accomplishes "tax diversification" while maximizing "total compensation" from your employer. You could get up to 10k in roth accounts if you want to open an account for your wife.

bkru21

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Re: Fund max of 401k or wife's Roth?
« Reply #2 on: May 29, 2013, 09:26:19 AM »
Remember, contributing to Roth is post-tax, so whatever tax bracket you are right now, the money gets taxed at that rate. Because your wife's source of income is from your's, it will be same. IMO, it's best to max out your 401k than the wife's Roth to get the full deduction.

I like to have 3-6 months in my emergency fund. Some consider your Roth to be an emergency fund (because you can withdraw your contributions any time penalty/tax free), but I disagree. It's for your future. I opened a online savings account that has a 1% interest rate to put my emergency cash in, not much, but atleast it's better than .05%.

ghaynes

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Re: Fund max of 401k or wife's Roth?
« Reply #3 on: May 29, 2013, 11:20:03 AM »
I thought to open an Roth IRA you needed to have earned income, so if your wife is not working is this possible?

icefr

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Re: Fund max of 401k or wife's Roth?
« Reply #4 on: May 29, 2013, 11:57:31 AM »
I thought to open an Roth IRA you needed to have earned income, so if your wife is not working is this possible?

But since he is and they're (I assume) married filing jointly, it's fine. You do need earned income, but when you file married filing jointly, the earned income is as if you both earned 50% of it really.

madage

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Re: Fund max of 401k or wife's Roth?
« Reply #5 on: May 29, 2013, 12:41:41 PM »
I thought to open an Roth IRA you needed to have earned income, so if your wife is not working is this possible?
Spousal IRA makes it possible. Also note the limits for 2013 are $5,500 per person under 50, $11,000 per married couple.