Author Topic: Ways to Catch Up At End of Year  (Read 1435 times)

ReadySetMillionaire

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Ways to Catch Up At End of Year
« on: November 06, 2017, 07:15:19 AM »
My wife and I have had quite a year.  Among other things: we got married (and paid for a lot of it), went on a honeymoon, I had ACL surgery on my right knee (and a ton of physical therapy), and I ended up buying a 2014 CR-V after my old Focus needed $3,000+ in repairs.  Furthermore, my wife was not eligible to contribute to her 401k until this October. 

In summary, and because of these large expenses this year, we aren't on pace to meet our lofty goals for 2017.

That said, I still think we can do some things over the next two months to somewhat salvage our year. So far we have done the following:

(1) I've increased 401k contributions to achieve $18k max
(2) My wife is contributing 50% of her paycheck to 401k contributions
(3) We are going to contribute to HSA at end of this year
(4) We are going to contribute as much as possible to traditional IRAs before April of next year.

So some questions:

(1) The above 401k situation leaves us with a negative cash flow for the next two months, i.e., our expenses will exceed our net income. But we have plenty of savings to cover the difference, so should we just go ahead and have my wife contribute even more to her 401k?

(2) Is there anything else I may be missing over the next two months? Maybe look at expenses more?

Thanks in advance.

GizmoTX

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Re: Ways to Catch Up At End of Year
« Reply #1 on: November 06, 2017, 10:15:06 AM »
If you are fully funding a t401k, you won't be able to deduct a tIRA, but you will be able to fund a Roth IRA (assuming you are under the annual AGI for a married couple). IMO, a Roth is better than a non-deductible tIRA.

I'd max both 401k accounts. You won't get to go back & add to them later.

charis

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Re: Ways to Catch Up At End of Year
« Reply #2 on: November 06, 2017, 10:20:42 AM »
If you are fully funding a t401k, you won't be able to deduct a tIRA, but you will be able to fund a Roth IRA (assuming you are under the annual AGI for a married couple). IMO, a Roth is better than a non-deductible tIRA.

I'd max both 401k accounts. You won't get to go back & add to them later.

How do you know that?  I don't see where the OP mentioned his MAGI. 

seattlecyclone

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Re: Ways to Catch Up At End of Year
« Reply #3 on: November 06, 2017, 10:26:39 AM »
(1) The above 401k situation leaves us with a negative cash flow for the next two months, i.e., our expenses will exceed our net income. But we have plenty of savings to cover the difference, so should we just go ahead and have my wife contribute even more to her 401k?

Sure! If your savings account balance is a bit higher than you feel like you really need, drawing this down to increase your 401(k) contributions is essentially the same as transferring money between the two accounts.

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(2) Is there anything else I may be missing over the next two months? Maybe look at expenses more?

Any medical stuff you've been thinking of getting looked at? If you had ACL surgery and physical therapy you're likely past your deductible and perhaps even at your out-of-pocket max. Might be a good idea to schedule any other appointments before the beginning of the year when your deductible will reset.

If you are fully funding a t401k, you won't be able to deduct a tIRA...

Not necessarily true. Married couples covered by retirement plans at work can deduct full traditional IRA contributions if their MAGI is below $99k.

ReadySetMillionaire

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Re: Ways to Catch Up At End of Year
« Reply #4 on: November 06, 2017, 10:50:16 AM »
If you are fully funding a t401k, you won't be able to deduct a tIRA, but you will be able to fund a Roth IRA (assuming you are under the annual AGI for a married couple). IMO, a Roth is better than a non-deductible tIRA.

I'd max both 401k accounts. You won't get to go back & add to them later.

I've done the calculations, and based on our MAGI, we would each be able to contribute roughly $3,800 to traditional IRAs and deduct that amount from our AGI.  I don't think we can achieve that full max due to the cash outflow this year, but it's certainly something we are considering doing.

terran

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Re: Ways to Catch Up At End of Year
« Reply #5 on: November 06, 2017, 01:28:09 PM »
If you are fully funding a t401k, you won't be able to deduct a tIRA, but you will be able to fund a Roth IRA (assuming you are under the annual AGI for a married couple). IMO, a Roth is better than a non-deductible tIRA.

I'd max both 401k accounts. You won't get to go back & add to them later.

I've done the calculations, and based on our MAGI, we would each be able to contribute roughly $3,800 to traditional IRAs and deduct that amount from our AGI.  I don't think we can achieve that full max due to the cash outflow this year, but it's certainly something we are considering doing.

Remember that you can make 2017 IRA contributions up to the tax filing deadline, so you don't need to come up with the cashflow this year (just within the 1st 3 months next year).

fuzzy math

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Re: Ways to Catch Up At End of Year
« Reply #6 on: November 06, 2017, 02:10:12 PM »
Make sure you've adjusted your withholding after upping your contribution levels.

Don't feel bad about your savings... We are running negative cash flow in this house on a 0% credit card to maximize mega retirement accounts for this year due to higher than normal income. When it resets back to normal #s next year the cc will be paid off and retirement contributions back to normal.