Author Topic: Would you dip into other funds to front load a Roth?  (Read 1404 times)

Gin1984

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Would you dip into other funds to front load a Roth?
« on: June 24, 2014, 01:33:29 PM »
This year I started my PhD position in January but my first paycheck was in February.  In the next few months my husband (also a Phd student) will be graduating and moving to a post-doc.  When I did the tax math for our current incomes for 2014 we discovered we would be in the 10% bracket (but when we add in the child tax credit, the tuition credit, childcare credit we are much lower, for the effective rate).
My husband will be graduating soon and found a post-doc position. My husband's post doc salary is a little less than $1000 more a month than his PhD student position but for me to stay in the program the closest job my DH could get was an hour a way.  This means an additional car ($120/month), gas ($100/week) and insurance ($500-600/year).  This plus taxes and 15% to retirement eats up the raise.  However, that plus our current retirement is $9420/year. But we found a cheaper daycare so the savings of $140/month will also be added to our monthly saving.  That gets us up to $925/month.  So, we are planning to put in the 403b $983.34/month for Sept, Oct, Nov, Dec and have money from our current savings set aside to make up the difference.  Then Jan-April, I was going to toss $925 into a Roth to capture the extremely low rate.  Between my current Roth savings and then, I should have about $6000 or so to go in the Roth. 
So my question:  Should I "borrow" from my other cash funds to max out on the Roth at this rate, if it means not funding the Roth from May-Oct for 2015? 
« Last Edit: June 24, 2014, 05:49:30 PM by Gin1984 »

NewStachian

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Re: Would you dip into other funds to front load a Roth?
« Reply #1 on: June 24, 2014, 03:14:15 PM »
Gin,

I found it challenging to follow your post 100%, but I think I understand your general question. Given your tax situation it seems like a ROTH is by far the best bet, assuming you don't have the option of getting a 401(k) match (free money > no money). The great thing about a ROTH is you can always take the money back out, so if you overextend yourself by dipping into emergency funds, you can always take that money right back out of a ROTH if you need to with no penalty.