Well our HR department sent out the form that allows us to modify our contribution percentage for the upcoming quarter. I went ahead and bumped up my percentage from 14% to 17.5%. This increase is a direct result of the planning I did in this post.
Well I have only had 2 months worth of paycheck deductions at the new higher deduction level due to my switching over to the Roth 401K from a traditional IRA (see my posts here and here), but I am pretty sure I am not going to run out of money losing the extra $67 out of each paycheck. In fact I am even contemplating bumping it up a few percentage points more starting next quarter(earliest I can adjust the percentage).
Well I decided that we aren’t going to run out of money in the near future, so I went ahead and sent my wife’s 2006 Roth IRA contribution off to Scottrade. This means that other than my 401k we won’t be able to contribute anymore money to our retirement accounts until 2007, but it also means that we are being proactive and have already contributed our 2006 contributions before probably a majority of people who do actually contribute to their IRAs make their 2005 tax contribution (sometime shortly before they file their taxes on April 15th).
Anyway look for a good boost to our net worth in next month’s financial report.
Well I didn’t exactly get to my follow up post as quickly as I would have liked to, but here goes. Well I ended up sending the form in and leaving my contribution at 14%. According to my calculations I had figured this would cost me an extra $124 out of every paycheck. Now I have our budget strung pretty tight as it is, but when it comes to saving for retirement I tend to act irresponsible like this and splurge on my retirement. I’ve done this a number of times in the past and I’ve never had cash flow problems yet, somehow there always seems to be enough money left over to pay the bills.
Well I planned on starting this blog with more introductory articles on the basics investing tools available, but my employer just decided to offer a Roth 401k plan and I have to fill out the form today so I figured I’d blog about my decision process when filling out the form.
For those of you who don’t know a Roth 401k is a new savings vehicle that the IRS is releasing as of January 1, 2006. A Roth 401k is very similar to a Roth IRA in that any money you contribute to the plan you have to pay taxes on. The good news is that because you paid the taxes on the money up front any money you make a long the way is tax free and when you withdraw any money from this account after age 59.5 the money is also tax free. …