With Chad earning a little bit of extra income, I’m wondering if it makes sense to have him open a Traditional IRA.
This year, I’m maxing out my 401K, plus getting roughly $5K match. We also plan to max out our Roth IRAs, giving us a total of about $31,000 contributed to retirement. We have quite a bit of money sitting in cash, but since we’re agreed that we’d like a house someday in the future, it doesn’t seem like too much.
Complicating matters is that Chad received a very small bonus from his old job, part of which was put into his old 401K. I’m guessing this affects the amount he can put into a traditional IRA, but considering that he doesn’t even really know how much he got in that bonus, I have no idea.
I’ve never had to deal with anything more exotic than my own 401K, which is seriously 2 clicks of the mouse and you can contribute however much you’d like.
Part of me thinks that we can never contribute too much to retirement. Another part want to shore up our cash savings some more (because maybe we could buy a house in cash!). The part of me that loves big tax refunds is calculating how much extra we’d get back next April. The rational part of me is weighing the tax benefit now vs. the fact that this might be one of the lowest combined salaries we’ll ever have vs. the fact that our income in retirement could be much smaller since we’re only living on 50-60% of what we make. With 30 years to go before normal retirement age is even close, I have no idea what the right choice is. Oh, and I have a pension ($400 per month once I turn 65! Woo!), so does that affect retirement contributions?
Anyone who has fought this fight before want to give me some advice? What would you do – put it in cash, or take a risk in the stock market over 30 years and planning that this will all still be around then?