The limit is annual, so you can make a $5,500 contribution on January 1st if you want, as long as you earn that much over the rest of the year.

I can see the appeal of splitting the resources, but I think this makes things a little more complicated than necessary. If you can put 3 months of emergency funds away in a savings or money market account, and then an additional 3 months in a Roth IRA, then you are in a position to put all 6 months in a dedicated…

Melanie, I remember seeing you post before about this. Why was it that you don't want to use a 529 account?

Using conservative investments in a Roth IRA is a waste of very limited resources: time and money. If you have no other emergency funds, then necessity may dictate that you keep whatever savings you do have in conservative holdings, even if it is in a Roth IRA. But this is FAR from ideal, and a damn shame if you ask…

I had a rather lengthy discussion with another commenter a few weeks ago about this exact topic, Melanie. I'm very much against using a Roth IRA for an "all-in-one" savings tool, especially for short-term goals. Here is why:

The article is valid and appreciated, but I agree with the others about the title. "Choosing a 401k" is an actual specific task performed by employers that is not mentioned in this posting. Either change it to "Watch out for extra fees when choosing your 401k investment options" or "Watch out for extra fees when…

If you could put an additional $1,375 in your Roth IRA today and have it grow at 9% annually, then yes, it would be worth $18,243 tax-free in 30 years. However, I and the rest of us live in a world where the maximum Roth contribution is $5,500. Your scenario of growing that "extra" $1,375 in tax savings in such a…

Maybe you aren't understanding me, so I'll try to make it even more clear one more time. The 2014 limit for traditional Roth IRA contributions is $5,500 if you are under age 50. If that one $5,500 contribution grows for 30 years at a constant 9%, you end up with $72,972, not $749,691 as you stated. Even though your…

Regardless of the taxes, a $5,500 contribution will grow at the same rate whether it is in a Roth or traditional IRA. Even if you pay taxes on the principal now for the Roth contribution, the earnings are completely tax free. If you are young enough for the earnings in a Roth to outgrow the principal, then you have…

$5,500 is $5,500 no matter which IRA it goes into.

Most people's income will reduce significantly upon retirement.

I agree that a flowchart is a terrible way of conveying this information, but the principles still make sense logically. Think of it this way instead:

Your age is important because:

For reference purposes, $350,000 in Plano, TX will buy you a 4-5 bed, 3-5 bath, 3,500-4,000 sqft palace with a decent yard in a nice neighborhood. Toyota's current US headquarters is located in Torrance, CA, where the same money will buy you a meager 2 bed, 2 bath, 1,000 sqft condo.

If I limited myself to eating Swedish food, I would have nothing but meatballs, potatoes, gravy, lingonberry jam, and those delightful gummy fish for every meal. I would be happy, but I predict I would slowly grow to the size of a first generation Volkswagen Beetle, with similar proportions.

PMI is an additional premium added to your monthly mortgage payment. For example, if you have a $2,000 monthly payment, maybe only $1,300 goes toward the mortgage itself (i.e. principal & interest). The rest gets split up between escrow items like homeowners insurance, PMI, taxes, etc.

According to noted professional dickwad Darren Rovell, Meb may call himself "American", but we all know the truth. Right?

First one, then t'other.

An emergency fund should be an emergency fund. Interest rate doesn't matter, you should have a set amount of months worth of expenses set aside in a completely liquid and accessible place. Ideally, it would be jointly owned so that if you are married and something happens to one spouse, the other can withdraw the…

Hush that fuss. The nose is one of the best bits!