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URL:  http://boards.fool.com/10-of-her-salary-approx-110-per-week-towards-20228440.aspx

Subject:  Re: Contributng Too Much towards Retirement??? Date:  1/28/2004  10:28 AM
Author:  JLC Number:  38784 of 75839

10% of her salary (approx. $110) per week towards her 403B invested in Van Kampen 403B
10% of my salary with company 24% match (approx. $150 per week) towards my 401K (Beneco Polaris plan with some decent choices)
8% of her salary (about $80 per week) (because she's a teacher) gets automatically taken out and invested in a low returning retirement annuity.

Also, we had opened up two Roth IRA's about two years ago that we started to invest towards but stopped due to day care, etc., so they are active, but the balances are low (about $2,500 in each).


Saving 10% of your salary is a decent rule of thumb. But its just that, a guide, an outline. If your kids are starving or your not enjoying life a little because you're "saving too much", stop and re-evaluate your expenditures, including savings. Also, how much you need to save depends on what you do in retirement and when you plan to retire.

Having said that, here are my suggestions.

I am assuming you have an emergency fund, i.e., about 3-6 months living expenses saved in cash. Nor have any outstanding credit card debt. Those are first things on the list to take care of.

I would max out your 401k to the company match and no more. The company match is "free money", if putting in more doesn't get more "free money", stop the extra.

You don't say if your wife's 401k has a match. If not, I'd hold off on contributing for now. It sounds like 8% is taken out for what is a teacher's pension plan and that it is not an option to participate or not.

Start contributing to your Roth IRAs again. You might be able to fund it with the 10% that was going into your wife's 401k. The Roth is your best option because you make the choices of where your money goes. You are not limited by a company plan.

In summary, order of importance:
#1--emergency fund/credit card debt
#2--401k to company match maxiumum
#3--Roth IRAs
#4--taxable accounts

JLC



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