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Greetings All:

Today, I sent in the final car installment bill. No more credit cards, car payments, kids college etc... (still ove $45,000 on the house 3 years to go there).

The cash emergency fund and 401Ks are funded as our mine & wifes ROTH IRA's. It was a tough slog, (read: 4 years of THOUGH budgeting) but I feel much better already. (sigh)

Should I goose-up the 401K to the MAX allowed (about 2,000 a year more)?

Or, should I just save more in cash equivalents to pay for replacement cars, furniture etc?? By the way what is the ROTH limit next year if you're over 50?

We've never been debt-free before...this feeling is new....and a bit terryifying, I think I'll screw it up somehow.
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Congratulations!

Should I goose-up the 401K to the MAX allowed (about 2,000 a year more)?

Or, should I just save more in cash equivalents to pay for replacement cars, furniture etc?? By the way what is the ROTH limit next year if you're over 50?


I'll take the easy question first.

For 2007, the IRA contribution limit is $4000 if younger than 50; $5000 if 50 or older by the end of 2007. For 2008, the IRA contribution limit is $5000 if younger than 50; $6000 if 50 or older by the end of 2007. After 2008, the limits are indexed to inflation in $500 increments.

As far as saving in a tax-deferred account vs. a taxable account - it depends on where you are with respect to how much you feel you will need for retirement and how much you feel you will need for the other needs, like cars and furniture.

Now that you have done the 'budgeting thing' for a few years, you should have a good idea of what your minimum comfortable living expenses are. If you forecast those expenses out for when you expect/desire to retire, subtract any other income you expect to have then (SS, pension, etc.) and then multiply the remainder by 25, you should have a good idea of what size nest egg you will need, at a 4% 'safe withdrawal rate'.

You can then determine how close you are to meeting that goal to see if you need to add more to your retirement stash or not. Also - just because it's money that you 'want' to use for retirement, doesn't mean that it has to be in a 401(k), IRA, or other similar account. Taxable accounts work just fine in retirement, too.

If you want more information on retirement planning, check some of the very early posts on the Retire Early CampFIRE page (used to be Retire Early Home Page): http://boards.fool.com/Messages.asp?bid=112992 Lately it's been more of a political board, but during the first couple years, there are some pretty good discussions on retirement planning.

We've never been debt-free before...this feeling is new....and a bit terryifying, I think I'll screw it up somehow.

It is a different mindset, but one that becomes pretty fun when you start seeing the power of compounding working for you instead of against you.

AJ
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Should I goose-up the 401K to the MAX allowed (about 2,000 a year more)?

Yes, especially if you are not getting the full company match for which you are eligible. And if you like the investment options available.

Or, should I just save more in cash equivalents to pay for replacement cars, furniture etc?

Yes, you are in a great position to plan for your future instead of paying for your past.

Fuskie
Who thinks rather than being terrified you should be excited for the possibilities...
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:)
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You need to call in to the Dave Ramsey show on a Friday to yell "I'm debt free!" with the rest of the inspirational debt free people!
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Congrats to you!

I would make sure you have a budget for your Freedom Fund contributions for cars, furniture, needs/wants, etc.

Making sure you have that taken care of, max out the additional $2k, especially if your company matches.

AJ already told you the limits on IRA contributions, dont forget to increase them for inflation yearly also!

bdgf06
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Should I goose-up the 401K to the MAX allowed (about 2,000 a year more)?

Or, should I just save more in cash equivalents to pay for replacement cars, furniture etc??


If all you are going to do is "save" the money, then by all means put it somewhere behind the tax wall and let it compound tax free, rather than giving a slice to the government every year. You will end up with a lot more dough if the taxman doesn't take a 20% slice off every year's increases - even if you have to pay something on it at the end (or not, if a Roth.)

If you think you might need that money for "cars" or other things, then (obviously) don't.

And, you can adjust this each year, so you're not locked in forever on whatever decision you make.

I'm assuming you're at the level needed to get the complete "employer match". If not, get there - that's free money.
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Today, I sent in the final car installment bill. No more credit cards, car payments, kids college etc...

Congratulations!
mm
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We've never been debt-free before...this feeling is new....and a bit terryifying, I think I'll screw it up somehow.
*********
First,let me cheer:

2 bits, 4 bits
6 bits, a dollar
All for RHStacey
Stand up and holler!


I don't know the details of your finances, but I would try to make the maximum to your retirement accounts as well as setting up a freedom fund for vacations and replacement items.

I don't think you will screw it up if you are careful. Continue paying attention to your monthly budget. I like the idea of giving every dollar that comes your way a "name" or destination before you spend it.

Hope you keep posting--I'm sure you have a lot of good advice you can add to the board.

Molly--standing up, cheering and doing happy dances



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