December 14th, 2009 
NCN
As preparation for 2010, I’ve spent some time updating automated contributions to various retirement, education, and cash savings accounts. Here’s the breakdown -
My Retirement Accounts -
403(b) – Monthly amount = $1375
A percentage of pre-tax income is deducted from each monthly paycheck.
Roth IRA – Monthly amount = $312.50
My goal is to make the maximum allowable contribution for 2010. For my situation, that’s $5000.
My Wife’s Retirement Accounts -
Roth IRA – Monthly amount = $312.50
My wifes’ goal is to make the maximum allowable contribution for 2010. For her situation, that’s $5000. She also makes pre-tax contributions to her pension plan.
Education Savings Accounts -
ESA 1 – Monthly amount = $125
The annual contribution limit for my oldest daughter is $2000.
ESA 2 – Monthly amount = $125
The annual contribution limit for my son is $2000.
ESA 3 – Monthly amount = $125
The annual contribution limit for my youngest daughter is $2000.
Cash Savings Account -
Automobile Replacement – Monthly amount = $500
At some point, we will need to replace one of our automobiles.
Future Home Purchase - Monthly amount = $500
At some point, we hope to pay cash for a new home (or use available savings for healthy down-payment).
Summary -
The total of all monthly contributions, excluding my wife’s contributions to her pension, is $3375, which represents a very substantial portion of our household income. It’s important to note, some contributions, those to Roth IRA and Education Savings Accounts, are calculated for a 16-month contribution timetable, running January of 2010 until tax-filing deadline April 2011.
As we continue to live debt-free, my wife and I have come to realize just how important it is to save, save, save – and then save some more. We set lofty goals for ourselves, including the contribution goals that you see above.
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Hey NCN – Do you also set aside money for irregular expenses (insurance, auto reg, etc) or do you account for them in your monthly budget?
SingleGuyMoney – I budget for them, each month, and put the money in a savings account. I also have a standard “emergency fund” from which I could pull money, should I need it sooner than regular budget would allow. What about you?
Nice to see a new post. I thought you were MIA
Hello,
I see you’re contributing $312.50 monthly to your Roth. However, $5000/12 = $416 per month.
What you may be doing (and what warrants further discussion), is making 2010 Roth contributions before April 15, 2011; thus giving yourself 16 months to get in $5000. Indeed 16*$312.50 = $5000.
However, I’ve thought about this, and I’m not sure it’s the best idea. In your case, you’re depositing $625 per Roth (half for 2010 and half for 2011) in the first four months of the year, and $325.50 in the other eight. Thus, you’re systematically oversampling the market in the first four months, and biasing your dollar-cost-averaging towards Jan-April.
Is this intentional (part of your strategy) or a minor oversight?
Thanks!
What happens if you contribute monthly to a ROTH IRA but than find out during tax time of the next year that you made to much to contribute, what happens?
Welcome back! Missed you!
That’s a lot of money into tax-advantaged accounts. Do you keep enough outside as well?
@Boyan I suppose you are correct. Keep in mind, I’m still making contributions to my 2009 IRAs, and will do so for the next 5 months. (Dec – April)
@Matt I’m 99% sure that I won’t make too much to make maximum contributions. If I WERE to get close, I’d just hold back on the contributions from say January to April…
@mbhunter It’s good to be back! I keep a 12 month emergency fund in my savings account…
Your budget is ready for 2010, no worries for payment. You’re lucky for being debt free. More luck to you and “Happy Holidays”.
Hi
Great information and it’s important to note, some contributions, those to Roth IRA and Education Savings Accounts, are calculated for a 16-month contribution timetable, running January of 2010 until tax-filing deadline April 2011
Good for you. This posts makes me a little sad though as your 403(b) contributions are more than my biweekly income.
Sounds like you have a goal for 2010 which is more than I can say for my finances. I try to save and contribute to my ira but it gets a little tricky some months. I bet if I sat down and wrote everything out I could do it so thanks for the tip!