Savings Story

Three Topics In One Post: Taxes, Roths, Fees

I have 3 “mini-posts” that I’ve decided to consolidate into one “bigger-post”.

I mentioned some time ago that I was ready to file my taxes.  Do to the fact that I’ve been very, very busy, I am just now getting around to actually filing.  For more information about the free service that I’ll be using to file my taxes online, read this post that I wrote in February.

Roth IRA updates.  I received my account verification documentation from Tradeking.com.  My wife and I now have Roth IRAs.  I am super-excited!  Now I have to make a decision.  What happens if the calendar creeps towards April 15th and I have not managed to fully fund both Roths for 2006?  Should I dip into my emergency fund?  I don’t know what would bother me more: missing a year of fully funding my Roths OR using my emergency fund for a “non-emergency”.  Here’s to hoping that I don’t have to make this difficult choice!

Fees.  For the first time in 2 years, I paid a bank fee.  My bank charges $2 if I make a withdrawal from another bank’s ATM.  In a moment of anti-NCN behavior, I left home without my cash envelopes.  I had to make a quick trip to another town about 45 minutes from where I live, and when I arrived, alas, I had no cash.  Thus, I was forced to use a competitor’s ATM.  So, I’m out $3.50.  Dork!

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12 thoughts on “Three Topics In One Post: Taxes, Roths, Fees

  1. “what happens if the calendar creeps towards April 15th and I have not managed to fully fund both Roths for 2006? Should I dip into my emergency fund?”

    My answer to that would be, YES. You will still have time to refund your emergency money but once April 15th is gone it’s too late. I save best by breaking my deposits down to either monthly or per paycheck and even then bumping up one or two of the deposits so that I have a cushion in case something happens.

  2. Do you qualify for the tax deduction for having an IRA? If so, I would say definitely “borrow” from your emergency fund. Especially if it is only 1K or 2K dollars, not the full 4K. I can’t remember if you said you are getting anything back from Uncle Sam. If you are, use that to repay your emergency fund. If you don’t qualify for the IRA deduction, you may still want to borrow from yourself. Look at the results in the long term; which will benefit you more in 20 years?

    Regarding the ATM fee, yeah I haaaate that. But you have to tell yourself that occassionally you will pay for convenience. It was surely worth $3.50 (wow, I’ve never seen a fee above 2 bucks), in time and gas to pay it this one time. I know you aren’t going to make a habit of this. Maybe you should stash a check or two in your glove compartment for those emergency/brain cramp moments like this?

  3. Look at this long term… in twenty years, will you be glad you funded the IRA, or you kept a couple of thousand dollars in the emergency fund. Also, if you qualify for the IRA tax deduction DEFINITELY borrow from your emergency fund.

    About the ATM fee – I haaaaaate that. And $3.50 is the highest fee I’ve seen, I’ve never seen above 2 bucks. However, occassionally you should pay for convenience. It was worth the fee in time and gas. It’s not like you’re gonna make a habit of it, right? Have you thought about leaving a check or two in your glove compartment for emergencies/brain cramp moments?

  4. Hey:

    Take it from a 51 year old – fund that ROTH. I wish I would had a Roth opportunity 20 years ago – I wish I would have saved more 20 years ago. We are maxing out everything now – but the twenty years of growth has passed us by. Fund the Roths.

  5. I agree, fund the Roth. You are going to be on track to fund 2007 without this sort of shuffling but it is silly to forgoe the opportunity just to keep a ‘perfect’ eFund record. You have a substantial eFund and if you want to take a loan from it, that makes total sense to me. It may not be a true ’emergency’ but it is a good financial decision. You are still only a couple of years into righting the ship and if you have to fudge a bit to get it done this year, so be it. You won’t be doing much more of it the way you’ve been going.

    Peg

  6. Question, I’ll ask it here; from what I here you don’t pay taxes on what you make in your Roth. So say I open up an account at Tradeking, then buy say stock that pays out about 8.5% in dividends. Are those dividends taxed in the Roth? Not sure how they treat dividends but I’m assuming that at the end of the year those dividends would be mine and not taxed in a tradeking roth?

  7. AC in Arizona,
    I’m not a tax expert, but I’m positive that all earnings inside of a Roth IRA grow TAX FREE.

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