In March I opened two Roth IRAs, one for myself and one for my wife. In April I ‘borrowed’ $5000 from my savings account so that I could fully-fund both Roth IRAs for fiscal year 2006. The total contribution for both accounts equaled $8000. Since April, I’ve been working to replace the $5000 that I ‘borrowed’ from my savings account. Yesterday, I deposited the final ‘re-payment’ to my savings account.
As some of you know, I’m trying to save $48,000 this year, in various retirement, education, and investment accounts. As part of my goal, I want to fully-fund two Roth IRAs for 2006 and 2007. I’ve already fully-funded both Roth IRAs for 2006. So, I had a choice to make. I had to decide if I wanted to wait a few months to send a contribution to one of the Roth IRAs, or if I wanted to ‘borrow’ the contribution from my savings and then spend the next few months rebuilding my savings. Quite frankly, I enjoy the added motivation of building and rebuilding my savings. Once I have made a contribution to a retirement account, the money is “out of site, out of mind”. So, this will be my ‘system’. I’ll build up my savings, to a certain point, make a contribution to another account, and then rebuild my savings. Rinse, repeat. Rinse, repeat.
By the way, if you are wondering why I don’t send in smaller contributions, instead of the full $4000 each time, it’s just a matter of personal preference. I make a one-time contribution to each account and then make a single, annual ETF purchase. I chose to fund “my” Roth IRA. Why? It was listed first on my spreadsheet. Next up? My wife’s Roth IRA and then my son’s ESA. Saving money rocks!
Resources mentioned in this post: The Orange Savings Account. Earn 4.50%. Great rates, no fees, no minimums