Friday, March 22, 2013

Financial Advice from the Fidelity Guy

(first off, you probably won't notice, but I added a new blogroll because google decided to ditch google reader.  BOO!!  I finally got an app so I would keep better track of blogs and now they're ditching the RSS feed.  The good news is I'll be reading those private blogs more often now.  yay!  But if you're uncomfortable with me having a link please let me know.  Thanks!)

So at the last benefit fair I went to I got to sit by the 401K guys for the company we were visiting.  When I wasn't chatting with employees I tried to listen to the advice he was giving out and finally at the end of the day just point blank asked him what I should do with my money.  And I decided to share that with you.

#1- contribute the maximum for matching to your company's 401K.  If you have to put in 6% for them to match 3%, put in 6%.  If it's 5% and they match 4%, put in 5%.  Do that before anything else regardless of your income.
#2- create a liquid emergency savings account that will cover 3-4 months expenses.  That means you sock cash away somewhere you can get to it fast-so not investments.
#3- save more for retirement.  But my questions was, what's the advantage of a RothIRA over a 401k or is one better?
IF you want to purchase a home in the near future or save for kid's college, you want to open a RothIRA.  You can contribute up to $5500/year and when the time comes to buy a home or pay for college, you can withdraw from the principal.  Here's the part I that was new to me:
If you are in a low tax bracket, you want to do a RothIRA because you will not pay taxes later and you're not paying taxes already.  A Roth is after tax contributions.  So if you're like me and pay next to nothing in income taxes, you really want to put the rest of your retirement savings into a Roth. I had honestly never considered that.
If you make more money, then more contributions to the 401k may be the better option for you since those contributions are pretax dollars and will lower your taxable income.  You do pay taxes later when you withdraw.
Now that I'm making some extra money and we'll actually have money to save, we've been trying to decide if we should pay off our rental property or contribute more to our 401K.  Now we know we want to open a Roth.
I like this added perk of my job.  Maybe this advice will help one of my readers too.


  1. I never felt so grown up in my life, until I opened up a RothIRA a few years ago. :)

    Oh, and PS, that lemonade stand is collapsible and fits under a twin bed. That was what sold me on it. :)

  2. We're having these conversations right now. Thanks for adding to my (limited) store of knowledge!