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Forum » Finance brahs...max out Roth IRA or keep cash for short-term spending?
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Thread: Finance brahs...max out Roth IRA or keep cash for short-term spending?

post 1680952413 04-17-2023, 12:16 AM
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Finance brahs...max out Roth IRA or keep cash for short-term spending?

with looming recession, wondering if i should keep extra cash for economic headwinds ahead or put some of it to max out Roth IRA? havent been seeing much gains in my portfolio so wondering if its better to put it somewhere else like no penalty CD for this year?
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post 1680953213 04-17-2023, 12:54 AM
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Lol @ Roth over Traditional
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post 1680954243 04-17-2023, 01:37 AM
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My vote is if you're in your twenties, and early-mid thirties, you should just do the 401k match and nothing more. You need the excess cash for a house down payment, paying off debt, emergency fund, etc. I'd say put the excess into an investment brokerage account for stocks and mutual funds, or at least a savings account with the highest yield you can find. Same concept can be applied if you're single and kidless IMO.

If you've got kids, wife, dependents in general, or are 40+, then you should focus more on the retirement accounts and doing less risky stuff in general.
post 1680954303 04-17-2023, 01:39 AM
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banks are at like 4-5% interest
post 1680968433 04-17-2023, 08:59 AM
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Originally Posted By elterrible987⏩
For 2023 IRA contributions you have until April 2024 to contribute.....

so if you have zero emergency fund then keep it as an emergency fund and save up to max out your contribution before the deadline


on the flip side if you have a solid emergency fund then max out your IRA now especially if you think the market tanks so you have cash there to buy
this is for 2022 contribution.

i usually put in retirement target 2055 and leave some in settlement account as cash pile so you can buy into stock market when its more stable.
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post 1680968953 04-17-2023, 09:10 AM
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Because you've no idea what tax rates will look like in the future, whatever you're throwing into retirement should be half roth and half traditional.

I never max out though, just enough to get matched by the company. Maxing is only good if you've nothing else to invest your cash on in the short term.
post 1680969263 04-17-2023, 09:15 AM
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You can withdraw a roth at anytime. That is your contributions. For example, if you have 6000 in your ROTH from 5500 contribution and subsequent 500 gain, you can withdraw 5500 of that 6000 without penalty.
post 1680969363 04-17-2023, 09:16 AM
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There aren't a lot of good financial plays right now.

If you want to stay liquid, buy 6 month or 1 year T-Bills. It offsets about half of the guaranteed 10+% loss of holding cash.

IRAmaxxing is never a bad idea, but I hate this stock market right now. Much more room to move down than up IMO. Real growth has averaged about 1.8% a year for 20 years... that's kind of your baseline case without more Fed rocket fuel.

Ditto with RE. It's being driven by the same underlying mechanism as stocks.

For commodities, it depends if you think we are going into a 2009 type straight deflationary crash, or into 1970s style stagflation. Commodities get murdered in A but outperform in B.

And really, the present environment is a mix of the two. The trigger of this recession is identical to '09 (rapid Fed hiking cycle creates interest rate risk, eg on ARMs), but there is a $9T ocean of inflationary funny money riding underneath this market that didn't exist back then.

Anyway, just dropping some different ideas on a Monday morning. As conservative as I am, I think your best play is bonds.
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post 1684745703 06-16-2023, 03:20 PM
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Originally Posted By fate0311⏩
You can withdraw a roth at anytime. That is your contributions. For example, if you have 6000 in your ROTH from 5500 contribution and subsequent 500 gain, you can withdraw 5500 of that 6000 without penalty.
This finance blog post helped me prioritize my ROTH IRA contributions: fangwallet.com/2017/11/27/5-steps-to-budgeting-and-saving-for-retirement-effectively/
post 1684745983 06-16-2023, 03:27 PM
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If you have a 401k or other alternative for proper retirement accounts AND are ok with risk do Roth.

You can pull contributions any time, just do not touch earnings. If you need the money you can pull it, if not just let it ride, add to it, and collect returns. It's the perfect savings + emergency fund vehicle if you also have other retirement options available and I don't know why it's not pushed more.
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post 1684746393 06-16-2023, 03:34 PM
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IRA maxxing depends on your overall strategy and where you are in life. It's great early on when you're in the low tax rate, because you'll expect to pay more taxes as you get older (generally, mvoe up corporate ladder, higher salary = higher tax bracket). ALSO, younger = further away from retirement = less certainty on what taxes will even look like in the future.
After matching 401k I put money into my roth IRA, but my strategy has changed dramatically. I expect a much earlier retirement and would rather not have it locked in a roth, so I don't contribute anymore. This account is where i do all my short trading anyways, so the tax advantage is awesome.

Originally Posted By FA*******⏩
IRAmaxxing is never a bad idea, but I hate this stock market right now. Much more room to move down than up IMO. Real growth has averaged about 1.8% a year for 20 years... that's kind of your baseline case without more Fed rocket fuel.
For commodities, it depends if you think we are going into a 2009 type straight deflationary crash, or into 1970s style stagflation. Commodities get murdered in A but outperform in B.
Nice part about a roth IRA is you can dictate your investment to a much higher level than a company 401k. If you believe a lot of downside, shift your capital to puts or sell covered calls on any ETFs/Shares.
Commoditiesgenerally have a low correlation to stocks, so it's not bad to have a commodity ETF in the mix.
Originally Posted By -JR⏩
If you have a 401k or other alternative for proper retirement accounts AND are ok with risk do Roth.

You can pull contributions any time, just do not touch earnings. If you need the money you can pull it, if not just let it ride, add to it, and collect returns. It's the perfect savings + emergency fund vehicle if you also have other retirement options available and I don't know why it's not pushed more.
Yeah good points. Once my IRA gets to a certain $ (im not contributing any more capital to it) I'm going to withdraw what I put in (no penalty) and save all the returns for late retirement with a nice sweet tax free return.
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