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over saving? and this year's raise

May 9th, 2013 at 08:26 am

Oh my goodness, I just made an interesting discovery about how much money went toward my retirement savings in 2012. I contributed the maximum to my 403b through payroll and fully funded my new Roth IRA. Since I turned 45, my employer has kicked in a generous 15% (it was 9% up to 45 years old) of my salary (on top of my salary, not from it) each year to my 403b, which apparently I havenít calculated in a long time, because it is a higher amount than I thought it would be. Then I realized that an additional mandatory 6% of my salary was being pulled out into my work 403b, which I believed was part of the maximum that I was already voluntarily contributing, not in addition to it. So the grand total was:

2012 retirement funding
my contribution to 403b 17,000.00
employer's contribution to 403b 9,312.10
my contribution to new Roth IRA 5,000.00
newly discovered additional mandatory contribution to 403b 3,724.77
grand total 35,036.87

That seems like a lot. My current salary is $63,190, so I contributed about 33% of my pretax salary and then an additional $5000 (no tax break) to the Roth IRA. Actually, my salary for the first half of the year was $61,053, so my contribution was even more than 33% of my salary. Itís awesome that so much money went toward my retirement fund and itís definitely growing at a nice rate, but Iím starting to worry about having too much money tied up in retirement savings that I canít access without penalty until Iím 59.5 years old. Iím not sure how to figure that out.

I also recently discovered that if I continue working full time, I meet the qualifications to ďretireĒ from my place of employment at 55 and could start to access my 403b funds then, if needed, without penalty. I will be 49 in September. Who knows if I would have enough money by that time to retire fully, but it would give me the option of ďretiringĒ and then trying something new Ė maybe even working part-time in a different field.

I love the idea of having a fat retirement pot, but I really need to make sure that Iím enjoying life now because who knows how long I will be around. I donít have children, so Iím not thinking and saving strategically with the idea of leaving an inheritance to anyone. I will probably name my 1 niece and 3 nephews and maybe some close friendsí children in my will (which I really need to create). Lots to think about.

I just very belatedly had my performance evaluation and I will be recommended to receive a higher percentage raise than the normal increase. Yay! It wonít be huge, but every little bit helps. I just located last yearís increases Ė 3.6% normal or 4.5% for high performance. If the numbers are similar for this year, I will be excited to break the $65K mark! Smile

3 Responses to “over saving? and this year's raise”

  1. MonkeyMama Says:

    I think "over-saving" is mostly impossible to do. (Actually, I have had some extreme savers in my family so is possible, but I think it's hard to do if you are aware of the possibility, which you seem to be). If you over-save today, you can always spend that money tomorrow. BUT, I think you have valid concerns with tying so much up in retirement funds. What kind of other funds do you have access to? Is *all* your worth really tied up in retirement?

    I know plenty of very balanced people who save 30% - 70% of their income. So I don't think that in itself means much. What do you feel you are missing out on? How much would you need to feel you are enjoying more? What are your retirement goals? It's hard to answer your question without knowing how much you need to retire?

    I'd probably commit to maxing out the $17k to 403b because it keeps you otherwise in the lower tax brackets. $17,000 x 25% tax rate = $4,250 tax savings. That is almost enough to entirely fund your ROTH. I would then fund ROTH over Traditional IRA. If you pay state taxes, your tax savings may be greater. I would consider the ROTH just "Savings" as you can touch the principal at any time. But it would make far more sense than investing that $5k in taxable accounts. I am not sure on the tax logistics of that other "forced 403b contribution"?

    How much do you need to contribute to receive that match? Will you also receive social security income, eventually? It is certainly possible that you should reduce the retirement contributions and make sure that you are saving outside of the "retirement" umbrella. But it's hard to give a good answer without a lot of information. I recommend you check out bogleheads forums too. They would ask for a lot of information, but you would get really good and FREE financial planning kind of advice over there.

    P.S. Work on that will starting TODAY!!! I would do that first before anything else.

  2. MonkeyMama Says:

    P.S. I see from sidebar that you have other assets - six figures - so that is good. This means you are not way overly imbalanced on the retirement funds.

  3. snafu Says:

    Another voice pleading that you write out a Will. Google, copy and print the form as a first step which you can modify and finalize with a lawyer/notary in the near future but it is so important to make a start. If you delay, you put your assets in the hands of government bureaucracy and you surely don't want to do that!!! 2nd, also print out what is often called an Advance Directive or Durable Power of Attorney or even Living Will. It gives explicit instruction for medical treatment if you become incapacitated.

    These forms are not complicated, they are not uncomfortable or sad. Anyone with assets needs to do this task. Have you named a beneficiary on your various Retirement Programs 403b, Roth IRA?

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