April 16, 2008

Retirement Contribution Schedule

It’s always irked me a little that my retirement contributions don’t appear in my Vanguard accounts until two days after payday, but it’s at least been consistent since I opened my accounts a few years ago. What really gets my goat is that this last pay period’s contributions didn’t show up until this morning, a full week after we were paid.

What’s up with that? I’ve sent an email to our benefits people to get an explanation because I do NOT want to see that happen again. My money has places to be, folks, don’t hold it up!

Does anyone else have to wait a certain number of days before they see their contributions? And that does fluctuate for any reason?

Am I just extraordinarily neurotic about my every penny?


April 4, 2008

Thinking Aloud: Cash versus Retirement Savings

This isn’t the first time I’ve pondered this and I’m sure it’s getting old. I’m mulling over the various adjustments I’d like to implement for Tax Year 2008. I know what my annual goal was fairly sensible, but in light of some mistakes made in Tax Year 2007, I need to make some post-Q1 adjustments.

Mistake Number 1: Underestimating the amount of “contractor” income I was going to make.

This led to Mistake Number 2: Adjusting my withholdings drastically to make up for what I thought had been excessive withholding, given my Head of Household status. For the last few months of the year, I was paying very little federal tax.

Had I not received so much untaxed income in Q4, too late to correct the withholding and increase my retirement contributions correspondingly, my estimate of my taxable income and corresponding tax bill would have been just about perfect.

Instead, the effects of the two mistakes above were:

1. I ended up owing the entire amount of taxes assessed on the untaxed income, and
2. My percentage of retirement contributions of total income was significantly lower than it should have been.
3. I think I’m being assessed a $32 federal penalty for not making quarterly payments on that income because I withheld too little. 🙁

Rather than making quarterly payments this year, I’m considering the following:
1. Increase my retirement contributions for the rest of the year to include the equivalent of 30% of the untaxed income.
2. Save 10% of the untaxed income for taxes, instead of the usual 30%.
3. Keep my withholding at 1 and add a small, additional amount per month so that I don’t have to waste time, money and brain capacity on sending in quarterly payments.

I like this plan because I really like watching the balances in my Vanguard account go up (despite the market volatility, it creeps up now and again). I really like the idea of committing to a bit more in the retirement accounts. I like reducing that feeling of false security when I’m holding a lot of cash in anticipation of a tax bill.

Cons of the plan: reducing my take-home pay even more will make budgeting even more difficult. I’ll have to be ultra-careful about juggling expenses because I’m no longer holding out until that next fat supplement check, what I gots is what I gots!

Any cons that I’m missing here?

June 18, 2007

Good enough for now: Retirement Accounts

Two weeks ago I bit the bullet and sent in my change of contribution forms drastically trimming down my 403(b) contributions to little more than the required amount to get the full company match. Today, I added up the amounts of my Rollover IRA that I never look at, the Roth and 403(b), to find it’s a shade over 10k!

It doesn’t seem like much, but that’s a 150% increase in my 403(b), and the Roth is brand new as well (for 2006.) This helps the bitter go down a little more easily, as does the knowledge that I’ll pick up contributions again as soon as I’m able.

May 8, 2007

Your House is Your 401(k)?

Chatting about the house for sale down the streeet with a friend, I was taken aback at his bald statement: Forget about your 401(k) until you have a house. Your house is your 401(k)!

His logic is as follows:

It took him 10 years after college to buy his home. That was 6.5 years ago. He hasn’t contributed a cent in the last 6.5 years because he and his wife bought a fixer-upper and have spent that time and money tearing out floors, replacing the bathroom, kitchen and deck, and various other housely duties.
They overpaid the mortgage and refi’ed almost every 6-8 months (paying no closing costs each time) until they arrived at what they considered a great interest rate. I’m not sure what that is, but they’re happy with it.
Now, they have 1 little girl and another little one on the way, they’re secure in their home and are comfortable with their house and tax payments even with his wife working on sales commission and making a bit less than usual.

When he’s going to start contributing to his retirement again, or how much he really contributed before, was left unsaid.

I can see how being house wealthy with a growing family in his mid-30’s can create such an air of contentment, but I wonder how he’s going to make up for his lost years of compounding interest, unless he initially contributed heavily in his 20’s and that’s why it took a while for him to save the money needed for a down payment. On the other hand, he’s flexible, focused and driven, very entrepreneurial and creates new income streams for himself really easily.

I’m rather intrigued, not enough to stop contributing to my retirement plans and watch my tax bill shoot through the roof instead, but intrigued nevertheless.

April 25, 2007

New Retirement Plan, two vendors?

Here’s an interesting twist I didn’t see coming: The university has posted our new retirement plan information online, which I’ve filled out, so all I have to do now is decide which funds I want. The matched 5% goes to the 401(a) and is less than my current contribution, so I’m going to continue to contribute to the Supplemental Plan [my current 403(b)] as well. Turns out they allow me to contribute to different vendors for each plan. So, do I want to branch out to Fidelity/Prudential/TIAA-CREF plus Vanguard? Or just stick with Vanguard? (Ok, probably not TIAA-CREF, I’ve heard too many horror stories about them.)

On one hand, I feel uneasy about keeping all my money in one basket. On the other hand, it’s probably better to keep all the accounts under one roof. That way, I’ll pay fewer fees for non-retirement account investments when I become a valuable, high-account-balance customer.

In the meantime, I should re-evaluate the funds I’ve got and whether or not I want to change my allocations.

April 6, 2007

Income Dividends vs. Long Term Cap Gains

I received my first Roth IRA transaction statement today, and I must admit: I’m baffled. It lists income dividends at the end of each month, which I understand: as your fund makes money, you get dividends paid out which are just reinvested in the same stock or bond if you choose not to take the money out. Yes? So, what’s this other thing, the long term capital gains thing?

This statement has a lot more information than my usual Vanguard statements. It lists the Year-to-Date Income Dividends, the ST/LT cap gains, the contributions/distributions, and the total income year-to-date separately and neatly. It’s even got my 30-day yield, share prices, trade dates, and total shares owned. Yet, I understand so little!!

I’m really writing this post to serve as a big fat reminder that I need to look all this up and figure it out. But I’m not going to do it right this second because it’s ten til midnight and I’m old and tired. Better luck tomorrow.

April 4, 2007

Addendum to Retirement Plan

We received our information pamphlets on the upcoming changes to our retirement plans and I found another tasty tidbit.

Remember the piddly 2.2% that the university was contributing for the unvested-until-after-5-years-tenure employees? Well, they’re preparing to freeze that plan at the end of the fiscal year. We knew that. And we knew that the benefit payout from that plan is still protected. But what we didn’t know was that we are now all fully vested in that plan, regardless of our tenure! So the 2.2% that I completely disregarded because it wasn’t really “mine,” is!

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