I've read through the wiki many times over the past year, but not taken action. I just want some input from the community if this plan makes sense or if I should do anything differently:
Background: $52K annual salary, or $1350 (after tax/healthcare) every two weeks. $350 per paycheck goes into savings. Only debt is ~8K car loan that's at 1.99% APR.
Problem: Entirety of savings = 25K sitting in savings account earning despicable .01% interest. Nothing separate for retirement, although if I stay at my current job forever (not likely) I have state retirement system.
Notes: I read through the prime directive. My employer doesn't offer any matching plans, but does offer 403(b) or 457(b) plans. I don't know how long I'll stay with current employer. There's a good chance I'll leave in next 2 years to do a thru-hike. My employment future after that is anyone's guess.
My immediate plan:
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1) Open an IRA and deposit the maximum $5500 for the year. Having trouble deciding between Roth or Traditional.
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2) Move the remaining $20K in savings to a high-yield savings account at an online bank like Ally.
Longterm plan:
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1) Of the $9100 I save annually (350 per check @ 26 pays a year), plan on $5500 annually going into IRA.
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2) Set up a 403(b) or 457(b) with my employer to contribute $70 per paycheck ($1300 per year). I don't think I can just deposit into these accounts through my savings, I think it has to be a payroll deduction (?).
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3) Add remaining $1300 per year to my new high-yield savings account. This account will be my emergency fund.
Questions:
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Most important: does the above plan make sense?
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I probably don't need a $20K emergency fund. Where else could I put some of that money for more short-term savings? CDs?
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Should I prioritize the 403(b) 457(b) over the IRA? From the prime directive in the sidebar, my thinking is "no" since my employer doesn't match but I'm not sure.
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When is it smarter to just pay off the $8K car loan versus making $300/month payments for 3 more years?
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Check my understanding of the 403(b) and 457(b) plans: the money I elect to put into a 403b or 457b plan gets deducted from my payroll pretax, so I end up paying less income tax as I'm working. Upon retirement age, I pay income tax on the money as it's withdrawn. So it's like placing a bet that income taxes are going to be lower in 20-30 years. Is that correct?
Thank you in advance for any help. And thanks for putting together such a helpful wiki/community!
Submitted October 28, 2017 at 09:52AM by 5t5hrow5away5 http://ift.tt/2iEgMrn
