financial discussions with the girl next door

Roth IRA – Maxing Out 2010 March 9, 2011

Filed under: Uncategorized — girlnextdoorfinance @ 6:43 pm

I have known for quite a while that you have until April 15 of a year to max out a Roth IRA for the previous year. I have made regular contributions to my Roth IRA since opening it but thus far I’ve never actually maxed it out. However, now that I’ve covered all of my moving expenses and am relatively settled in Chicago, I’ve been making plans to back-contribute for 2010 and finally max out my Roth.

(Here’s a link to the IRS website explanation of Roth IRAs for those who are unfamiliar.)

In 2010 I was contributing $200 a month to my Roth IRA, which brings my total contributions for the year to $2400. The maximum you can contribute in one year is $5000, so I am allowed to contribute up to $2600 more for 2010. I contacted a local financial adviser (so I could meet with someone here, since I am never going to be back in my hometown – where I opened the account – during normal business hours!) and set up an appointment in January. I wanted to set up 3 payments of $867 each to cover the remaining $2600. The adviser was more concerned about setting up recurring monthly payments for this year, which he wanted to start as soon as possible. I wanted to first focus on maxing out 2010, then focus on 2011 and going forward. He ended up not getting everything set up in time to have three payments, so instead I’m back-contributing $1300 in March and another $1300 in April. He ALSO set up my 2011 payments, $417 per month, to be withdrawn each month. Since this wasn’t set up until March, I’ll have to play catch-up later in the year for the January and February payments that were missed.

It also means that for March and April, I’ll be contributing $1717 each month to my Roth IRA. That’s over half of my take-home pay! I find this incredibly frustrating, as it’s going to make my budget very tight for those months. (I’m really trying not to dig money out of savings for this kind of stuff.) I’m also concerned because the payments were supposed to be withdrawn on the first of each month, but the March payment didn’t actually process until Monday (March 7). I’m slightly worried that my April payment is going to end up not going through in time! This whole thing has been frustrating enough that I’m thinking about switching companies for my Roth IRA. The only reason I haven’t is because I really don’t have time to deal with it right now.

I’ll be relieved when this is all straightened out and my retirement savings can be back on auto-pilot again!


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