[94SilverCab]

After 11 years as a consultant I have become an employee (of my largest Client). As of January 1, I am putting the maximum "matchable" amount in my company's 401k (they will match 50% up to 6% salary contribution), and fully funding my IRA (given that I'm 50 I can put away another $6,000/year).



Is this my best strategy?



Also, I can put as much as $22,500 into my 401k, but I'm just getting used to salary vs. 1099 income, so I don't want to leave myself cash starved this first year. Can I make a lump sum payment into my 401k next December if I find I have "extra money"?



Thanks,



Jay

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[Lear35A]

As far as funding your IRA I recommend doing it as a Roth. I've got a bunch of money in a traditional IRA and dread the coming tax implications of that. The idea was that your tax rates would be lower in retirement when you withdrew the money from the IRA. Well as I see it lower tax rates are NOT going to happen.

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[Rap]

As to the lump sum at the end of the year what does he plan document read. There will be those that will say that this sort of timing can miss gains. There are those that follow dollar cost averaging where one makes monthly contributions. After the turmoil in the market the past number of years I'm not sure what is correct to do. I make monthly contribs because of ease and its a set program that stays in motion. As for the end of year, we have an old plan which allows for end of year contribs. Taking out the top heavy rules under this plan one can find other ways to spend allocated dollars during the year, can you say supercharger or get cold feet.

Roth IRA's are great if you can afford paying the capital gains to transfer it in. One can also set a Roth up and do measured contribs over time to decrease the amount of up front expense to pay for the whole transfer. Of course again one may find themselves in a situation were putting off action leads to not doing it.

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[Rap]

Oh by the way, if your rich and earn $250,000 the D's have you firmly in their sites and could change the Roth IRA rules because you can't tax everyone enough to pay entitlements and pay the debt down!

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[94SilverCab]

RE: The lump sum payment...I would expect this to be a one time thing. I haven't quite "equalized" getting a paycheck that's 40% of what I am accustomed to bringing home. The IRA has always been paid as soon as possible for this year (2013) on January 1, so I'm ahead of 99% of people who have traditional IRAs that put them away in April the following year (i.e. April 15, 2013 for 2012).



Jay

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[Rap]

I subscribe to the theory of saving as much as you can and still lead the life you want. Saving as much as you can is the only guarantee to the poor interest environment !

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[MB968]

Jay, I did exactly what you're thinking of doing some years ago. I took full advantage of the post-50 rules which allow you to put quite a few $'s away. On at least one occassion I think I had the company take almost all of my last paycheck or so for the year and put it into the IRA. I remember getting a zero paycheck or two when I did it. But, check the rules, I retired at 57 which was several years ago, and your individual plan rules may be different. Talk to HR.

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