Blown Away wrote:
Flagpole,
I have about 4 months worth of expenses saved but I am a teacher so I am pretty confident in my job security. Also due to being a teacher I have to contribute to teacher retirement which gives me my salary when I retire. Basically a 401k but not quite. My wife does not have a 401k at the job she is at.
My question is this. Why dump money into the roth when I can't get to it very easily. Why not put most into a mutual fund that I can get to for things like college or emergencies.
1) With your decent job security, 4 months of expenses saved is good. I wouldn't do more than that unless something else changes in your life.
2) Roth or no Roth, you should be doing about 15% of your income (your HOUSEHOLD income) into retirement accounts. If with the pension you feel like you can do ok contributing just 10% or so, then do that. As was already mentioned in this thread, you can get at the contributions in a Roth, but I hate that way of thinking. You should decide your level of comfort for earmarking money into retirement accounts, and then if you like open a non-retirement mutual fund for extra investing. Even the stock-happy Jim Cramer suggests that you do retirement giving (401k or 403b perhaps in your case and Roth IRA) and THEN invest separately in non-retirement ways. He's mostly a stock guy, but he does recommend some mutual funds in one of his books. Retirement accounts should be sacred cows, and you MUST contribute to them to ensure a decent retirement. After those are fully funded, THEN invest separately.
3) Regarding college, you can fund that a LOT of ways. 529 plan, simply out of you and your wife's combined income at the time, loans for the kids, have them work and pay for a lot of it, etc. One thing my wife and I have decided is that the house will be paid for before my oldest enters college, so that just frees up cash. You can also just give so much to retirement accounts before college starts so that you can suspend it when the kids are in college. Lots of ways to do it. For middle class families, not every kid gets to go to Harvard. If they get a free ride perhaps, but there are lots of decent state colleges a kid can go to, and many states have reciprocity agreements with other states, so the choices are usually pretty big.