What would you do?

[skives]

Currently my wife and I each save 15% of our income in our 401ks. Each year we save $15,600 that is in an online savings account. Would you continue this scenario or would you lower general savings to put more into 401ks? Currently have $8,500 in general savings and $101k in my 401k and I'm 33 and my wife has $19,000 in her 401k and she's 28.

[disneysteve]

What is the purpose for that money? Is it your emergency fund? Is it additional retirement savings? Is it being set aside for shorter term needs like your next car or vacation or home repair? Knowing what the money is for will guide how it should be invested.

[skives]

What is the purpose for that money? Is it your emergency fund? Is it additional retirement savings? Is it being set aside for shorter term needs like your next car or vacation or home repair? Knowing what the money is for will guide how it should be invested.

It's emergency fund and short term needs all in one.

[Jluke]

Do you have (are you eligible) for a Roth IRA?

If you set aside 15600 each year why do you have 8500?

Are you aware that you can each put $18k in the 401k and $5500 in the Roth (again if eligible)?

Putting more in your 401k helps come tax time as well.

More info would help

[skives]

Do you have (are you eligible) for a Roth IRA?

If you set aside 15600 each year why do you have 8500?

Are you aware that you can each put $18k in the 401k and $5500 in the Roth (again if eligible)?

Putting more in your 401k helps come tax time as well.

More info would help

We have $8,500 because we bought a house last fall. I am aware of that. Right now I wanted to build up my savings in case of anything i.e. Emergency or a need.

[Jluke]

Thanks. I know some people do mental accounting where they don't acknowledge a savings account. For instance someone is trying to get out of cc debt and then a few weeks later mentions a savings account with 9k.

Are you paying PMI on the mortgage?

What is your target for general savings?

I like 30k for myself in cash savings. I also have 2nd tier in taxable investments if needed.

[skives]

Thanks. I know some people do mental accounting where they don't acknowledge a savings account. For instance someone is trying to get out of cc debt and then a few weeks later mentions a savings account with 9k.

Are you paying PMI on the mortgage?

What is your target for general savings?

I like 30k for myself in cash savings. I also have 2nd tier in taxable investments if needed.

Not paying PMI

my target for general savings is 25k by the end of 2018 and 50k by the end of 2020.

[disneysteve]

It's emergency fund and short term needs all in one.

my target for general savings is 25k by the end of 2018 and 50k by the end of 2020.

I think you just answered your own question.

You are saving $1,300/month.
You have $8,500.
You want to have $25,000 by the end of 2018.
That means you need to add that $1,300/month for 13 more months.
You want to have $50,000 by the end of 2020.
That means you need to add the $1,300/month for 32 more months.

And that all assumes that you don't spend any of that money along the way, which is unlikely since it's your EF and emergencies can and will happen. The odds of not having to dip into savings between now and the end of 2020 are slim to none.

It sounds like you should keep doing exactly what you're doing in those are your goals.

[scfr]

In that scenario, I'd try increasing 401k contributions by 1%, decrease general savings by half of whatever the 401k increase is, and then use tax savings combined with minor tweaks to spending to make up the difference.

In other words, if a 1% increase in contributions to the 401k equaled $100, I'd cut general savings by $50.

Small incremental increases to savings can often be absorbed quite painlessly. That was my experience.

And it's usually easy to change 401k contribution percentages, so you can always make changes later as needed.

Next time either of you get a raise, I'd revisit the situation and look at possibly increasing 401k contributions a bit more.

[bennkar]

Given what you have said I would consider what you expect your marginal tax rate will be in retirement versus what it is today. If you think it will be at least as high in retirement as today I would start a Roth IRA. Starting one starts the clock running to the 5 year window where after you can get your money out fairly easily. And if you fear the market values are too high you can save it in a savings account (or other near cash equivalents) inside of the Roth. When I started my Roth I considered it my emergency fund, no reason you can't do the same.

For transparency, I have maxed my Roth for the past 10 years, but.... I also have a full year of expenses in my savings account, so go figure. I would put more in my brokerage account, but I am leery of the market values right now.

[MonkeyMama]

Currently my wife and I each save 15% of our income in our 401ks. Each year we save $15,600 that is in an online savings account. Would you continue this scenario or would you lower general savings to put more into 401ks?

Personally, I would continue funding savings and not put more into 401k.

The exception is if you had a large income and could save a substantial amount of taxes with 401k funding. (Looking at your past posts, I get the sense you aren't in a high tax/high income situation).

(At a similar income level, we've never seen the point to put more than 15% away to retirement. Having no debt, a paid for home, etc., of course helps significantly in retirement. So it's not like "non 401k savings" doesn't help you towards a goal of retirement. Only 40% of our wealth is in retirement specific funds, but we are also able to be very tax efficient given our income level).