what to do with my stimulus (car vs roth)

[vthokie06]

I plan on buying a (used, probably 4 year old) vehicle within the next four years (current car is 1995 civic with 170k miles on it). I plan on spending under 20k. I have $2k saved so far.

I also have a roth IRA that was fully funded last year, though it is looking as though it will probably not be fully funded this coming year with the amount going up to $5k.

Worth noting is that I'm in my early twenties and last year was my first full year of employment since college. I currently rent and have no savings for a home, and I do have an emergency fund in high interest savings that would cover my expenses for 4-months. I saved that up first, then opened the Roth, and have since started saving for the vehicle.

So tell me, what should I concentrate on saving for, and what should I put my stimulus check toward?

Thanks in advance!

[InDebtInDC]

Read up on withdrawing Roth contributions without triggering tax implications.

[bjl584]

My Roth is fully funded, so I'm using mine to pay done some debt.

[jIM_Ohio]

Roth should win out over other short term savings goals. Always fund the longest term goal first (retirement) and decisions like this become MUCH easier to make going forward.

[creditcardfree]

In your case I would put it towards the Roth. Then continue saving toward the car.

Once your money has been in the roth for five years, you can withdraw the principal (the amount of your contributions) tax free. This might be something to consider when you go to purchase a home. Personally, I would avoid it, but it can be done. The more you save when you are young the better...especially if you don't touch it.

[disneysteve]

I'd also fund the Roth first unless the car purchase became a necessity (like the current one died or became too costly to repair). I'd also dial down the planned spending limit for the next car a bit.

As for taking money out of a Roth, forget that it is even an option. Just block it out of your mind. There is no point in starting early and funding your Roth as you should and then turning around later and taking the money out. Retirement accounts are for retirement.

[Aleta]

I vote on funding your Roth. Early investing is important now. You will have time to buy many cars. You can always buy cars on sale but you can't find a retirement on sale. Continue to do what you are doing and pretend the stimulus was going to the Roth anyway.

[Broken Arrow]

A well-maintained Civic should be good for another 100k....

[ThriftoRama]

I drive a 1997 Honda civic with about 170k on it and it still runs great. Planning to drive it until it explodes (hopefully in at least another 5 years!). I agree with everyone here. Max out Roth then put a little bit away every month into a car fund. It could be $50 a month. By the time that Civic dies, you'll have a decent chunk to put down on a "new" used one! Personally, I have my eyes on a Honda Fit.

[maat55]

Originally Posted by vthokie06

I plan on buying a (used, probably 4 year old) vehicle within the next four years (current car is 1995 civic with 170k miles on it). I plan on spending under 20k. I have $2k saved so far.

I also have a roth IRA that was fully funded last year, though it is looking as though it will probably not be fully funded this coming year with the amount going up to $5k.

Worth noting is that I'm in my early twenties and last year was my first full year of employment since college. I currently rent and have no savings for a home, and I do have an emergency fund in high interest savings that would cover my expenses for 4-months. I saved that up first, then opened the Roth, and have since started saving for the vehicle.

So tell me, what should I concentrate on saving for, and what should I put my stimulus check toward?

Thanks in advance!

Are you debtfree? Do you have an EF of 3 to 6 months expenses? If not, you need to does these first.

[InDebtInDC]

Originally Posted by disneysteve

As for taking money out of a Roth, forget that it is even an option. Just block it out of your mind. There is no point in starting early and funding your Roth as you should and then turning around later and taking the money out. Retirement accounts are for retirement.

While I agree, I still think it's fair to pursue all options so you know the alternatives.

I know a lot of people who fully fund their retirement accounts but are still itching to pull money out for a splurge. I believe that if you make an informed decision, there is less buyer's remorse.

[vthokie06]

Originally Posted by maat55

Are you debtfree? Do you have an EF of 3 to 6 months expenses? If not, you need to does these first.

I am debt free and have a 4 month EF.

[GiftBlogger]

$20K is a lot for you to spend on a car. You are young, resourceful and should be able to find a nice used car for $5K to $8K. Cars are terrible investments and should be last on your list of priorities.

Use any excess cash to pay down credit card debt. Once that's done, contribute to your IRA.