IRA maxed out. Now what?

[pikey412]

My newly opened Roth IRA is maxed out for the year. I am a contractor so I have no 401k. I have zero debt right now with a $7000 emergency fund. I'd like to purchase a home within a year or two. What should I be doing with my extra savings sitting in online acct... saving for a down payment or trying to find another way to put it towards retirement? What other options do I have besides an IRA?

[kork13]

Need a little more information.... How old are you, what are your total balances for regular savings, home savings, and retirement savings, what debt do you have, and such like that.... Have you maxed for both 2008 and 2009? You can still contribute for 2008 if you haven't. Also, approx. what are your monthly expenses? Unless it's only $1000/mo, I'd say you should beef up your EF. You want at least 3 months' worth, but preferably closer to 6 months--particularly as a contractor, as there may be dead time between contracts during which you still need to support yourself.

Without knowing anything I mentioned above, for now I would focus on saving up a home downpayment, but I would still put a little bit aside each month in another account for retirement purposes... if nothing else, just as regular (taxable) investments.

[disneysteve]

I agree that we need more info. A 7K EF may or may not be sufficient. I'm guessing it is not. As a contractor, you should probably keep a 6-8 month EF. Since you are looking to buy a home soon, that EF should probably be even longer, like 12 months.

What other savings do you have? Down payment? Any debt?

[pikey412]

I am 27 years old. Again, I have zero debt. I rent at $400/month and utils+ins ad up to about $300/month. My IRA is maxed out for 2008 AND 2009. $4k in checking, $7k in emer savings, $24k in online savings.

[disneysteve]

You want to have enough in savings to put down 20% on the home purchase and want to buy a home for no more than 3 times your annual income. Run the numbers from there to decide how much you need to save up.

[tripods68]

What other options do I have besides an IRA?

Continue to SAVE SAVE SAVE!!

[disneysteve]

Continue to SAVE SAVE SAVE!!

I think the question was where to put it. If you are saving for your EF and/or your house down payment, keep it in a high yield money market account or CDs.

[Ima saver]

I agree with steve. You can still get c.d.'s for close to 4%

[moneybags]

Are you self-employed? If so, you can open a solo 401K or Simple account and deposit funds pre-tax. You'd have to research them, or maybe a self-employed person here can give you some info.

[zetta]

A SEP-IRA may also be an option for retirement savings for you...

[swanson719]

Figure out when you would have enough in savings to buy the house you want, or build for that matter being a contractor, and then take that date to the bank. You should be able to put your money from online savings into a CD that will yield better than simple savings. Also, while your EF is sufficient for now, realize that with a mortgage payments and a house, you're going to need to beef it up in order to cover 6 months expenses then unless you intend on saving for several more years and paying the house in full when you buy it. Not a bad idea, considering you'll pay more in interest the first few years than you pay in rent right now. Really just depends on how bad you want to stop renting.

[isthisused]

A SEP-IRA may also be an option for retirement savings for you...

Thats what I was thinking if hes self employed. Dont know much about them.

[LivingAlmostLarge]

Why not a SEP IRA if you are self-employed? Up to 25% of salary or something.