Medicated Money

Tuesday, July 11, 2006

Positive: New Job...Negative: Financial Uncertainty

After celebrating our recent good news, we needed to try to sit down and determine a to-do list of financial items that will need to be address with our upcoming move. We just sat down and brainstorm ideas, so this is in no particular order.

  • We will need to roll-over our 403(b) account into a IRA. From everything that I have read, you should remove your money from the old company's plan to a separate IRA. What I do not know is can/should this be done if you are planning to stay with the same financial institution? We also have a pension plan that 6% of our salary is invested in each year. One must be with the company for 5 years to become vested, and we do not meet this criteria. I am planning on rolling-over this account into the same IRA? To be honest, I am not sure of the technical details of this, but I believe you can roll both accounts into one IRA at the same, current financial institution that our 403(b) is with. If you know this answer, your help would be appreciated!

  • We plan to continue our debt repayment plan as schedule. We are on pace to complete this goal by the end of 2006, our target date. We are currently thinking about tapping into our emergency fund to pay it off sooner. We are thinking that we may take an additional $5,000 from the EM and put this towards the debt. This would allow us to pay it down faster and then be able to begin saving for a down payment for a house.

  • We are planning to rent for 1 year after moving home, however, we both are at the point that we are extremely tired of renting. Our theory for renting vs buying here in Houston was very similar to Miserly Bastard's at Yet Another Blog About Money's excellent posts of why they rent in NYC. However, we are just getting to the point in our lives where we want to be home owners rather than tenants. With saying this, we are currently thinking of not funding a 401(k)/403(b) at our new positions. Now, before you crucify me, here are our reasoning. The main reasons for this is that we do not receive a company match until after 1 year of employment with our 403(b). Secondly, we will receive a pension plan that the employer invests in for us. We are feeling that this is a way for us to save for retirement for 1 year. Finally, we would like to have a rather large down payment for a house that we are currently planning to purchase after 1 more year of renting. I have to do the math again, but to come up with a 20% down payment on a house in an area we would like to live, all of this may be worth it for 1 year.

  • Speaking of renting, we are planning on finding an apartment that is just big enough for us to be comfortable in for one year. We hope that we can find something for no more than $1,200. Our current rent is $1,500 and we would like to reduce our overall monthly spending to help build our future down payment. Monthly rent is our largest expense category, so to limit this as much as possible will in turn allow us to save more.

As you can see, we are continue to keep our short-term goals into being out of debt excluding our student loans and save for a down payment as close to 20% as we can get. To do this, we know that it may go against many personal financial commandments. However, with interest rates continuing to rise and the raising of home prices (although they are plateauing), we feel that the faster we get out of consumer debt and have a large down payment, the faster we can be able to purchase a home and begin starting a family.

1 Comments:

  • Medicated..
    Yes you can move your defined benefit (pension plan) and your 403b into the same IRA account. It's all pre-tax money and should be in the same account. Many plan providers like Vanguard, Fidelity and others offer IRA accounts. It makes perfect sense to do an "internal rollover" into their IRA. It's simple and allows you to gain access to a full spectrum of funds, stocks and CD's. However, you can move both plans to any IRA provider. Be aware- the defined benefit plan requires a final calculation and generally they will send out a check to you. The check should be made payable to your IRA custodian to avoid any tax witholding.

    By Anonymous nancy, at 9:37 PM, July 14, 2006  

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