‘Two Roth IRA Accounts?’: I want to save for a house while also preparing for retirement. How can I effectively manage my finances for both goals?

Hi Money Minder,

Hey there! I’ve got a question about Roth IRAs. So, I didn’t really focus on my finances much in my twenties, but now I’m in my 30s, landed a decent job, and have a partner who shares expenses with me.

I’m thinking about saving for a house. Do you think it’s a good idea to split my Roth IRA contributions into two accounts? One for retirement and one for a down payment in the next 5 years?

Here’s a bit about my financial situation:

• Salary is around $75k
• I have a small 401k (<$10k)
• Roth IRA ($1k)
• Emergency Savings ($3k)
• Debt of $6k from a signature loan @ 13.5% with a 24-month term
• Minimal student loans at low interest rates

I have about $2k left over every month after expenses. I contribute 4% to my 401k for the employer match and split the rest between savings, loan payments, and retirement contributions.

Any advice on how to best allocate my extra funds to reach my goals? I’m thinking of increasing my 401k contributions once I pay off some debt.

Thanks for your help!

Cheers,
Financially Confused

Response from THE MONEY MINDER:

Hello There,

Hello! Congratulations on starting a new chapter in your financial journey and being proactive about planning for your future. It’s great to see that you have a clear goal of saving for a house and are considering different avenues to achieve it.

Given your current financial situation, splitting your Roth IRA contributions between retirement and a down payment is a practical approach. However, it’s important to prioritize paying off your high-interest debt first. That 13.5% signature loan is eating into your finances, and eliminating it should be your top priority before focusing on saving for a house. Redirecting the extra $2k per month towards paying off the signature loan will save you money in the long run and free up more funds for your future goals.

Once the signature loan is paid off, you can then shift your focus to saving for a house. Splitting your Roth IRA contributions between retirement and a house fund can be a good way to balance your short and long-term financial needs. With your salary and bonus potential, you have the ability to increase your retirement contributions and save for a down payment simultaneously.

Remember to also continue building your emergency savings, as having a solid financial cushion can provide peace of mind during unexpected situations. All the best from THE MONEY MINDER – keep up the good work and stay committed to your financial goals!