| Debt to income ratio and a few other questions |
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remarc65
New Member
Cash: $ 0.70
Posts: 3
Joined: 17 Oct 2006
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| Debt to income ratio and a few other questions |
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My husband and I have a combined annual income of $50,000.00. Our only debts are, our Mtg which the monthly payments (including escrow) is $711.00. and We have one vehicle a 2006 Chevy silverado and the monthly payment on that is $545.00.
We have $3000.00 in our emergency fund and IRA's totaling somewhere around $25000.00 and we contribute $300.00 (total) a month to them. We got a late start on our retirement saving, up until 6 years ago we were over our heads in credit card debt and paid that all off first then started saving.
We have no personal loans and no credit card debt now. I am 41 he is 37, our last child at home is 17. As far as debt to income ratios go, is this good? I am wondering if we should be contributing more to our IRA's or paying more on the truck to get it payed off first then invest more? Also our mtg is an ARM. which we are looking into converting to a fixed rate before it adjusts in April 2007. Any suggestions there?
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Tue Oct 17, 2006 7:09 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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One option if you are going to build a larger emergency fund is to contribute some of that to a Roth IRA. If you got in a real bind, you can draw out your (already taxed) contributions at any time without penalty, and you pay no tax on gains as long is that is qualified (over age 59.5). That way if you do not need it for emergencies, it grows tax free. And if you need it for lump sums after retirement, there is no tax on it.
I heard a rule of thumb that you should contribute 10% of your income towards retirement throughout your working years. So people who contribute in the average range of 6-7% are going to have to bump that up to much more than 10% eventually to catch up (since less money in early years will not compound to as much).
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Tue Oct 17, 2006 11:56 pm |
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