As discussed in a previous post, I have managed to get a new job that starts in the second half of 2013 and will involve moving to a different state. Even though my employer will cover selected moving expenses, I still expect to incur some one-time costs related to the move, so my expenses will be higher than normal. I will also have a temporary reduction in income because my current job contract is over at the end of June, but my new job contract does not begin until August (to coincide with the start of the academic year), so I will have no job income for July. Thus, with higher expenses and lower income this summer, it seemed prudent to be more conservative with my capital allocation policy.
My savings from April, May, and June will go toward increasing my emergency cash reserve, which I will use to cover any moving-related and July expenses. I will also be receiving payments from Seeking Alpha in April and July that will partly compensate for the lack of July income. My savings in June will be helped by the fact that I won't have to pay rent for that month (when I signed my lease I had to pay first and last months' rent) and I should get my security deposit back after I move out. The rent-related savings and security deposit will be more than enough to cover my July rent and utilities at my new place. Thus, I might make little use of my cash reserve in July, but I decided to be as conservative as possible, considering that I don't yet know how much all my expenses during that time will be.
If things work out as anticipated, then in August/September I will trim the excess from my cash reserve and reallocate it toward investing. In addition, in July I should be able to roll over the two retirement plans I have with my current employer into a traditional IRA, which would make a large chunk of money immediately available for investing.
That makes sense. I'm guessing the last thing you'd want to do is have to sell a stock for moving expenses...ReplyDelete
I'm moving in a few months myself. Headed to Colorado next. I'm soo excited, time to dust off my skis!
CI: Yes, I don't want to have to touch my investment accounts, so I decided the best course of action was to save some money in advance.Delete
I hope everything goes smoothly with your move to Colorado. I'll be moving to the Midwestern U.S.
Conversion to a Roth does not need to be all or nothing. Why not not convert part? There is nothing like tax free income/ ability to not take a distribution at age 70.5 plus other benefits.ReplyDelete
Scott: Thanks for your comment. You are correct -- I could do partial conversions over time to spread out the tax burden. I am still mulling over what approach is best. Regardless of what I do, the first step will be a rollover into a traditional IRA. Once that happens, I can decide exactly what I want to do next.Delete
Glad to see you're rethinking the Roth IRA conversion. I converted mine last year and am glad I did. It's up 15% since then; if I had waited to convert I'd be paying thousands more in taxes! Paying the $10,000 at conversion is way better than paying $100,000 at the time of withdrawals.ReplyDelete
Kelby: Thanks for your comment. The same thought occurred to me: Paying around $6,000 in taxes this year would save me from paying much more in the future, regardless of whether I'm in the same income tax bracket.Delete