Andy Hough

Keep Savings Aside from Retirement Accounts

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You shouldn’t have all your savings in retirement accounts. You need to keep some of your money outside retirement accounts for emergencies.  There are several reasons for this.  The main one is if you have to pull money out of your retirement accounts for an emergency you will get hit with a large tax bill.  On a 401k you’d have to pay a 10% penalty plus ordinary income tax on the amount you withdraw. This could eat up almost half of your withdrawal.  On a Roth IRA you’d also have a 10% penalty but you’d only owe ordinary income taxes on your withdrawn earnings not your contributions.  There are exceptions that will let you avoid the penalty but they won’t apply to most withdrawals.

The other big reason to avoid pulling money out of your retirement accounts is that you lose the ability to contribute that amount to your retirement accounts.  If you put $5,000 in your Roth IRA and then have to withdraw it you can’t put it back in.  You’ve lost the ability to contribute $5,000 to your Roth IRA for that year and you’ll have to wait until the next year to start contributing again.  Since you are only allowed to put a certain amount in retirement accounts it is important to make full contributions if possible.

Those are just the biggest drawbacks to using your retirement accounts as an emergency fund. Some people think it is worth the risk to keep all of their savings in retirement accounts but I wouldn’t recommend it and it isn’t what I do.  I may not be able to fully fund my Roth IRA this year because I don’t want to bring down the balance of my non-retirement savings too low.  There is a drawback to this too because I’m losing the ability to contribute that amount.  What would you do, keep a fully funded emergency fund or withdraw most of it to contribute to a Roth IRA?

Reflections on First 3L Week

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I just completed my first week back in law school and I am finally a 3L. This school year will be my last one way or the other. Hopefully it won’t be the other. This semester will be the big test. I have 6 classes for a total of 14 credits this semester. Next semester I only need to take 9 credits to have enough to graduate so that semester should be easy.

My classes this semester are only on Tuesdays,Thursdays, and Fridays. My Friday classes don’t last all semester. I’ll have it even easier after those classes end. The classes I’m worried about are App Ad II and my Family Law clinic. Both require public speaking, legal research, and legal writing which aren’t my favorite things. They’re pretty important things though if you want to be a lawyer though so I need to do it. I also have to retake Biz Org which I think should be easy for me. I didn’t think the class was difficult last time but I bombed the final so I probably shouldn’t overestimate my knowledge. Overall, I don’t think this semester will be too difficult academically. I’m not used to getting up early for classes and I haven’t gotten into a routine yet. In another week or so that should be established and everything should be relatively smooth sailing.

August Credit Score

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My credit score for August is 725 up from 716 the month before. It finally seems to be heading the right direction after declining this spring and early summer. It is still a long way from the high of 787 earlier this year but it is good enough for my present needs. I get my credit scores for free from my Wamu credit card which is all I use the card for any more.

I Won’t Be Living In A Van

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At least not in the near future.  When I stated that I was going to be moving into a van this fall I had every intention of doing so and was looking forward to the prospect.  However, things have changed since then. My relationship with my GF has grown more serious and I’m spend almost every night at her house.  If I moved into a van I’d still be spending almost every night at her house.  That would end up being an unfair situation since I’d basically be living at her house but not sharing any of the living expenses.  Therefore when my lease is up I will be moving in with my GF. I’ll be contributing towards our living expenses an amount roughly equal to my current living expense. I’ll probably do a separate post about that.

I hope this isn’t too much of a disappointment to those who were looking forward to my posts about living in a van but moving in with my GF is the fair and practical thing to do.  Of course it also represents a step forward in our relationship and a further commitment to each other.

My new plan is to live in a car or van for a short time this fall as a sort of experiment.  I’ll post details and pics when this plan is finalized.

I Can Drive 55

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With apologies to Sammy Hagar I must say that I can drive 55. Maybe it is because when I was growing up and first started driving the national speed limit was 55 mph. I was used to going 55 mph and it seemed fast enough. Of course once the speed limit was lifted I started driving over 55 mph but now that gas is more expensive going back to 55 mph doesn’t seem like that bad of an idea. Slowing down to 55 mph does make a noticeable difference in you fuel efficiency.

There is even a national campaign to bring back the 55 mph speed limit. It isn’t likely to work and I’m not even sure it is a good idea. I regularly drive on a stretch of highway with a 55 mph speed limit and the average speed is about 70. Reducing the limit probably won’t slow people down it will just increase tickets. The current speed limits need to be enforced better before they lower them.

That being said I think people should voluntarily drive 55 mph. It not only saves gas it improves safety. Some dispute whether the 55 mph speed limit actually saved lives but it is clear that probability of injury and fatality increases with increasing speed. If you’re in a 70 mph zone you might need to go a little faster than 55 mph so that you’re not drastically slower than the other traffic. You should still try go as close to 55 mph as safely possible though.

I know most people aren’t going to voluntarily start driving 55 mph anytime soon. There are more willing to do it now that gas is more expensive though. Maybe if gas gets expensive enough more people will see the benefits of driving 55 mph. Or if that is too much maybe there can be a compromise at 60 mph.