I've taken a few years to build up my HYSA to almost 10k. This is an emergency fund. I support myself and if I were to lose my job, I estimate that I would need roughly 2k a month to survive. I currently spend closer to 3k a month (rent + utilities + food + community college tuition + random needs/gas), but I could reduce this if I didn't have to travel to work and I would temporarily drop out of school.
- I currently contribute $200/month to HYSA + 2 annual bonuses + potential tax refund.
- I currently contribute only $25/month to Roth IRA (SWYNX) which currently sits at 2k. I am not prioritizing because I want to ensure I have enough liquid emergency funds.
- I currently contribute 5% to 401k + job matches 4%.
My Roth IRA was opened in September 2024 (under 5 years old). I understand that contributions can be withdrawn without penalty anytime, but I still view the account as money I can't touch until 59 1/2. The idea of contributing all my savings and bonuses to this account feels like I'm looking too far ahead. Should I build my HYSA to 15-20k before I focus on Roth IRA?
- Age: 29
- Location: Texas, USA
- Salary: 52k.
I'm aware my earnings and contributions are low. I'm hoping to increase my salary/job opportunities with a degree. I started working on my associates last year.
Should I prioritize funding my Roth IRA instead of HYSA?
byu/talkingtimmy3 inpersonalfinance
Posted by talkingtimmy3
10 Comments
The earlier your start saving for retirement, the better. There’s no such thing as “looking too far ahead.” You don’t have to put all your savings and bonuses in that account, but you should definitely be contributing 15% of your income towards retirement. That ensures that it has plenty of time to compound.
A lot of people think that putting in larger chunks of money later in life will make up for starting late. But in reality, slow and steady ends up saving more because the growth is exponential.
Click the pf wiki click flow chart
Investor A starts at age 25, puts $1,000 a year into an IRA but makes their last contribution at age 35 so $11k total invested.
Investor B starts at age 35, puts $1,000 a year into an IRA and keeps making contributions with their last being at age 66. Total invested $32k.
Assuming 6% growth per year, who has more money at age 67? Investor A by a few hundred dollars ($102,415 vs $102, 124).
That is the power of starting early.
To give you some perspective I max out Roth IRA contributions on January 1st. Then I have 364 days to increase savings if needed.
Your EF is pretty solid at five months. IMO, I’d start funneling the $200 into your Roth. FWIW, you can always pull out your Roth IRA contributions without penalty.
You need 12k in your emergency fund to have 6 months.
However, you are pretty much contributing nothing to your Roth IRA
Put $125 a month in your Roth IRA and $100 in your HYSA
Have you considered using the Roth IRA as your emergency fund? In other words, invest conservatively and withdraw contributions if absolutely necessary. Considering the limited annual limits, it makes sense to get as much in there as early as possible. You can still make 2025 contributions until April 15th.
My financials are similar to yours. I’m mid 30s, take home about 58,000 pre-tax, single income household with 1 dependent. I could make it on $2,000 per month bare bones but $2,500-$3,000 is my more realistic monthly spending. I have $10,000 in a HYSA emergency fund, just opened a Roth in 2025 and have put $3,500 in so far and have no debt except $9,000 student loans (all fairly low interest) and $5,000 on a 0% interest credit card which I will pay off before the interest accrues.
I have been wondering the same question as you, have done some research online and also consulted with my friend ChatGPT. Based on all that and my own preferences, my goal is to get my HYSA up to 15k to have more of a solid 6 month cushion and then work on my Roth after that. If all goes well I should be able to increase my hysa to 15k, put at least 3k in my Roth and pay off the credit card before interest starts up, by mid 2026 or at least before the end of the year for sure. After that I will switch my priorities to maxing out my Roth and paying my student loans down more aggressively.
Investing is different from Retirement planning. Once you have some money as emergency fund.
Get 401k match.
Roth
Brokerage
Then spend.
This illustration is just a real life example of the power of compounding. I’m 64, went thru a divorce at age 40. Had 3 kids under 10, hadn’t worked in 10 years as I had two and then a third and suddenly he thought the grass was greener elsewhere.
Back to my career, thankfully. Had to buy house and car and do all the kid activities. Kept my retirement account which was 80k at the time. My goal was max my contributions and the 3% company match and was invested in all stocks, no bonds. Aggressive for some, but not for me. Fast forward 20 years and it was worth 800k.
It wasn’t fancy, it was consistent. I didn’t try to time the market I just religiously plunked it in the 401k every month. Any bonuses or pay increases went straight to the investment accounts. It’s not as much as I would like right now, but I keep working at. Good luck!