My husband and I recently experienced some life changes and we are trying to figure out the best ways to optimize our extra cash flow.
We maxed out our IRAs this year. We have emergency savings and some other savings in a HYSA. Part of that savings is intended to be to max out ou roths again in 2027. I am starting to wonder if that money might be better spent just invested in a brokerage though?
We don’t have any other debt aside from our mortgage – which we’re applying extra cash to principle each month.
We have 401k max contributions set up, accounts for our kids, the Roths and our own brokerage accounts (very new ones).
What would you do?
Next years Roth contribution sitting in HYSA
byu/theconfidentobserver ininvesting
Posted by theconfidentobserver
8 Comments
Of course
Just shave off gains from your brokerage to fund roths.
I’ve never heard of saving up for Roth IRA for the year after this year (unless it’s close to a tax year transition like right before the April cut off). If you don’t have any budget use for the money and absolutely want it for the Roth then I guess it could just sit and wait in a Treasury money market. Or maybe you could invest it into a regular brokerage, then sell on Jan 1st 2027 if you have gains, or Dec 31st 2026 if you have some losses that you want to get the IRS deduction for
The market can go down too. You shouldn’t risk next year’s max today. If you want to invest it in something, instead of just a HYSA, then there are government treasuries like I-Bonds.
If you put it in a brokerage now can you afford to max out your Roth IRAs via a regular monthly contribution in 2027? If so, I would do that. Otherwise I would keep it in a HYSA or similar until January 2027.
You could get fancy and invest it in a brokerage depending on your situation. The risk would be if the market drops between now, you would be able to take the tax loss and contribute to your Ira when the market is relatively lower. I would only do this if the market declining won’t affect your ability to max out the accounts. If you have exactly $7,500 for each of you I wouldn’t do this and you won’t go wrong keeping it in your HYSA.
SGOV
If you keep it in HYSA you’re going to pay tax no matter what on the interest. ~3.5% gains for the year (or calculate the PV of hitting 7500 and deposit that much)
If you do it in a brokerage, that $7500 could grow beyond 3.5%, and you’ll take a hit on taxes, but you would’ve paid tax anyway in the HYSA scenario. If it goes down, you get a little tax break, BUT need to deposit more if you want to max out the IRA next year.
IMO since it’s going to be invested regardless, you get a win win with the brokerage, you either have more than 7500 next year, wait until next summer to sell and dump the cash into IRA to take advantage of LT capital gains, OR it goes down like it would have anyway had it been invested in the IRA today, you get a small tax break, and get to buy more shares next year.