To be more specific, our friend was wondering whether it’s OK not to contribute the maximum amount to her Roth IRA and instead contribute to a savings account set aside for her wedding.
Before I answer, I just want to let everyone know that I’m making a few assumptions about my friend’s situation:
- She is debt free
- She has at least 3 months worth of cash for emergencies
- She is maintaining her 401K contributions up to the company match
My Answer For Her:
Never go into debt to pay for your wedding. If you have to decrease the amount you’re saving for retirement to pay for your wedding, that’s fine.
If you’re currently dollar cost averaging into your Roth IRA each month, decrease your monthly contribution to a minimum, say $100. It’s important not to stop contributing entirely because you want to maintain the habit of investing.
Until your wedding, make sure to allocate a large portion from your paycheck to a savings account every month. (Here’s an example of how I set up sub-savings accounts in ING Direct) If you need to save $5,000 in 24 months, you need to be saving about $200 a month. If you need to save $5,000 in 18 months, that’s about $275 a month.
Finally, with the money you receive as gifts from friends and family attending your wedding, go on an amazing honeymoon and max out you and your husband’s Roth IRA when you get back.
Considering your just 25, you will be off to a great start financially.
In most cases, I believe that you should pay off all non-mortgage debt before investing for retirement. If she choose to go into debt to pay for her wedding, while continuing to max out her Roth IRA, she would violate this principle.
Also, while she is missing some important years to take full advantage of compound interest, she is already off to a great start financially. If her and husband continue the habit of saving that she has already developed, they will have plenty of money when they reach retirement.
Other Random Financial Advice Regarding Weddings
Knowing that I was just married in April, I have a few words of wisdom regarding money and weddings.
- Negotiate everything!
- Pay everything by credit card. Here’s my story of how this saved us about $2,000. Plus, use the rewards to pay for your honeymoon.
- Spend money on what’s most important to you. Spend little on everything else.
In the comments please list any suggestions you might have for someone in this situation. Do you agree that it’s OK to stop saving for retirement?