Key insights
- A 20-year-old student is considering liquidating brokerage and emergency savings to fully fund their Roth IRA. Given the tax implications, potential emergency needs, and upcoming travel plans, liquidating assets is not advisable. The impact on the broader US equity market is negligible, but it reflects a common dilemma faced by young investors balancing short-term needs with long-term investment goals.
Im 20 years old and for last years Roth IRA I contributed $4,505 leaving me with $2,495. Unfortunately I was between jobs for a while in October and now in February. Thankfully I am more job secure now, but Ive been wondering as we approach the deadline to contribute to 2025 if I should add more money.
I currently have about $1,600 in my brokerage account and $1,600 in emergency fund savings. I actually just reached that number for my brokerage account and my next plan was to save up more for travel and to keep my Roth funded.
Now I could nuke my savings and brokerage, but I bought everything in August so I would pay the higher tax. I also worry of having an emergency and not having fluid cash on the spot. I also have a trip with flights bought for in August to Spain that I have yet to purchase the hostel reservations yet for.
A bit more background on my situation. Im a full time student working 20-25 hours a week. I live with my parents and I go to a reputable university on a full ride scholarship costing me $1,000 annually, so I have no notable debt at all. My credit cards are paid off in full every month, and I don't plan on any big purchases like a car or a house any time soon.
I figure I can ether eat my brokerage and use the savings for the remainder, eat my savings and use my brokerage to fund the remainder, or just not fund it at all and do better next year. What do you y'all think the most prudent move is here?
(Currently I hold my roth in a 75-25 split between FSKAX and FTHIX, my brokerage is bit messier, but follows a similar set and forget strategy between some blue chip stocks and VOO)