Maxing out Roths with a balance transfer

One of our goals for 2006 is to not only make the maximum allowable contributions to our retirement accounts, but to do it as aggressively as possible at the beginning of the year to maximize our long-term gains.

One of the ways we are accomplishing this is by having adjusted the husband’s SIMPLE IRA contributions so that he maxes out by the end of June (at which point he should have a new job). Roughly half of his paycheck is now going straight to Vanguard.

Another strategy we were kicking around was possibly utilizing a no-fee, 0% balance transfer offer to immediately make the maximum contributions to each of our Roth IRAs at the beginning of the year. In a previous post we briefly touched upon the idea and our reasoning for doing so.

Ultimately, we decided against this strategy this year primarily for two reasons:

• We are planning to use a no-fee, 0% balance transfer offer in the very near future to completely pay off student loan #2. Combine this with the fact that we already have the 2.99% lifetime balance transfer we are currently paying down with American Express, we’re just not comfortable introducing another source of debt at this stage. Our preference is to have no more than two balance transfers at any one time.


• Even though we are making great progress each month, we’re still not satisfied with our amount of available credit. To max out both Roths would certainly push our credit utilization well above 50%.

We still plan to be aggressive with our contributions and should be able to max out both Roths far more quickly than last year, especially now that our primary incomes have increased. Next year will be a more opportune time to use the balance transfer strategy to max out the Roths because we’ll have the transferred balance of student loan #2 paid off and have much more available credit.