08 Apr What to do with wedding gifts?

 Q. I just got married, and my wife and I are trying to decide what to do with our wedding gifts, which will be about $18,000 after we pay off some credit card debt. I contribute the max to my 401(k) and she does about $6,000 a year. We’d like to buy a home in a few years and we have no other money in non-retirement accounts. Suggestions?

A. First off, congratulations on your recent wedding and the pace at which you are putting away for retirement. We’re also glad to hear you’re getting rid of your credit card debt. It sounds like the two of you are off to a great start!

Juggling savings options can be a challenge — but it’s a great challenge to have.

“My recommendation is to keep your retirement account contributions at the current level — assuming that your wife is receiving the full company match with her contribution. If not, increase until she does,” said Bryan Smalley, a certified financial planner with RegentAtlantic Capital in Morristown.

Then have the $18,000 of cash first go toward an emergency fund of three to six months of living expenses, Smalley said.

Once your emergency fund is fully funded, he’d recommend putting your extra wedding money in a separate non-retirement account for your future house purchase, Smalley said.

Then going forward, any savings you are able to complete beyond your retirement accounts should be placed into the account for your future house purchase, he said.

“I would make it a goal to try and save enough cash for at least a 20 percent down payment for your future house purchase in order to avoid primary mortgage insurance,” Smalley said.

Primary mortgage insurance, or PMI, is an added expense for buyers who have smaller down payments.

If you’re are not able to save beyond your retirement accounts, Smalley recommends that you consider cutting back on your retirement account savings in order to bolster your future house purchase account.

But be sure not to cut back too much to where you lose the full employer match on your retirement account contributions, he said.

“With this approach, you should be at a place within a few years to put down a nice down payment on a home and be well on your way to building a sizeable nest egg for your future retirement years,” Smalley said.

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This story was first posted in April 2015.