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Roth IRA as a savings account?
Posted on 6/3/13 at 12:48 pm
Posted on 6/3/13 at 12:48 pm
I don't plan on withdrawing any contributions at all until retirement but the rules state that I can withdraw my contributions (not earnings) anytime without penalty whatsoever, right? I'll be contributing the maximum each month to both mine and my wife's Roth IRAs and just wanted to make sure we can technically use that as a $10,000 a year savings account IF something comes up and we needed the money. We have a savings account already with about 6 months' expenses in it.
6
Posted on 6/3/13 at 12:51 pm to TDsngumbo
You have a savings account with 6 month expenses?
Then why get another one? Just look at this as retirement (which is what it is).
Also, maximum contributions is 5500$ right? X 2 = 11,000$ . Correct me if I'm wrong.
Then why get another one? Just look at this as retirement (which is what it is).
Also, maximum contributions is 5500$ right? X 2 = 11,000$ . Correct me if I'm wrong.
Posted on 6/3/13 at 1:01 pm to TDsngumbo
Yes you can withdraw contributions penalty free.
Posted on 6/3/13 at 1:05 pm to LSUTigers00884
quote:
maximum contributions is 5500$ right?
I thought they were $5,000/year. I'll go check it out and get back to you.
Posted on 6/3/13 at 1:08 pm to TDsngumbo
quote:
I thought they were $5,000/year. I'll go check it out and get back to you.
Raised to $5500 for TY2013
Posted on 6/3/13 at 1:10 pm to TDsngumbo
Are you asking if you should take the savings account with 6months of expenses and put that money somewhere else and use you Roth as an emergency fund?
You can, but I wouldn't. Any contributions you withdraw from your Roth are penalty free, but you also lose the opportunity of tax free growth by not having the funds in there.
The emergency fund is not an investment, it's insurance.
You can, but I wouldn't. Any contributions you withdraw from your Roth are penalty free, but you also lose the opportunity of tax free growth by not having the funds in there.
The emergency fund is not an investment, it's insurance.
Posted on 6/3/13 at 1:23 pm to Vols&Shaft83
No, no. My emergency fund will stay there. I'll just contribute everything to both Roth IRAs instead of a combination of the two IRAs and the emergency fund. I'll use the IRAs as a doubled-down retirement/emergency fund IF I needed to use them as an emergency fund.
Posted on 6/3/13 at 1:23 pm to BayouBengal
Yep, $5,500. Just checked the IRS website.
Posted on 6/3/13 at 1:29 pm to TDsngumbo
quote:
No, no. My emergency fund will stay there. I'll just contribute everything to both Roth IRAs instead of a combination of the two IRAs and the emergency fund. I'll use the IRAs as a doubled-down retirement/emergency fund IF I needed to use them as an emergency fund.
Yes, that's fine. My Roth is my emergency fund for my emergency fund, lol. It would take an earth shaking emergency to get to the point where I'd need to touch it though.
Posted on 6/3/13 at 2:52 pm to TDsngumbo
Yes. The contributions to the Roth serve as my "something catastrophic just happened" savings account.
You can pull them out penalty free. You are already taxed on it anyways. My emergency fund is invested (conservatively) as well. I'd deplete that before I touch my roth.
You can pull them out penalty free. You are already taxed on it anyways. My emergency fund is invested (conservatively) as well. I'd deplete that before I touch my roth.
This post was edited on 6/3/13 at 2:55 pm
Posted on 6/3/13 at 3:04 pm to Vols&Shaft83
quote:
My Roth is my emergency fund for my emergency fund,
same here then i can get a nice big fat HELOC if need be and that is just using one property. plenty buffers, plenty back up plans. nothing wrong with that.
If i really need a 4th or 5th back up option I'll use dinars or bitcoins.
This post was edited on 6/3/13 at 3:06 pm
Posted on 6/3/13 at 9:37 pm to TDsngumbo
You are correct. If you are choosing between having a taxable "emergency fund" and a Roth, the Roth is obviously the way to go. There is basically no need to have a taxable emergency account until you are maxing your Roth and 401.
And if you're doing that, you probably have a HELOC you can tap as well.
And if you're doing that, you probably have a HELOC you can tap as well.
Posted on 6/4/13 at 8:42 am to foshizzle
You're not the first to mention a HELOC in this thread. What does a HELOC have to do with using a Roth IRA as a savings account?
Please forgive my ignorance on the subject!
Please forgive my ignorance on the subject!
Posted on 6/4/13 at 12:01 pm to TDsngumbo
A HELOC can be used as a stop gap before tapping your Roth funds. You'll pay interest on whatever you draw from that account but the rates are so low that you're (hopefully) outpacing it in your Roth. You also have a lot more flexibility in paying down a HELOC than you do in replacing Roth IRA contributions.
Posted on 6/4/13 at 3:38 pm to TDsngumbo
quote:
I'll be contributing the maximum each month to both mine and my wife's Roth IRAs and just wanted to make sure we can technically use that as a $10,000 a year savings account IF something comes up and we needed the money.
Keep in mind that you cant touch your contributions within the Roth IRA until the account has been opened for at least 5 yrs.
Posted on 6/4/13 at 5:40 pm to Cousin
quote:
Keep in mind that you cant touch your contributions within the Roth IRA until the account has been opened for at least 5 yrs.
False. You only face a tax penalty for non-qualified distribution of earnings, conversion contributions, or rollover contributions.
IRS Publication
quote:
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s).
quote:
The portion of the distribution allocable to earnings may be subject to tax and it may be subject to the 10% additional tax.
Posted on 6/4/13 at 8:12 pm to Cousin
quote:
Keep in mind that you cant touch your contributions within the Roth IRA until the account has been opened for at least 5 yrs.
Posted on 6/4/13 at 8:28 pm to Cousin
quote:
Keep in mind that you cant touch your contributions within the Roth IRA until the account has been opened for at least 5 yrs.
Posted on 6/4/13 at 8:29 pm to Vols&Shaft83
Lol
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