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Roth IRA question
Posted on 4/11/09 at 8:59 pm
Posted on 4/11/09 at 8:59 pm
I'm sure this can be found somewhere in Germany but....
Am I better off investing in a Roth IRA than in traditional mutual funds if I am somewhat likely to use the funds before retirement age?
I already have an IRA for retirement savings and other shorter term savings are all accounted for. My background is that I am in my late 20's and looking to have something that is accessible in my mid to late 40's (in case I want to change professions, retire early etc...) How accessible would a Roth be?
Am I better off investing in a Roth IRA than in traditional mutual funds if I am somewhat likely to use the funds before retirement age?
I already have an IRA for retirement savings and other shorter term savings are all accounted for. My background is that I am in my late 20's and looking to have something that is accessible in my mid to late 40's (in case I want to change professions, retire early etc...) How accessible would a Roth be?
2
Posted on 4/11/09 at 9:04 pm to MabshirTiger
You can take out the principal without paying a penalty I think. The interest you'd be fricked on though if you wanted it before you're 59.5. Still a better option than traditional IRA.
Posted on 4/11/09 at 11:01 pm to MabshirTiger
Go with the Roth. You can always withdraw what you contributed at any time. It is not generally a good idea to do so because the Roth shelters your earnings from taxes. So if you withdraw contributions your future earnings on that amount are subject to tax.
But this is still better than investing in a regular brokerage account, which is always taxable. Think of it this way - if you withdraw from a Roth and want to put it back in, the worst that can happen is that your contributions are now taxable, just like a regular account.
So go Roth.
By the way, you can invest in most mutual funds with a Roth just like with a regular brokerage account. Some employers mistakenly sign with a provider that tries to force you into their in-house funds, but there are explicitly legal ways to get around this, it's just a hassle.
But this is still better than investing in a regular brokerage account, which is always taxable. Think of it this way - if you withdraw from a Roth and want to put it back in, the worst that can happen is that your contributions are now taxable, just like a regular account.
So go Roth.
By the way, you can invest in most mutual funds with a Roth just like with a regular brokerage account. Some employers mistakenly sign with a provider that tries to force you into their in-house funds, but there are explicitly legal ways to get around this, it's just a hassle.
Posted on 4/11/09 at 11:09 pm to foshizzle
So if I decide in 15 years to withdraw a large portion out of a Roth, it won't be any worse than a regular account? Am I understanding this correctly?
Posted on 4/11/09 at 11:23 pm to MabshirTiger
yeah basically. Except you can't put that money back in your Roth.
Posted on 4/11/09 at 11:58 pm to MabshirTiger
I could be wrong, but i thought there was a 10% penalty on top of taxes if you withdraw money from a Roth IRA before you are 59 1/2.
Posted on 4/12/09 at 12:15 am to GeneralLee
That's only imposed for Roth's if you take it out before 5 years.
Posted on 4/12/09 at 7:41 am to LSUtoOmaha
Any withdrawal (pre 59 1/2) that is made in a Roth IRA is subject to a 10% penalty unless it meets the following criteria:
1. First Time Homebuyer
2. Death
3. Total disabiltiy.
Deductions are taken tax free as long as you have had the account for 5 years and you are at least 59 1/2. Maximum contribution per year is $5000.00 It is $6000.00 if you are over 50. Additionally, there is no required minimum distribution at age 70.
1. First Time Homebuyer
2. Death
3. Total disabiltiy.
Deductions are taken tax free as long as you have had the account for 5 years and you are at least 59 1/2. Maximum contribution per year is $5000.00 It is $6000.00 if you are over 50. Additionally, there is no required minimum distribution at age 70.
Posted on 4/12/09 at 10:18 am to Ringeaux
It is a little more flexible than that. From the Motley Fool site:
quote:
The early withdrawal penalty does not apply to distributions that:
Occur because of the IRA owner's disability.
Occur because of the IRA owner's death.
Are a series of "substantially equal periodic payments" made over the life expectancy of the IRA owner.
Are used to pay for unreimbursed medical expenses that exceed 7 1/2% of adjusted gross income (AGI).
Are used to pay medical insurance premiums after the IRA owner has received unemployment compensation for more than 12 weeks.
Are used to pay the costs of a first-time home purchase (subject to a lifetime limit of $10,000).
Are used to pay for the qualified expenses of higher education for the IRA owner and/or eligible family members.
Are used to pay back taxes because of an Internal Revenue Service levy placed against the IRA.
Posted on 4/12/09 at 11:59 am to Tigris
thanks for the help y'all, I appreciate it.
Posted on 4/12/09 at 6:36 pm to MabshirTiger
quote:
Are used to pay for the qualified expenses of higher education for the IRA owner and/or eligible family members.
I have 3 kids and I am using my Roth for their college fund.
When their college is done anything left in the Roth will just ride it out there until I retire.
Posted on 4/12/09 at 6:53 pm to GeneralLee
quote:
i thought there was a 10% penalty on top of taxes if you withdraw money from a Roth IRA before you are 59 1/2.
That's for the traditional IRA. For a Roth, so long as you don't take out any more than you put in there is no penalty and no tax. The reason why is that with a Roth you contribute after-tax money, not pre-tax. You already paid the tax once, no need to pay it twice.
With a traditional IRA you *do* have penalties and taxes because money in a traditional IRA is deductible, you're contributing pretax money.
I'm only talking about withdrawing up to the amount contributed earlier. Withdrawing earnings is completely different.
This post was edited on 4/12/09 at 6:56 pm
Posted on 4/13/09 at 9:29 am to foshizzle
The amount of mis-information in this thread is breath-taking.
Posted on 4/13/09 at 10:32 am to T-BRO
quote:
I have 3 kids and I am using my Roth for their college fund.
There are tax-friendly vehicles set up specifically for college expenses. Why would you drain a vehicle that stands to give you so much flexibility in retirement???
Posted on 4/15/09 at 6:53 am to Dusty Bottoms
Because I have a 401k matching that I contribute 15% to AND a pension.
The Roth was my choice for what I was interested in doing.
529's had too many rules.
When my kid's are done with college, I will probably drop back to contributing the bare minimum to the Roth until I retire.
Sounds like you don't agree with my choice.
That's Ok.
But, this is what I am doing and it's working out fine for me.
The Roth was my choice for what I was interested in doing.
529's had too many rules.
When my kid's are done with college, I will probably drop back to contributing the bare minimum to the Roth until I retire.
Sounds like you don't agree with my choice.
That's Ok.
But, this is what I am doing and it's working out fine for me.
Posted on 4/15/09 at 9:32 pm to Dusty Bottoms
quote:
The amount of mis-information in this thread is breath-taking.
I have no idea if you're being sarcastic or not, if so please be more specific. If not, thank you for your support.
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