Roth IRA's
Thread Starter
Joined: Jun 2007
Posts: 3,845
From: La Habra, CA
Roth IRA's
Anyone here have any experience with Roth IRA's? Probably gonna open one in a few weeks when I get back from vacation and wanted to know if anyone had any recommendations, advice, experience, etc.
Now that the car has been paid off for a few months now I want to start saving for a house and a Roth IRA seems like a good place to start.
Now that the car has been paid off for a few months now I want to start saving for a house and a Roth IRA seems like a good place to start.
I specialize in them, but too much info to cover here. Check this out for rules, limitations, etc.
http://www.irs.gov/publications/p590/ch02.html
The basics are covered in pages 56-68 of IRS Publication 590:
http://www.irs.gov/pub/irs-pdf/p590.pdf
Here are a few major points:
1. IRA accounts (both Traditional and Roth) are designed to save for retirement, not for a home.
2. You are currently limited to a $5000 contribution each year if you are under age 50.
3. Anything taken out of an IRA (Traditional or Roth) before you reach age 59-1/2 is penalized with an additional 10% tax, other than certain qualified higher education expenses, and up to $10,000 towards certain first-time home buyer expenses (see page 53 of the second link above). If married spouses each have an IRA, and are buying the home together, then they can each take $10k for a $20k total without incurring the 10% penalty; however if it is a Traditional IRA, or a Roth that is less than 5 years old, the distribution is still subject to ordinary income tax.
4. Gains in a Roth IRA are only tax-free after 5 years from January 1st of the year that the first contribution to the Roth was made, and still subject to the 10% tax penalty for withdrawal before age 59-1/2.
Use IRA's to save for retirement.
Use the highest interest rate 1-year CD's you can find, at a FDIC insured bank, to save for a home while protecting your principal. This way when interest rates start to climb, you haven't tied up your $$ for 3-5 years.
I hope that helps.
http://www.irs.gov/publications/p590/ch02.html
The basics are covered in pages 56-68 of IRS Publication 590:
http://www.irs.gov/pub/irs-pdf/p590.pdf
Here are a few major points:
1. IRA accounts (both Traditional and Roth) are designed to save for retirement, not for a home.
2. You are currently limited to a $5000 contribution each year if you are under age 50.
3. Anything taken out of an IRA (Traditional or Roth) before you reach age 59-1/2 is penalized with an additional 10% tax, other than certain qualified higher education expenses, and up to $10,000 towards certain first-time home buyer expenses (see page 53 of the second link above). If married spouses each have an IRA, and are buying the home together, then they can each take $10k for a $20k total without incurring the 10% penalty; however if it is a Traditional IRA, or a Roth that is less than 5 years old, the distribution is still subject to ordinary income tax.
4. Gains in a Roth IRA are only tax-free after 5 years from January 1st of the year that the first contribution to the Roth was made, and still subject to the 10% tax penalty for withdrawal before age 59-1/2.
Use IRA's to save for retirement.
Use the highest interest rate 1-year CD's you can find, at a FDIC insured bank, to save for a home while protecting your principal. This way when interest rates start to climb, you haven't tied up your $$ for 3-5 years.
I hope that helps.
Last edited by CIONIDE; May 13, 2010 at 11:15 PM.
Thread
Thread Starter
Forum
Replies
Last Post