Comments on: Financial Goals – Year Long

By: Opened a Vanguard ROTH IRA » Budget Freak

Opened a Vanguard ROTH IRA » Budget Freak — Thu, 15 Mar 2007 14:41:09 +0000

[...] employers. I’d been researching ROTH IRA’s for awhile now, and finally, after some helpful advice, I decided not to wait any longer. My biggest concern was that the money would be locked up until I [...]

By: BudgetFreak

BudgetFreak — Thu, 08 Mar 2007 15:45:24 +0000

Wow. There’s some food for thought. I didn’t know you could withdraw contributions without penalty. I had wanted the money in savings so it was accessible if I needed it, but if I could make withdrawals, there’s no reason it shouldn’t be in a ROTH IRA. Let me ponder this.

Thanks for the info!

By: helpful

helpful — Thu, 08 Mar 2007 06:44:44 +0000

Why not up your ROTH IRA contribution to $4000 instead of bumping your savings to $20,000? See reasons below:

1) Because you contribute after-tax dollars, you can always withdraw your full contributed dollars without any penalty or tax liability.
2) You can also withdraw up to $10,000 in EARNINGS to purchase a home. Up to $10,000 in earnings withdrawals are considered qualified if the money is used to acquire a principal residence. This house must be acquired by the IRA owner, their spouse, or their lineal ancestors and descendants. The owner or qualified relative who receives the “first time homeowner” distribution must not have owned a home in the previous 24 months.
3) You may not always be able to make ROTH contributions so you should make them now while you still can. As your earning power increases, ROTH eligibility fades and eventually disappear. While it may seem a long way off, you will eventually earn more than $50k a year. In a few short years, you may exceed the limits. See below:

Single filers: Up to $99,000 (to qualify for a full contribution); $99,000-$114,000 (to be eligible for a partial contribution)
Joint filers: Up to $156,000 (to qualify for a full contribution); $156,000-$166,000 (to be eligible for a partial contribution)