2 ms·
"I don’t use IRAs mainly because they aren’t liquid. I can’t withdraw without a penalty." I'm not a registered tax advisor, so this is not tax advice, but my i
by perl4ever 7y ago
"I don’t use IRAs mainly because they aren’t liquid. I can’t withdraw without a penalty."
I'm not a registered tax advisor, so this is not tax advice, but my impression is that you can take money out of a Roth IRA whenever you want, as long as you don't take more than you put in; the profits/returns are tax advantaged, but the original money is after-tax.
The reason why people will argue this is a bad thing to do is because you can only put so much money in per year, like $6,000 currently, and if you take money out, that doesn't add to the contribution limit.
- alexmingoia 7y agoIn my mind Roth IRAs will only be advantageous if income tax rates are higher in the future. But that’s true of money kept in savings as well, since it’s already taxed. And Roth IRA gains IIRC are taxed as income at withdrawal, which is higher than capital gains right now. I might be wrong about that though. I don’t see how a Roth IRA is really any different than keeping money in a traditional savings account, besides the withdrawal rules.
- perl4ever 7y agoRoth IRA gains are not taxed as income at withdrawal when you're retired - that's the whole point. To first order, if tax rates don't change, and your investment return is the same, then I believe that you end up paying the same with a Roth IRA as a non-Roth IRA, which in turn is significantly less than a taxable account. But Roths do have some other incidental advantages like I think you don't have a RMD. And if you have uneven income, you can do (partial) Roth conversions whenever your income is low. Which also gets around the contribution limit.