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My wife and I have been researching getting into long term real estate investing for over a year. We think we'll be mentally ready to pull the trigger in 2017. Real estate investing seems perfect for us as we both enjoy it, I'm very good with my hands doing DIY projects with great results on discounts, my father is a handy man and always more than willing to help me, and I have a family member who is a real estate attorney (helped my buy my first home without an agent for free). My question is, from a financial retirement standpoint is it okay to not put anything into a Roth IRA this year to have the extra cushion for the purchase.. should I just look at it as diversifying my portfolio and stop overthinking it? I could maybe do both, but it would push back the purchase timeline and again I like the idea of the added cushion if need be.
Do you know for sure you would buy in 2017? Where will you keep the money until then?
I'd put it into a roth just in case you dont buy. You can take it out as it would be contribution. If you dont want to invest it to prevent it losing value if market drops, leave it as cash. Depending on who you have account with, you might earn interest on it too, but this part would not be contribution so cant take it out without penalty.
Besides ira limit is $5500 under 60, i'd be worried about buying real estate if that margin would break the deal.
$5500 per account, husband and wife with 2 accounts would be $11,000. Contributions can't be withdrawn for 5 years otherwise you face penalty. And nothing in life is known for sure.. As of right now its just the plan and the money would just be kept in a credit union savings account till we're ready to use it.
Contributions can't be withdrawn for 5 years otherwise you face penalty.
You sure about that? The five year thing was for rollovers, they dont count as contributions, hence five year waiting period
I keep a small cash emergency fund because I have enough as contributions in roth ira that I can take out if needed. Would hate to, but emergencies are emergencies if need be. But better there than in bank/taxable in my eyes.
At least ira offers better legal protection than bank/taxable
"If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) in the following situations:
You use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.
You use the withdrawal to pay for qualified education expenses.
You're at least age 59½.
You become disabled or pass away.
You use the withdrawal to pay for unreimbursed medical expenses or health insurance if you’re unemployed.
The distribution is made in substantially equal periodic payments.1"
I think keeping part of an emergency fund in an IRA is a great idea once you've been contributing to the IRA for over 5 years so you can pull without penalty. Otherwise an emergency fund should be cash for an emergency, just my opinion tho.
"If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) in the following situations:
your qoute is for roth ira earnings, not contributions
Quote:
If you are under*59½, you may withdraw the exact amount of your Roth IRA contributions with no penalties. Roth IRA Withdrawal Rules
Roth emergency fund as I said above is nice for legal protection. If you are in an accident and get sued, they cant go after ira funds as easily. But you can take it out for the same emergency for your own medical bills. Also doesnt count against you for student aid if you have kids/are student
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