Roth IRA as a Savings Account
Posted on | June 28, 2014 | No Comments
I really like the idea of a Roth IRA. If one meets the contribution limits, one is allowed to contribute after tax income and the money can appreciate and you’ll never have to pay taxes on the gains.
The other aspect I like about it is that it can be used a savings account. Once the account has been open for five years any contributions can be removed without penalty or tax. I highly recommend that everyone open a Roth as soon as they can to meet the five year requirement.
I went back through my account records recently to make sure I captured the contribution amounts. Since opening the account, I’ve contributed $46,187.67. This includes a roll-over from an old 401k ($14,687.67). I hope I’ll never need to access the money for unplanned expenses, but if I ever do it is comforting that I have access to it.
A fun fact that I discovered about my Roth when I was reviewing the details today is that I’ve probably received close to $15,000 in dividends since I started the account 15 years ago. With compounding, the growth of my initial investments should start to accelerate very soon.
I’ll probably withdraw funds from the Roth IRA after I retire but before I’m eligible to withdraw money from my 401k penalty-free and to tithe me over until I’m eligible to receive social security, if it is still available then.
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