Mar 15

We are trying to save some money for the down payment of the house that we are planning to buy next year and thinking to stop our IRA monthly contributions for this year in order to do that.Is it a good idea, or we better of just keep making contributions and withdraw them later from our IRAs if we need the money under the 1st Home Buyers criteria especially if it’s going to be penalty free?

4 comments so far...

  • Mary Said on March 15th, 2010 at 4:59 pm:

    ALWAYS contribute to your IRA. This is one of the best tax benefits you have. Do not borrow from the IRA unless you really have to.

  • STEVEN F Said on March 15th, 2010 at 5:14 pm:

    Of the options you list, I would recommend suspending contributions for a year. Remember, you can make ALL your contributions for the year at once any time before you file your tax return for the year. You don’t have to qualify to use this method. It is also less likely to be reported incorrectly on your tax return.

  • PoliPino Said on March 15th, 2010 at 5:32 pm:

    Don’t stop contributing. As you said, you can withdraw a portion of the earnings under the 1st time homebuyers clause. But, you can always withdraw your contributions to a Roth IRA with no tax or penalty, since you’ve already paid the taxes on the money. So at least for your contributions, the Roth IRA should act like a savings account.

  • Britt Said on March 15th, 2010 at 5:38 pm:

    Since the first funds out of your Roth IRA according to the IRS ordering rules are your original contributions…

    And since you can withdraw your original contributions tax-free and penalty-free at any time for any reason…

    It makes little sense to contribute to your Roth IRA if you’re absolutely sure you’re going to tap it in order to buy the house. Otherwise, you’re just putting the money and taking it out like a savings account.

    Now, the best case scenario is you’re able to buy the house AND contribute to your Roth IRA. Remember, time is your most valuable asset when it comes to retirement savings. You can pay off a mortgage fairly easily when you’re 50 years old. Saving for retirement at that age is a lot harder.

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