I’ve been putting more money into my regular brokerage than my Roth IRA because I like having access to my funds before 59. But is this a bad idea? I know people say to max out the Roth IRA first, then move to the brokerage, but IDK why that’s better if I want to access the money early. Can anyone explain?
You really should max out your Roth first. You can access your contributions anytime.
Morgan said:
You really should max out your Roth first. You can access your contributions anytime.
What do you mean by contributions? Like the money I put in, not the growth?
Morgan said:
You really should max out your Roth first. You can access your contributions anytime.
What do you mean by contributions? Like the money I put in, not the growth?
Exactly, you can withdraw the money you’ve put into the Roth without penalties. The earnings have to stay though.
Are you planning to spend all your money before 59? With a Roth, you can pull out contributions anytime and let the gains grow tax-free until later.
Corey said:
Are you planning to spend all your money before 59? With a Roth, you can pull out contributions anytime and let the gains grow tax-free until later.
Yeah, tracking your basis (the original contributions) is key for that. Those are always penalty-free to withdraw.
If you need money before 59, you’ll probably have to go over the Roth IRA limit anyway. Max the Roth first for tax benefits, then use brokerage funds for early withdrawals.
Gale said:
If you need money before 59, you’ll probably have to go over the Roth IRA limit anyway. Max the Roth first for tax benefits, then use brokerage funds for early withdrawals.
Wait, what’s the Roth IRA limit?
@Zen
For 2023, it’s $6,500 if you’re under 50, $7,500 if you’re over. It changes sometimes, so worth checking yearly.
This depends on your income, needs, and tax situation. For most, prioritizing Roth is smarter. Tax-free growth beats taxable gains.
Ren said:
This depends on your income, needs, and tax situation. For most, prioritizing Roth is smarter. Tax-free growth beats taxable gains.
Exactly. Tax-free growth improves long-term returns by a ton. You can’t really compete with that.
You’re penalized for accessing Roth earnings before 59 unless it’s contributions. The advice is for those saving for retirement, not short-term access.
Toryn said:
You’re penalized for accessing Roth earnings before 59 unless it’s contributions. The advice is for those saving for retirement, not short-term access.
Actually, you can withdraw contributions tax- and penalty-free. It’s only the earnings that come with penalties if you withdraw early.