Author Topic: Using Roth IRA as savings account  (Read 1725 times)

jflo

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Using Roth IRA as savings account
« on: April 16, 2014, 09:24:46 AM »
Since you can pull the original contributions out of a Roth IRA, we've been thinking of using this rather than a regular savings account for our emergency fund.  After all, we only plan on using it for emergencies.  We're still keeping a small amount in a regular savings account for  unexpected expenses (though we've generally been able to just pay these with income) and I'm fully insured for life/disability/etc. through my job (we live off of less than my income, my husband's is smaller but we could make that work in an emergency).
My Roth is currently w/ Vanguard.  I'm trying to come up with a couple of funds to contribute to that would give some security in the event of an emergency, + another index tracker so that the Roth can still perform in the event there are no emergencies (say 3 funds total).  The idea would be if I need to pull money out, pull it out of the fund that is not currently losing money (or losing the least).
Does this make sense?  Any suggestions for a 3 fund mix?
(And if there's another thread on this, happy to just read that, but didn't find one in a search.)
Thanks!

birdman2003

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Re: Using Roth IRA as savings account
« Reply #1 on: April 16, 2014, 10:07:07 AM »
Read this thread from last week

http://www.mrmoneymustache.com/forum/investor-alley/will-open-a-vanguard-roth-ira-account-$1k-or-save-for-$3k-before-starting/


Year 1: Put your $5500 into your Roth IRA's money market account (same return as bank = $0) to keep it accessible in case of an emergency
Year 2: Put additional $5500 into your Roth IRA.  This amount can be invested in index fund of your choice.  VTSMX is good if you're with Vanguard.  Your emergency fund is working for you, plus you have cash available in case of emergency tuba lessons (hilarious comment by Aghast in the thread I linked to above).

jflo

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Re: Using Roth IRA as savings account
« Reply #2 on: April 16, 2014, 11:18:48 AM »
This discussion is what I was looking for - thanks!

birdman2003

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Re: Using Roth IRA as savings account
« Reply #3 on: April 16, 2014, 12:04:43 PM »
This discussion is what I was looking for - thanks!

You are welcome!