Author Topic: Roth IRA Contribution vs Saving  (Read 3132 times)

cbr shadow

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Roth IRA Contribution vs Saving
« on: January 04, 2013, 03:30:33 PM »
My wife and I are saving money so that we can refinance into a conventional mortgage and get rid of our PMI, which will require us bringing money to the table.  How much we wont know until we get an appraisal this summer.

We both opened Roth IRA's a few months ago and maxed them at $5,000 for 2012.  I noticed that we can put $5,500 each for 2013.  We have about $24k in cash right now..  The plan has been just to keep money in our savings account until we refinance, but would it be smarter to put $11k of that money into the Roth IRA right away, then if needed pull that money back out for the refinance?

A couple other Roth IRA questions..

1) I realize I can take the money that I put into the Roth IRA back out, but earnings have to stay.  Can I replace that 2013 money at a further date?  What if I pull money out of there in 2013 and then in 2014 I want to replace the 2013 money AND contribute for 2014?

2) Can the Roth IRA be used as a short-term (6 months probably) place to keep $5,000 like suggested above?  Any downside?

When all is said and done we will both max our 2013 contributions, but I'm wondering what the smartest thing to do right now is.

Thanks,
Ryan

chucklesmcgee

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Re: Roth IRA Contribution vs Saving
« Reply #1 on: January 04, 2013, 05:51:13 PM »
would it be smarter to put $11k of that money into the Roth IRA right away, then if needed pull that money back out for the refinance?
Probably. Depends on your estimated refinancing costs, your expected income and savings rate in the next 6 months or so.

Quote
1) I realize I can take the money that I put into the Roth IRA back out, but earnings have to stay.  Can I replace that 2013 money at a further date?
Not without it counting against your contribution limit, from my understanding.

Quote
2) Can the Roth IRA be used as a short-term (6 months probably) place to keep $5,000 like suggested above?  Any downside?

Yes. The downside being that if you remove it, you won't be able to put it all back in this year.

Zaga

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Re: Roth IRA Contribution vs Saving
« Reply #2 on: January 04, 2013, 07:01:55 PM »
Once you take the money out of a Roth you can never put it back.  You can only add to the annual limit each year and it's use the space or lose it.

icefr

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Re: Roth IRA Contribution vs Saving
« Reply #3 on: January 05, 2013, 07:52:47 PM »
If it was me, I would keep the $11k in an online savings account until I knew whether I needed it. What do you plan on doing with your savings in the next 6 months? You might be able to put some money into your Roth IRAs later in the year. You can also always contribute part of the limit now and some more later, it doesn't have to be all at once nor do you have to put it all in. I wouldn't put any in until you're sure you don't need it though since you lose that contribution room forever once you put the money out.

sheepstache

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Re: Roth IRA Contribution vs Saving
« Reply #4 on: January 05, 2013, 08:51:35 PM »
You may know this already but you have until April 15 2014 (or whatever the tax deadline is) to make contributions that count for 2013.  Contributions made between 1/1/2014 - 4/15/2014 count towards either 2013 or 2014 depending on what instructions you give your financial institution when you make the contribution.

According to this, you can replace the money if you do it within 60 days.  Basically it's a rollover to the same account.
http://finance.zacks.com/can-funds-taken-out-put-back-roth-ira-1292.html
Has some references at the bottom. I have no experience with this myself.