Author Topic: Splitting between Roth IRA and Mutual Fund or Pooling  (Read 1785 times)

seventytwohours

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Splitting between Roth IRA and Mutual Fund or Pooling
« on: October 31, 2016, 11:37:05 AM »
Hi Mustachians!

I'm very much a newbie here and very much an amateur with investment. I'm taking the first real steps on my investment journey now, and had a question about how to best invest.

I currently have only one investment in my portfolio: a Vanguard Target Retirement Roth IRA (Target year 2055). It's not been an actively maintained investment. I've had it for two years now, having first opened it under the advice of a college friend. It only has about $6,500 in it as, up to this point, I've been a lackluster investor and saver.

Now, I'm taking control of my savings and reading up on how best to achieve FIRE. I want to start putting my savings in the good ole VTSAX. I figure that will be pretty much the only or at least the main thing in my portfolio for a long while. I've around 18,000 a year I can feed it, which may not be great but it's a fine start, I feel!

But the Roth IRA is just sitting there, with it's $5,500/year limit and its almost 40 year countdown before I can even touch it. It does nothing to help me achieve FIRE and would only be a draw off of my already limited investment dollars to keep piping money to it.

So my question is: would it be better for me to take the withdraw fee hit and close out the IRA fund, letting me put those funds and all future funds exclusively on investments that I can a.) put however much I want in and b.) access whenever I'm ready? Or should I leave the IRA alone and just count it as a loss for the next 40 years until I get access to that small amount already invested? Or something that I'm not thinking of?

Any help would be appreciated! ^^ This is my first big step and I'd like to make it a good one. :D

NoStacheOhio

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Re: Splitting between Roth IRA and Mutual Fund or Pooling
« Reply #1 on: October 31, 2016, 11:40:13 AM »
You can withdraw Roth IRA contributions (but not earnings) penalty-free after five years.

Do you have an employer-sponsored plan to which you can contribute? If you're self employed you can start a solo 401k too.
« Last Edit: October 31, 2016, 11:51:40 AM by NoStacheOhio »

mskyle

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Re: Splitting between Roth IRA and Mutual Fund or Pooling
« Reply #2 on: October 31, 2016, 11:44:53 AM »
But the Roth IRA is just sitting there, with it's $5,500/year limit and its almost 40 year countdown before I can even touch it. It does nothing to help me achieve FIRE and would only be a draw off of my already limited investment dollars to keep piping money to it.

How to Withdraw Funds from your IRA and 401k Without Penalty Before Age 59.5.

(Someone should create a bot that posts this link automatically to everyone's first post :P)

plog

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Re: Splitting between Roth IRA and Mutual Fund or Pooling
« Reply #3 on: October 31, 2016, 11:47:54 AM »
Quote
Or should I leave the IRA alone and just count it as a loss for the next 40 years until I get access to that small amount already invested

You're post shows a lot of enthusiasm but very little understanding.  My advice is to take some time, read this forum and others, find out about investing before doing anything and then make an intelligent decision. Looks like you skimmed some headlines and got a malformed idea in your head.

Your $6500 isn't in a safe at the bottom of a shark infested lagoon. It's still very much in your control.  Not only can you get to the initial investment, you can change the entire way the whole amount is currently invested--i.e. moving it all into VTSAX without breaking it out of the roth.  Again, read, breath, understand and then act.

ooeei

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Re: Splitting between Roth IRA and Mutual Fund or Pooling
« Reply #4 on: October 31, 2016, 12:19:51 PM »
Quote
Or should I leave the IRA alone and just count it as a loss for the next 40 years until I get access to that small amount already invested

You're post shows a lot of enthusiasm but very little understanding.  My advice is to take some time, read this forum and others, find out about investing before doing anything and then make an intelligent decision. Looks like you skimmed some headlines and got a malformed idea in your head.

Your $6500 isn't in a safe at the bottom of a shark infested lagoon. It's still very much in your control.  Not only can you get to the initial investment, you can change the entire way the whole amount is currently invested--i.e. moving it all into VTSAX without breaking it out of the roth.  Again, read, breath, understand and then act.

This is good advice.

seattlecyclone

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Re: Splitting between Roth IRA and Mutual Fund or Pooling
« Reply #5 on: October 31, 2016, 01:03:18 PM »
You can withdraw Roth IRA contributions (but not earnings) penalty-free after five years at any time.

Fixed that for you. There is never any penalty due on the withdrawal of your Roth IRA contributions.