IRA contribution

[Thomas_Thumb]

If you qualify, I highly recommend starting and contributing to a Roth IRA - money grows tax free no MRD in retirement and no tax on investment growth if/when funds are withdrawn.

A mix of pre-tax and after tax retirement accounts is a good hedge.

[Anonymous]

Yes I will plan to do that in my future currently through my job I can only do 5500 a year into roth part of my thrift, the max combined is 18000.  The reason I want to contribute extra into an ira for tax season 2015 and 2016, is because it is money I have for my house savings anyway, and I can withdraw 10k tax free as a first time home buyer, which will save me a few thousand in taxes, on money I would have to save anyway.

[Anonymous]

You are mistaken.  When a person withdraws 10k from a conventional IRA as a downpayment on a first home, the 10k is penalty free, but not tax free.  The word penalty in this context means that ordinarily when a person withdraws money from his IRA before the age of 59 1/2, he has to pay a penalty, in addition to paying income tax on it. 

http://www.schwab.com/public/schwab/resource_center/expert_insight/ask_carrie/homes_mortgages/dip_in...

[elim]

Cash is'nt a bad option this month.  Another option is precious metals... 10k per year is unreported. Silver is pretty low right now and is a real hedge option,

[Anonymous]

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@Anonymous wrote:

You are mistaken.  When a person withdraws 10k from a conventional IRA as a downpayment on a first home, the 10k is penalty free, but not tax free.  The word penalty in this context means that ordinarily when a person withdraws money from his IRA before the age of 59 1/2, he has to pay a penalty, in addition to paying income tax on it. 

http://www.schwab.com/public/schwab/resource_center/expert_insight/ask_carrie/homes_mortgages/dip_into_ira_to_buy_first_home.html

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Thanks alot, I did not know that, I thought it was penalty and tax free.

[CreditDunce]

If you invested in a Roth IRA, you could withdrawal the contributions at anytime tax free..   It is probably not worthwhile if you are going to only keep the money in one year.  However, Roth IRA's make good places to hold true emergency reserves when you are starting out.  It also might worth asking your mortgage lender if they would accept money in a ROTH as part of your reserves.

Before giving up on your idea to contribute to a deductible IRA, run a few what if's with your taxes this year.  Check to make sure you can't trigger any other tax deductions/credits.  The two that come to my mind are the earned income credit and IRA savers credit.   Remember your AGI is the important number for tax credits/deductions. 

The other thing to remember is your trick will allow you to shift the year the taxes are due.   If the house allows you to pay a lower marginal tax rate, it could make financial sense.

[Anonymous]

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@CreditDunce wrote:

If you invested in a Roth IRA, you could withdrawal the contributions at anytime tax free..   It is probably not worthwhile if you are going to only keep the money in one year.  However, Roth IRA's make good places to hold true emergency reserves when you are starting out.  It also might worth asking your mortgage lender if they would accept money in a ROTH as part of your reserves.

Before giving up on your idea to contribute to a deductible IRA, run a few what if's with your taxes this year.  Check to make sure you can't trigger any other tax deductions/credits.  The two that come to my mind are the earned income credit and IRA savers credit.   Remember your AGI is the important number for tax credits/deductions. 

The other thing to remember is your trick will allow you to shift the year the taxes are due.   If the house allows you to pay a lower marginal tax rate, it could make financial sense.

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With a Roth, you still pay a 10% penalty if you withdraw before age 59.5. 

[Anonymous]

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@Anonymous wrote:

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@CreditDunce wrote:

If you invested in a Roth IRA, you could withdrawal the contributions at anytime tax free..   It is probably not worthwhile if you are going to only keep the money in one year.  However, Roth IRA's make good places to hold true emergency reserves when you are starting out.  It also might worth asking your mortgage lender if they would accept money in a ROTH as part of your reserves.

Before giving up on your idea to contribute to a deductible IRA, run a few what if's with your taxes this year.  Check to make sure you can't trigger any other tax deductions/credits.  The two that come to my mind are the earned income credit and IRA savers credit.   Remember your AGI is the important number for tax credits/deductions. 

The other thing to remember is your trick will allow you to shift the year the taxes are due.   If the house allows you to pay a lower marginal tax rate, it could make financial sense.

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With a Roth, you still pay a 10% penalty if you withdraw before age 59.5. 

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Isn't that only for appreciation/profit/earnings (not sure the right term). I thought you could withdraw contributions any time because they've already been taxed. 

[tacpoly]

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@CreditDunce wrote:

If you invested in a Roth IRA, you could withdrawal the contributions at anytime tax free..   It is probably not worthwhile if you are going to only keep the money in one year.  However, Roth IRA's make good places to hold true emergency reserves when you are starting out.  It also might worth asking your mortgage lender if they would accept money in a ROTH as part of your reserves.

Before giving up on your idea to contribute to a deductible IRA, run a few what if's with your taxes this year.  Check to make sure you can't trigger any other tax deductions/credits.  The two that come to my mind are the earned income credit and IRA savers credit.   Remember your AGI is the important number for tax credits/deductions. 

The other thing to remember is your trick will allow you to shift the year the taxes are due.   If the house allows you to pay a lower marginal tax rate, it could make financial sense.

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It is still a good idea to open and fund a Roth IRA early to start the clock on the 5 year holding requirement (specially if one is nearing retirement). 

[Anonymous]

Just a quick observation, everybody.  I think we may have gone down a rabbit hole.  I am sensing that the OP is not really interested in finding places to invest extra money for retirement.  Rather, he was under the impression that he could use an IRA to avoid paying taxes on an upcoming 10k downpayment for a house.  That was the driver for his original post.

Given that the answer there is "no" -- he'd probably be best served by the boring unsexy advice that would apply to anybody saving for a DP coming up soon.  I.e. find a good online savings account and start putting all your extra cash in that.  Most of the best such accounts are offering a little over 1%.  (Though depending on what how much extra work he's willing to do, he can find savings accounts at a higher rate than that, e.g. 4-5%.)