You can also go with Roth IRA , where you can withdraw any amount with no penalties.
If you need the money in the 1-2 year time frame, putting it in the market (even the SPY index) doesn't make sense to me: stocks or the market as a whole can go down in that time frame and not be there for a mortgage down payment.
Carrying it in a guaranteed investment is likely a better choice in his scenario. Longer term I think SPY is a good choice.
Withdrawls from either IRA type still has to be for a qualified reason: namely to be penalty free it needs to be for a first time home in this example. Roth IRA's still have a 10% penalty otherwise as i understand it, though that might be on gains rather than the initial investment I've never looked seriously into it.
@Revelate wrote:If you need the money in the 1-2 year time frame, putting it in the market (even the SPY index) doesn't make sense to me: stocks or the market as a whole can go down in that time frame and not be there for a mortgage down payment.
Carrying it in a guaranteed investment is likely a better choice in his scenario. Longer term I think SPY is a good choice.
Withdrawls from either IRA type still has to be for a qualified reason: namely to be penalty free it needs to be for a first time home in this example. Roth IRA's still have a 10% penalty otherwise as i understand it, though that might be on gains rather than the initial investment I've never looked seriously into it.
From what i understand about roth ira , there is no penalty when you withdraw early since you are already paid tax on your contribution. Roth IRA is in contrast to 401k and traditonal IRA because you can withdraw early without penalty. Somebody can correct me if I am wrong about that.
Also for short term investment like 1-2 years. Only way i would go is safely with an high yield online savings account or an cd.
@mongstradamus wrote:
@Revelate wrote:If you need the money in the 1-2 year time frame, putting it in the market (even the SPY index) doesn't make sense to me: stocks or the market as a whole can go down in that time frame and not be there for a mortgage down payment.
Carrying it in a guaranteed investment is likely a better choice in his scenario. Longer term I think SPY is a good choice.
Withdrawls from either IRA type still has to be for a qualified reason: namely to be penalty free it needs to be for a first time home in this example. Roth IRA's still have a 10% penalty otherwise as i understand it, though that might be on gains rather than the initial investment I've never looked seriously into it.
From what i understand about roth ira , there is no penalty when you withdraw early since you are already paid tax on your contribution. Roth IRA is in contrast to 401k and traditonal IRA because you can withdraw early without penalty. Somebody can correct me if I am wrong about that.
Also for short term investment like 1-2 years. Only way i would go is safely with an high yield online savings account or an cd.
You don't pay taxes on your contribution, you do pay taxes on your earnings in this case, and there's still the 10% IRS penalty fee if you're not using it for a qualified purpose from what little research I did a few years ago. This contrasts to the traditional IRA / /401k where you pay at your standard tax rate for all contributions and earnings plus a 10% fee on top of that.
I didn't really look into it beyond that as pulling from any tax-advantaged retirement plan in my case would be an absolute last resort: namely, I'm going to lose my house (if I owned one) otherwise. With how difficult it is to get money into the plan comparitively, and the opportunity cost associated with the lost compounding interest, I'd sacrifice most other assets in my life before that. That said my burn rate is trivial compared to most people apparently and it is a YMMV situation.