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Are there penalties if I withdraw some of my money from a Roth earlier than a certain age?

I'm asking because I'm in college and want to start investing for the long-term. I've realized that, with the amount of money I have now, an index fund would be the best way to go until I have enough capital built up to keep fees under 2% in an individual stock portfolio.

I knwo that a Roth is tax-free, so I think that would be the best way to go. But, I will also be saving for a house, car, etc. which I will buy before retirment age. This is why I'm wondering if I can withdraw early from a Roth (I'm guessing I can, but I figured I'd ask). If not, then I think an index fund with a discount broker would be the best thing for me.

-tdx
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Check out this link for just about every question you have regarding IRAs. On the right side of the of the page there is a blue box with a series of articles on all the topics.

http://www.fool.com/money/allaboutiras/allaboutiras.htm

Have a good one,
Neal
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>>Are there penalties if I withdraw some of my money from a Roth earlier than a certain age?

Not on the principal you invest- you can take it out anytime, tax and penalty free (you will pay taxes/penalties on the earnings if you're under 59.5, however). You can also withdraw up to $10,000 for a first time home purchase tax and penalty free, but only if your Roth account has been open for five years. Yet another reason to open one today!

Personally I wouldn't worry about future home and car needs- the power of an investment growing tax free for (in your case) 50+ years is too great to ignore. Invest $3K/year from age 20 to 30, never invest another dime, and you'll be a millionaire when you're 60, if the investment grows at 10% per year. And if that money's in a Roth, you'll be able to withdraw & spend it tax free.

Nick
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Thanks for the advice yobria. I plan on investing all of my investmnent money into a Roth until that amount becomes $3000, after which I will take the leftover money and start putting together an individual stock account.

This threshold will probably come in a year or 2 (when I'm 22), until then then I plan to spend time reading on investing as well as researching companies. And all the while, my Roth index fund will be be compounding. Forgive me for having visions of sugarplums dance in my head, but I'm so happy that I started looking into investing before I graduate college

-tdx
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Sounds like you're firmly on the road to wealth! A few things that can keep you from getting there:

-You stay in school til you're 30 getting a PhD in English and end up working in a bookstore (get a practical skill and get in the workforce ASAP!)

-Once you're making money, you spend more than you earn (Live a simple life and be extra frugal while in your 20s!)

-You MISinvest via options, market timing, high fee/commission investments, the wrong asset class (eg keeping all your wealth in cash) or other losers games. A Vanguard index fund or a Scottrade account is all you need.

Good luck avoiding these pitfalls. I started following the advice above when I was 22. I'm 30 now, have a substantial net worth and no money worries! It was worth the sacrifice.

Nick
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