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Author: NarnCeredir One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127236  
Subject: Where to Park Closing Cost Savings Date: 12/2/2012 11:55 AM
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Hi All,

I am currently saving for my first home purchase, which I am planning on completing in the summer of 2015 (about 2.5 years). I have my main home down payment savings in an online savings account, but also have approximately $3000 in a Roth IRA through Ameritrade. I would like to use these funds to cover my eventual closing costs (I have a healthy 457 and pension plan that I contribute to monthly. Thus the $3000 is not a major part of my retirement savings), but cannot figure out what vehicle to store them in. Ameritrade's cash sweep is very weak, and their CD options are not strong. Ultimately I'd like to find a 2-year CD or something similar.

I wish that I could just pull the funds out and put them together with my home down payment savings fund, but know I'd have to pay the requisite penalties and taxes since I won't be using the funds to buy a home for several years. Any thoughts on what to do? Leave the funds at Ameritrade despite their low cash sweep? Perhaps open an IRA with an online bank and transferring the funds there? It's such a small amount of cash that I'm kind of lost -- though I do know I want to use the funds for closing costs eventually.

Thanks for any insights you might be able to provide.

-Narn Ceredir
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124446 of 127236
Subject: Re: Where to Park Closing Cost Savings Date: 12/2/2012 1:03 PM
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I wish that I could just pull the funds out and put them together with my home down payment savings fund, but know I'd have to pay the requisite penalties and taxes since I won't be using the funds to buy a home for several years.

If you're intent on using this money for a home purchase, just move it to an IRA at a bank or credit union and buy CD's in it. If your first Roth contribution/conversion was 5 tax years before you use it for this purpose (and you meet all the other requirements in Pub 590 regarding home purchase) there will be no tax on the earnings.

Phil
Rule Your Retirement Home Fool

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124447 of 127236
Subject: Re: Where to Park Closing Cost Savings Date: 12/2/2012 5:50 PM
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I wouldn't think of the closing costs any differently than you do the down payment. It's all money you need at the time of purchase.

I'd stash the funds in the same account with your down payment money.

However, since you seem to be intent on trying to use a Roth IRA to accomplish something it was not designed to do, the next best thing would be to transfer the Roth IRA to the same online bank that is holding your down payment money. They almost certainly will be able to open up a Roth IRA for you and then accept a transfer of the money from TD Ameritrade.

--Peter

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Author: NarnCeredir One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124448 of 127236
Subject: Re: Where to Park Closing Cost Savings Date: 12/3/2012 11:43 AM
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I wouldn't think of the closing costs any differently than you do the down payment. It's all money you need at the time of purchase.

I'd stash the funds in the same account with your down payment money.

However, since you seem to be intent on trying to use a Roth IRA to accomplish something it was not designed to do, the next best thing would be to transfer the Roth IRA to the same online bank that is holding your down payment money. They almost certainly will be able to open up a Roth IRA for you and then accept a transfer of the money from TD Ameritrade.

--Peter


I certainly understand that the Roth IRA is not designed as a sort-term savings account. The very small amount of money in the IRA has been there for awhile (I opened the account while I was in graduate school, with little plans and before I had a real job, etc.) and is not a part of my overall retirement strategy. But the money will be helpful for my short-term goal of purchasing a home, and will not hurt my retirement savings. I'm just trying to simplify and minimize tax liabilities as much as possible. Thanks for the advice!

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