Roth IRAs are by far my favorite type of investment holding account available.
I love the idea of setting aside $5,000 in after-tax money in order to never pay taxes on the amount ever again.
There are other perks to using a Roth IRA besides never paying income tax on your nest egg. One of the most prominent: you can withdraw your contributions at any time, even before retirement. (This isn’t recommended, of course, but it is possible.) You won’t pay any penalty or taxes for withdrawing your contributions under normal situations. You will pay tax and penalties if you withdraw your investment earnings, so never do this.
This unique withdrawal capability has some people counting on their Roth IRAs as an emergency fund.
But is this a wise choice or a fool’s gamble?
Should I Use My Roth IRA as an Emergency Fund?
[Read more…] about Using a Roth IRA as an Emergency Fund – Pros and Cons