Cashing in Roth

maat55 · #1 (**permalink**) 03-02-2008, 07:20 AM

What are good reasons to cash in a Roth and when not?

It's hard to think that there would ever be a good reason to cash in a Roth, but what about if you needed money for a down payment on a good realestate investment. I'd like to see some ideas.

safari · #2 (**permalink**) 03-02-2008, 10:03 AM

It is never a good idea because once you cash in that money, you won't be able to put them back in. It's better to borrow money from your 401(k) if you really need it because you will repay that loan to yourself. The only time cashing in your Roth is justified is when you have a true emergency and can't pay your bills because you lost your job or had a medical emergency. Using that money as a down payment is not an emergency.

disneysteve · #3 (**permalink**) 03-02-2008, 11:49 AM

Quote:

Originally Posted by safari

The only time cashing in your Roth is justified is when you have a true emergency

I agree. There is no good reason short of a catastrophe to raid your retirement accounts. If you want to buy a home, save up a down payment.

LivingAlmostLarge · #4 (**permalink**) 03-02-2008, 05:53 PM

Um, unemployed for 3-4+ years and have drained all taxable savings. Nothing else to live on?

Broken Arrow · #5 (**permalink**) 03-02-2008, 07:58 PM

Interesting....

In my case, my 401k is maxed (and again, my employer has no match limit). Sooo, with a Roth, I can go either way with this, because I currently don't own a house but would like to some day. So, if I was going to build a house fund anyway, it makes more sense to me to use a Roth rather than a taxable account....

Again, I think this is a very specific case, and I do not disagree at all with the convention to never use your Roth IRA for anything else.... But then, as the saying goes, "Every rule has an exception", especially with finances?

maat55 · #6 (**permalink**) 03-02-2008, 08:22 PM

Say a business owner has been renting a place to do business at a very low rent and the building is being put up sale. The business owners options are to leave and pay higher rent or buy the building and rent out additional space at the cost of the loan payment, but he needs down payment money to do the deal. Is cashing in an roth a good idea for this senario?

texastek76 · #7 (**permalink**) 03-03-2008, 05:22 AM

Quote:

Originally Posted by LivingAlmostLarge

Um, unemployed for 3-4+ years and have drained all taxable savings. Nothing else to live on?

Is this even possible anymore for someone really trying?

disneysteve · #8 (**permalink**) 03-03-2008, 05:26 AM

Quote:

Originally Posted by maat55

Say a business owner has been renting a place to do business at a very low rent and the building is being put up sale. The business owners options are to leave and pay higher rent or buy the building and rent out additional space at the cost of the loan payment, but he needs down payment money to do the deal. Is cashing in an roth a good idea for this senario?

I guess you need to run the numbers. Figure out how much you will lose in penalties by cashing out the Roth. If you are only withdrawing contributions, you likely won't lose anything. In that case, look at the overall retirement picture. If you have adequate retirement assets without the Roth (like a big 401k account or a solid pension), then perhaps you can be okay without the Roth assets. Personally, though, my Roth IS my retirement account so I can't imagine touching that for anything but retirement.

LivingAlmostLarge · #9 (**permalink**) 03-03-2008, 08:18 AM

Apparently it is. I don't know anyone but if you read some blogs they were unemployed for 3+ years.

Gruntina · #10 (**permalink**) 03-03-2008, 12:47 PM

Quote:

Originally Posted by LivingAlmostLarge

Apparently it is. I don't know anyone but if you read some blogs they were unemployed for 3+ years.

In the Bay Area there are several Deaf people with professional degree or experiences that were laid off has taken them a few years before finding another job. People who never experience working with Deaf people are reluctant to hire them due to ignorance. I understand this is classifying deaf unemployment but I am sure this is beyond that. People are people so it can happen and others are well fortuned to not have this problem.

anonymous_saver · #11 (**permalink**) 03-03-2008, 01:41 PM

Quote:

Originally Posted by maat55

Say a business owner has been renting a place to do business at a very low rent and the building is being put up sale. The business owners options are to leave and pay higher rent or buy the building and rent out additional space at the cost of the loan payment, but he needs down payment money to do the deal. Is cashing in an roth a good idea for this senario?

I would still say "No."

You still need retirement money, just because they are a business owner, doesn't mean they would be good/sufficient landlord, etc.

autoxer · #12 (**permalink**) 03-03-2008, 01:52 PM

Quote:

Originally Posted by maat55

What are good reasons to cash in a Roth and when not?

It's hard to think that there would ever be a good reason to cash in a Roth...

The best reason to cash it in... Because you are retired and it is part of your retirement spending plan.

disneysteve · #13 (**permalink**) 03-03-2008, 02:09 PM

Quote:

Originally Posted by autoxer

The best reason to cash it in... Because you are retired and it is part of your retirement spending plan.

Love it. That's the best answer!

maat55 · #14 (**permalink**) 03-03-2008, 06:03 PM

Quote:

Originally Posted by disneysteve

I guess you need to run the numbers. Figure out how much you will lose in penalties by cashing out the Roth. If you are only withdrawing contributions, you likely won't lose anything. In that case, look at the overall retirement picture. If you have adequate retirement assets without the Roth (like a big 401k account or a solid pension), then perhaps you can be okay without the Roth assets. Personally, though, my Roth IS my retirement account so I can't imagine touching that for anything but retirement.

I look at it as trading one investment for another. Being that it is only down payment money, it shouldn't break the bank. I agree, that it should be a last option.

moneybags · #15 (**permalink**) 03-03-2008, 06:56 PM

My kids have money in their Roths. If they need it for college, they may use it. Hopefully college will be funded from other sources, but the Roths are a back up. I prefer they leave it in, but who knows what they'll think as a grown up.

I would think taking money out as an 18 year old, they still have time to fund their retirement. (I also think it's never too early to save for retirement, which is why this money is there.)

safari · #16 (**permalink**) 03-03-2008, 08:24 PM

Quote:

Originally Posted by moneybags

My kids have money in their Roths. If they need it for college, they may use it. Hopefully college will be funded from other sources, but the Roths are a back up. I prefer they leave it in, but who knows what they'll think as a grown up.

I would think taking money out as an 18 year old, they still have time to fund their retirement. (I also think it's never too early to save for retirement, which is why this money is there.)

How were you able to fund Roth IRA for your kids? Only people who had income from work can contribute money to an IRA account. Link

disneysteve · #17 (**permalink**) 03-04-2008, 04:48 AM

Quote:

Originally Posted by safari

How were you able to fund Roth IRA for your kids?

Some kids work. Babysitting counts. That first job flipping burgers at McDonald's counts. Starting a lawn mowing business in your neighborhood counts. A paper route counts. Lots of ways for kids to earn money. What a lot of parents do is provide matching funds so the kid can start that Roth but still have money available to spend.

moneybags · #18 (**permalink**) 03-04-2008, 03:39 PM

Quote:

Originally Posted by safari

How were you able to fund Roth IRA for your kids? Only people who had income from work can contribute money to an IRA account. Link

They modeled when they were younger (they are 11 & 14 now). Great way to start the college fund!

cptacek · #19 (**permalink**) 03-07-2008, 07:00 PM

Quote:

Originally Posted by disneysteve

I guess you need to run the numbers. Figure out how much you will lose in penalties by cashing out the Roth. If you are only withdrawing contributions, you likely won't lose anything. In that case, look at the overall retirement picture. If you have adequate retirement assets without the Roth (like a big 401k account or a solid pension), then perhaps you can be okay without the Roth assets. Personally, though, my Roth IS my retirement account so I can't imagine touching that for anything but retirement.

As a business owner, you have to play things a little different than employed people. How much will it cost you to move? Will you lose business? Will you lose time being open? Will you lose name recognition? If it will cost you more (long term) to keep the money in the Roth IRA than to cash it out for your business, then you need to cash it out.

maat55 · #20 (**permalink**) 03-08-2008, 06:16 AM

Quote:

Originally Posted by cptacek

As a business owner, you have to play things a little different than employed people. How much will it cost you to move? Will you lose business? Will you lose time being open? Will you lose name recognition? If it will cost you more (long term) to keep the money in the Roth IRA than to cash it out for your business, then you need to cash it out.

These are very important factors. I started this thread because I am in this situation. I have the money for the down payment, but was wondering what if? Moving a business is a big deal. I'd be the first to do it if it were the better option, but staying is, in this case.

I like most people think that your retirement fund is sacred, but am not sure in some cases.