Started my first 401(k)

[veronak]

Re: Started my first 401(k)

All I can say is congratulations I do not have a 401K but a Roth IRA, at first I thought it would be hard to contribute but with automatic payments I do not even miss the money out of my check

[WellManicuredMan]

Re: Started my first 401(k)

All I can say is congratulations I do not have a 401K but a Roth IRA, at first I thought it would be hard to contribute but with automatic payments I do not even miss the money out of my check

Thank you

Now I have been reading up on Roth IRAs and I'm trying to decide if I should start one of these as well. In another thread I talked about how I am also saving for my first home purchase. Because of this I decided to only contribute 4% to my 401(k) to get the maximum match from my employer. However, a Roth doesn't have the same draw-backs that 401(k)'s have when you might need the money before 59 1/2 because you can withdraw up to $10,000 for your first home without any penalty. And you can withdraw the contributions at any time without a penalty (just not the earnings) since you've already paid taxes on them. If I understand it correctly... or do you have to have the account open for 5 years first?

[WellManicuredMan]

Re: Started my first 401(k)

I was trying to find out if I can use the same account with Vanguard so I can have the Roth and 401(k) under the same username/password. Anyone know?

Nevermind! I just answered this question for myself when I attempted to create a new account on Vanguard. It let me log in using my 401(k) information to add an account to it.

[Broken Arrow]

Re: Started my first 401(k)

I could be wrong, but I think you have to have the money in the account for five years before you can withdraw the principal without penalty. Even then, it only qualifies for certain conditions, such as a downpayment for a house as you mentioned.

However, I believe an IRA is best used as it was intended: For retirement. (Or... is it? Anyone want to comment on that?)

[sweeps]

Re: Started my first 401(k)

You can withdraw your contributions from your Roth at any time without penalty. But to withdraw the earnings, yes, you must have had the money in the Roth for at least 5 years and it must be for a qualifying event (e.g. $10,000 for first-time home).

But I agree that your retirement plan should be for one thing: Retirement. Once you start thinking of it as money for other purposes, you're in trouble.

[WellManicuredMan]

Re: Started my first 401(k)

You can withdraw your contributions from your Roth at any time without penalty. But to withdraw the earnings, yes, you must have had the money in the Roth for at least 5 years and it must be for a qualifying event (e.g. $10,000 for first-time home).

But I agree that your retirement plan should be for one thing: Retirement. Once you start thinking of it as money for other purposes, you're in trouble.

Thank you sweeps for clarifying that. I thought that was how it worked. I'm pretty surprised that the IRS will even allow this to be done with your contributions.

And I agree 100% with your second statement. I don't plan on using my retirement for other purposes, but it is nice to know that if I really need the money I could take it out (minus earnings) without having to pay a penalty.