Would it be wise or risky to use the Roth IRA as a savings account?
Eric and I opened up Roth IRA’s last year as part of our 2012 goals. At the beginning of the year, I deposited $100 into each account and that was that. I haven’t touched them since.
We’ve just had other things to worry about, like paying off debt and saving up. I’m not terribly concerned about the loss in retirement savings, since we are both in work-sponsored pension plans (if I work here 30 years, I’ll retire and receive 75% of my salary annually for the rest of my life) , plus I have my 403 (b) with the full company match.
I do plan to contribute to our Roth IRAs, but realistically, that’s not going to happen any time soon.
That being said, we have kicked into high gear our goal of saving up for a house and putting together a down payment fund.
Our online savings account yields us something like 0.6% in interest. It’s pitiful.
Our Roth IRA on the other hand, yielded us a 15% return–in one year!
I know that a 15% return is not the norm. But I’m wondering, should we be putting some of our savings into the Roth IRA* since we can take out our contributions without penalty?
Or is it simply too risky? Would you recommend putting in a portion of our savings into the Roth IRA? Or none at all unless we’re prepared to lose it?
Realistically, we wouldn’t be touching this money for at least another year, and even more realistically, probably like two years.
Does anyone use their Roth IRA as a savings account or emergency fund?
*For those who may not know, a Roth IRA is an individual retirement account that you contribute to with after-tax deductions. You are able to take out your contributions at any point, tax-free (since it’s already taxed money, unlike a 401K) but you cannot touch the earnings. So if you put in $2,000, and make $50 in interest, you can take out $2,000, but the $50 has to stay.