loan repayments vs. taking an Roth IRA?
962908
If you are an immigrant and are planning to go back, then you may want to take it out, coz becoming debt free should be your primary goal. But if you are a citizen, a greencard holder or planning to continue to stay here. Please leave it there. Its very great that you have started with your IRA fund. I would not take it out.
896171
Let me make sure I understand the question.  Are you saying you are taking out an early distribution from your IRA of $40,000 and want to shelter all of it from the 10% early distribution penalty?  Well, first of all, you only have $10,000 per person per lifetime of 1st time home buyer's exemption.  Of course, if there are two of you, each can pull out $10,000 from their own IRAs.\n\nIt looks like you are reading Publication 590.  Good.  The phrase that is confusing to most people is "The part not subject to the tax is generally the amount that is not more than the qualified higher education expenses (defined later) for the year...".  What they are saying is that the amount you can exempt for education can not be more than the amount you paid for education.  They are not saying you can't include other exemption items on top of the education exemption items.\n\nSo, if you paid $11,000 for tuition, fees, books, supplies, and equipment regardless if it was from a loan, a gift, or from your own wallet, but not from a scholarship or grant, and if you paid at least $10,000 for a house, and if your medical expenses exceeded 7.5% of your AGI by $2,000 (regardless if you use a Schedule A), then you can pull out $23,000 from your IRA and not be penalized.  Don't forget that even though you avoid the penalty, you will still have to include the amount you pull out as taxable income in the year you pull it out.  There is nothing you can do to avoid that.
208027
It depends on your personal finances.  If you own a home and have a mortgage on it, you can deduct the interest.  You have to itemize (schedule A) to get most deductions on a personal return, but once there, you can also deduct charitables and medical expenses if they are very very high relative to your income.  The best strategy for most individuals is to try and minimize your income in the first place by contributing to an IRA (traditional) or to participate in the 401(k) plan where you work.  Not knowing anything about your personal situation, I can't offer much more advice than that.
578488
The formula is 1/R * ((1+R)^n - 1)\n\nThere is a link to a table.\n\nA ROTH IRA is pretty easy because your Future money is tax free.
453258
try to deffer the payments as much as possible so that if this ends up being you only source of income then you will end up paying less taxes i don't think that it will be tax free. unless it is a roth IRA where you paid taxes upfront to later have tax free money when you get the money.
844192
Yup, you can have both.  Many people do.  If you have a Traditional IRA you can open a Roth IRA, or vice versa, but Carlos R is right, "the funding limits apply to both together" per year.  So since you can only put in $4000 for this year (2006) if your under 50, and say you already put in $4000 in a Traditional IRA, you can't put anymore in a Roth for this year...  and probably, "if you have a choice, put it into a Roth IRA."  See this to be sure: http://finance.yahoo.com/education/retirement/article/101060/which_ira_is_right_for_you\n\nDisregard it saying the annual contributions limit is $2000.  That was in the past.\n\nHere's another link if you really want it: http://www.finance.cch.com/sohoApplets/RothvsRegular.asp
274365
A Roth IRA is an investment of after-tax money.  The current contribution limit is 4K a year.  You may withdrawl the money you have contributed at any time, for any reason without taxes or penalty.  \n\nAfter 5 years you may also withdraw the earnings for qualified expenses such as a first home purchase or educational expenses without penalty.  There are no age limits on your ability to make contributions to a ROTH IRA.  \n\nThe big advantage for younger investors of the ROTH IRA is that young people often have lower incomes and tax rates, so they will come out far ahead putting in money that they only had to pay low taxes on.
1176821
I think...your question...is kinda confusing.  There is the Tradional IRA, Roth IRA and 401(k).  I am not sure there is anything such as Tradional 401(K).\n\nif you're talking about 401(k) - you can move your 401(k) from previous employer to your current employer's 401(k) , OR if you want more options, besides 10 or so mutual funds your current employer offers ( or similar number of funds offered by your previous employer ), you will be better off, rolling your 401(k), into a ROLLOVER IRA. Of course, everytime you trade you're going to pay commissions, which may not be the case in 401(K)\n\nif you're talking about Traditional IRA to ROTH IRA : if you meet certain IRS criteria ( such as be Single, or file jointly if you're married and above all have a Adjusted Gross Income of less than 100K. )  If you think you're going to be in the same Tax Bracket as you are today or above that, when you're 50s ( i think 57 or something like that ),  you will be better off, paying taxes on your earnings in your traditional IRA, TODAY,  at your current lower federal income tax  bracket, so you don't have to pay ANYTHING in your ROTH IRA - even if grows to be Billions of $$$$.  As usual, there are the inherent benefits of ROTH IRA - you will not be required to withdraw monies from it ( with Traditional IRA you will be forced to take out money in 50s and pay taxes on it - if you don't you pay penalty ). You can pass on the ROTH IRA to your kids, etc.\n\nAs usual, consult a financial advisor, as each case varies.  \n\nOne more thing....If your considering converting traditional IRA to ROTH, be prepared to shell out taxes on your earnings/income - from out of your own pocket - DON'T CONSIDER PAYING IT OFF WITH YOUR EARNINGS/INCOMES FROM TRADITIONAL IRA - YOU WILL PAY EARLY WITHDRAWL PENALTY AT 10%
985867
A roth account might be good or bad for you.  They're not good for everyone.\n\nA 401k or IRA is just a type of account, and has nothing to do with how much of a return you can get from your investment.  If you are investing in mostly a diverse mix of stock funds, you should expect a long term average return of 7-9%.  In some years you will get more (like 13%), and some years you will lose money).  In either type, you'll be investing in a mix of mutual funds.  The benefit of a roth IRA has to do with taxes.\n\nHere's the benefit:  With a 401k or traditional IRA, you pay no income taxes now on the money you put in.  You pay income taxes when you withdraw the money in retirement.  With a roth IRA, you pay the income taxes now, and pay no taxes on the money you withdraw in retirement. \n\nIf your income tax rate is lower now than it will be in retirement, you do not want a roth account.  If your income tax rate will be higher in retirement than it is now, then a roth account would be good for you.\n\nHERE'S HOW YOU SWITCH:\nYou "rollover" your 401k balance to a traditional (pretax) IRA.  That means you tell the company that has your 401k to transfer the money directly into an IRA.  As long as you don't receive a check payable to yourself, you'll pay no taxes or penalties.  You then "convert" the traditional IRA to a roth IRA.  This is something the company that handles the IRA does for you.  Basically, they take taxes straight out of the IRA and send them to the IRS.  This makes the money in the IRA after tax, or "roth" money.\n\nBUT...\n\nTo be able to transfer the money from the 401k to the IRA, you'll have to have already stopped working for the company.  AND your company might have the "roth 401k" feature, which allows you to contribute to your 401k plan with after tax money and have exactly the same benefit as the roth IRA.  ALSO if your company matches your contributions to your regular 401k, that will probably outweigh any benefit you could possibly get from the roth IRA.\n\nYou need to talk to the company that manages your 401k plan to find out what your options are.  And call a company that does IRAs to find out more details on the roth IRA to find out if it would be a good fit for you.  Try Fidelity or Vanguard.
998314
Ahhh, the million dollar question for Roth accounts...\n\nAnd the answer is - it depends (sorry). Unfortunately, you need a crystal ball for this one. Your decision will likely come down to what you believe the future holds. You need to consider several factors, but you basically have two courses of action to take. \n\n1) Take the sure thing - Invest in a Roth IRA, paying tax upon the contributions at your current income tax bracket, enjoy tax-free compounding of interest, and tax-free withdrawals of contributions and earnings through a qualified distribution (usually at retirement).  Be careful, though...even if you are 90 years-old, your money must be in the Roth account for at least 5-years before qualifying for a tax- and penalty-free withdrawal. There are other benefits to having a Roth account versus a traditional IRA, such as the ability to get to your money without penalty for qualified reasons, such as needing to get to the money in order to purchase your first home.  Contributions to Roth IRA's are subject to certain AGI limitations, so check with the IRS or a competent accountant first.\n\n2) Let it Ride - Invest in a traditional IRA and enjoy a tax deduction today and tax-free compounding of interest until you are able to take a qualified distribution (usually at retirement) at which time you will pay taxes on the principal and earnings at your future income tax rate.\n\nSo, look into your crystal ball...\n\nDo you believe that you will be in a higher tax bracket at retirement age than you are right now?  If so, the Roth IRA option may be the right choice for you as you will likely pay less in tax today than you would 35 years from now. Likewise, if you believe you will be in a lower tax bracket in retirement, it makes more sense to simply contribute to a traditional IRA, enjoy your tax deduction today, tax deferral on earnings over the years, and pay the piper upon retirement.\n\nThere are several wild cards to consider in this scenario, not the least of which is the possibility that tax brackets change. If you want my honest opinion, I think it is naive to assume that the historically low tax brackets we enjoy today will be around in 30 years. I am 31 years old and, without getting political, just look at the current landscape of our country and its budget deficits. The cost of wars, strains on social security from aging baby boomers, etc, leads me to believe that the government is mortgaging our nation's current problems and our generation will likely have to pay for it. And how will we pay for it? Higher taxes. All things being equal - if you have more than 15 years until retirement, I would opt for the Roth IRA.
79634
Educational Roth IRA, or just a ROTH IRA depending on their age.  These are tax free, the educational one can be used for college or other types of school.  The other is used for retirement, if you start saving early; they will thank you in the end.\n\nAlbert Einstein once said the most powerful formula is compound intrest.
363359
Depending on whether or not you are married, the average amount you would get to take home is 6,200 per month or 74,400 per year. You'll be able to claim the interest on your land and student loans. The best thing for you to do, if you have no dependents, is to let your employer take the most amount of taxes out that you can afford. Also, if your company has it, participate in the 401k retirement funds. They are tax deductible.
4641
yup, unless you're 59 and a half, then you will have to pay the full tax on the money taken out of your 401k plan, which means if you are working right now, you are in your income earning years, hence your tax bracket should be higher, maybe even to the next level depending on how much you take out of your 401k, since that would be counted as regular income.  and the IRS (uncle sam calls it a penalty, but I like to call it a tip) would also be needing that tip from you, a 10% tip for every buck you want to take out.  so, if you take 20,000 out, that would be more like 14,400 if your bracket is in the 28% range minus $2000 for that tip i would telling you about, which leaves you 12,400 for taking out 20,000.  not really worth it huh
384050
If you take from your traditional you pay tax on it.  If you take from your Roth you do not.  This is why you would want your CPA to review your tax situation.  Maybe they will suggest a combination depending on your tax bracket and how close you are to the bracket.
755986
An early withdrawal of an IRA will mean severe tax consequences. You may can borrow other money from somewhere to pay your bills but there is no such thing as a Retirement Loan. If you withdraw it before age 59 1/2, you will have to claim it as ordinary income plus there is a 10% penalty tacked on for the withdrawing of it that the custodian (fund co., broker, etc.) must collect for the gov't. For your future's sake, don't do it.  Good Luck!
1058103
In most cases absolutely NOT. \n\nReason #1\nIt would be very expensive.  Money withdrawn from your 401K is instantly taxable at your highest tax rate.  For most people that's 28% federal plus your state income taxes.   If you are under 59 1/2, you'll pay another 10% penalty.    That's a lot higher than the interest rate on your mortgage.\n\nReason #2 - \nIf you are still with the same employer, you can't just withdraw the money.  You can borrow from some 401K plans, it depends on whether or not your employer allows it, but..... this is a really bad idea too, because in addition to interest, if you leave the employer you MUST pay it back immediately or you suffer the same tax and penalties as above.\n\nReason #3 -\nBecause your mortgage is at a low rate that should be lower than the rate of return on your investments within your 401K.  In other words, the money in your savings is likely to grow a lot faster than the interest you will pay on your mortgage, plus the mortgage interest is tax deductable so it reduces your current income taxes.\n\nReason #4 - \n\nTime is your best friend on investments because the return on it gets to grow exponentially every year.  In other words, if your $260K grew 10% this year and every year, you'd have $286K next year and $314K the year after and so on and so on.  Each year the dollar amount that gets added to your account grows.  (this rough example doesn't include more money you add to the account).   If you took $150K out (and you'd really have to drain nearly the entire account to cover the tax and penalty loss), you'd only have $110K this year left to grow.  So instead of making $26K this year, you'd only make $11K, and each year that deficit would grow larger.\n\nReason 5 - \nYour house is a leverage investment.  Really, since you have a mortgage, even though real estate typically rises in value less than stocks, the rate of return on the actual money invested, is really much bigger than you think.\n\nFor example, let's say you have $20K cash invested (down payment, improvements, and monthly payments) so far and you paid $170K for your house a year ago.  If real estate in your area rises an average of 5% a year, then your house is worth aproximately $178, 500 now.   So..while 5% doesn't sound like a big return, and it wouldn't be had you paid cash for the house, what you have actually realized is an $8,500 gain on the $20K you have already invested.   That's a real return of of 42.3%!  If you take into account what you've saved in income taxes, the return is even better.\n\nSo..anyway you look at it, paying off your mortgage with your 401K would cost you a ton of money.\n\nOh..and worst case scenario. You are suddenly unable to work the rest of your life and all you have is your house and your 401K, should you do it then?  Nope.  Better to withdraw the payment for the mortgage as you need it and leave the rest invested to continue to grow since over time it is likely to outpace your mortgage interest by a large amount AND you leave that money free to meet other needs that may crop up.\n\n:)
1109453
GOD YES!!!! NOW IS A GREAT TIME!!!\n\nI work as a financial advisor and I wish I could get as many people in their 20's to buy a Roth IRA.  \n\nRemember, a Roth IRA means that you do not pay taxes on the growth or interest, and their is no taxes when you take the money out after age 59 1/2 years old.\n\nAlso, if you work and you company offers a 401k, try that as they might match you on what you put in.  Remember, that money is not taxed when it goes in, but is taxed when you take it out after age 59 and 1/2.  \n\nIf you are so inclined, you can do both.\n\nTry Scottrade.com, or etrade.com if you want no limits on what you can invest in.\n\nStart with a mutual Fund that is called "balanced" or Asset Allocation.