Should I start an IRA Roth

spartaman64 · May 21, 2020

I'm 21 years old and my salary is about 30k a year. I have most of my savings in stocks. I like the tax free nature of it but I sort of want to retire early rather than until I'm 60. And I'm worried about when I run into an emergency like a medical issue and there is a 10% early withdraw penalty. Should I start an IRA Roth or should I continue to invest independent of it.

PlayCrackTheSky · May 21, 2020

Yes, you absolutely should. You said you were worried about an early withdrawal penalty. This doesn't apply to Roth IRA as long as the withdrawal does not include earnings. You can withdraw contributions at any time...tax free and penalty free.

RAS_3885 · May 21, 2020

11 minutes ago, spartaman64 said:

I'm 21 years old and my salary is about 30k a year. I have most of my savings in stocks. I like the tax free nature of it but I sort of want to retire early rather than until I'm 60. And I'm worried about when I run into an emergency like a medical issue and there is a 10% early withdraw penalty. Should I start an IRA Roth or should I continue to invest independent of it.

It's not tax-free, rather, you pay the taxes up front when the money is contributed. You are not taxed on growth or when you take money out. If you end up in a lower tax bracket when you retire compared to where you are now Roth may not be an advantage. Something to think about and determine if Roth vs. traditional is the better choice. I went Roth myself for and IRA.

If your employer has any company-sponsored matching programs make sure to maximize those first since it's free money.

Regardless, if you can afford to put the additional savings away for retirement then by all means go for it!

dalekphalm · May 21, 2020

28 minutes ago, spartaman64 said:

I'm 21 years old and my salary is about 30k a year. I have most of my savings in stocks. I like the tax free nature of it but I sort of want to retire early rather than until I'm 60. And I'm worried about when I run into an emergency like a medical issue and there is a 10% early withdraw penalty. Should I start an IRA Roth or should I continue to invest independent of it.

100% start a Roth account as soon as possible.

Just don’t put ALL of your investments into the Roth account. Keep investing some money into a non-retirement account for medium to long term usages that might come up before you retire.

Also, if you don’t already, look into getting health insurance.