#Why Should I Not Cash Out My ROTH IRA for Refinance?
You may be considering cashing out your ROTH IRA to refinance your home, but before making that decision, it’s important to understand the potential repercussions. Here are some key reasons why cashing out your ROTH IRA may not be the best option for you:
##Impact on Retirement Savings
Cashing out your ROTH IRA, which has a solid return on investment of 7%, will deplete your retirement savings. This can have a long-term impact on your financial security during retirement. By leaving your ROTH IRA untouched, you can continue to benefit from compound interest and potentially grow your savings further.
##Mortgage Interest Rates
While your current mortgage rate is 7.025%, it’s crucial to consider the tax advantages of keeping your ROTH IRA intact. The interest paid on your mortgage may be tax-deductible, whereas withdrawing funds from your ROTH IRA could result in penalties and taxes.
##Long-Term Financial Planning
It’s essential to consider your long-term financial goals and how cashing out your ROTH IRA may affect them. By preserving your retirement savings, you can ensure financial stability and security in the future. Additionally, having a diversified portfolio that includes retirement accounts like a ROTH IRA is beneficial for financial planning.
###Family Needs and Responsibilities
While it’s understandable that you want to provide the best care for your child with severe autism, it’s important to explore other options for financial support. Cashing out your ROTH IRA may provide short-term relief, but it could jeopardize your long-term financial well-being.
##Seek Professional Advice
Before making any decisions regarding your ROTH IRA or refinancing your home, it’s advisable to consult with a financial advisor. They can help you assess your overall financial situation, explore alternative solutions, and make informed decisions that align with your financial goals.
In conclusion, cashing out your ROTH IRA for a refinance may seem like a quick fix, but it’s essential to consider the long-term implications. By preserving your retirement savings and exploring other financial options, you can secure a stable financial future for yourself and your family.
Why would you not take the funds from your 401k? Your becoming disabled is how you’re basing getting the whole amount? Although you seem to be still working which may not allow you to use that exception to avoid penalties is how you ware wanting to “cash in” your Roth IRA? I don’t see how your withdrawal from either won’t trigger the 10% tax for early withdrawal. The only funds available without taxes would be the contributions that you made to your Roth IRA. Maybe consult a tax professional or lawyer about this since you are disabled in terms of the VA but idk if the IRS would grant that if you work full time?
Welcome home.
I had a lot of helpful comments but the one think I’ve not heard folks chime in on is the ability to allow my wife to be a SAHM to tend to our special needs child. I feel like this gives him the best possible outcome in life to possibly be independent (I highly doubt this) but that I’d regret not going all in on the kids future.
He can’t go back and gain the necessary skills when I’m old and gray and he’s a man still learning to communicate to the best of his abilities.
I appreciate all of the comments it helps me seek a different perspective and while it’s sound financial advice there’s the other side of the coin.
You can only withdraw contributions tax free so unless you have that much in contributions you’d be paying a penalty and taxes on the gains. Also, what are you invested in? 7% ROI since inception doesn’t mean much. What’s you’re actual returns, and what fees are you paying? If you have more than the fund expense ratio you should probably move your IRA.
>I’m now receiving $4600 per month tax free from the VA
Just use that to pay extra every month. Taking from your retirement is a horrible idea.
You shouldn’t cash it out because of compounding interest. While you may not see retirement (or a lengthy one) who is going to care for your child when you’re gone? If you child will need specialized care in adulthood, how is he going to afford it if he can’t work? Your Roth, contributed too for many more years, will grow and you can leave it to him. Or setup a trust with that Roth. Leaving him a paid off house is great, but if can’t work to afford it’s upkeep then he’ll lose that to tax liens or rot. Keep the Roth alive and contribute and look into financing the future of your child in case you’re not around for it.
If you don’t think you’ll like to see it in retirement age, then yeah, consider it, but if there’s a decent chance you’ll live long enough I wouldnt touch it.
FYI, Roth is not an acronym, it’s named after a person, so it’s just “Roth IRA”. “ROTH IRA” looks like you’re yelling. 🙂
The problem here is your Roth IRA is growing so little you are doing something very very wrong there, you should be very aggressively investing because you are given so much money every single month no matter what, you have basically no possible downsides nothing bad can happen with this much guaranteed income for life