The Roth IRA as Emergency Fund
June 8th, 2007If you have a Roth IRA, you have an emergency fund, too. See, one of the beauty parts about the Roth IRA is that you can take out the initial investment whenever you want and for any reason. You’ve already paid tax on the initial investment, so you can withdraw it without penalty. So right there you have yourself a ready-made emergency fund.
It’s not a great idea to use your Roth IRA as your primary emergency fund, though. That’s because once you withdraw that money, you can’t put it back (at least not from the original tax year). Also, it goes without saying that that money is no longer earning you anything toward retirement.
I’m not a huge fan of really large emergency funds as it is. So it’s worth keeping in mind this nice feature of the Roth IRA.
emergency fund roth ira
