[KCUnited]

Originally Posted by lewdog

Have a ROTH IRA question.

I've been maxing my ROTH for a few years now but after numerous large house projects needing to be completed in the past few years (new roof, new AC units and this year a pool remodel) all which were paid for in cash, I am going to be a few $k short on maxing my ROTH while I build our emergency savings back.

However, a post about someone contributing to a ROTH for 15 years and not realizing they needed to actually pick funds with their contribution, while it simply say in a money market account got me thinking (Wow, that's bad understanding!!!).

ROTH contributions can be withdrawn at any time right? So why can't I take the few thousand I'm missing to max this year and just put it in the money market account part of the ROTH and treat it like liquid savings? If I end up needing it, can I choose these funds in the money market account to withdraw or is it required I sell an investment to withdraw? Does anyone know how withdrawing funds from a ROTH works as far as choosing where that money comes from in the account?

Sounds like you should just keep it in the MM part of your ROTH.

The Roth IRA as an Emergency Fund

The advantage of putting emergency savings into a Roth IRA is that you don’t miss the limited opportunity to make that year’s retirement contribution. You can only contribute a few thousand dollars to a Roth IRA each year, and once a year passes without a contribution, you lose the opportunity to make it forever. However, accessing these funds should be your last resort...

The part of your Roth IRA contribution earmarked as your emergency fund doesn't belong in stocks, bonds, or mutual funds like a typical retirement contribution. It belongs in a liquid account (meaning cash or something that can easily be converted to cash and that earns interest) that can be withdrawn from at a moment's notice without losing principal.