What can i use my roth ira for

Q: Can I use my Roth IRA to buy a house?

Roth IRA Withdrawal Rules As long as your Roth IRA has been established for at least five years, you can use that money penalty-free for a home down payment as long as it qualifies as a first-time home purchase,” Levine said.

A Roth IRA is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA.

Table of Contents Show

Limits on Roth IRA contributions based on modified AGI
Additional resources
1. You get tax-free growth
2. You can take tax-free withdrawals in retirement
3. You decide when, if, and how to take withdrawals
4. You may qualify for additional tax credits
5. You may be eligible for a “backdoor Roth IRA” conversion
6. Your beneficiaries won’t be taxed
7. You may be eligible to invest in both a Roth IRA and a 401(k)
8. Choose from a wide variety of investment options
Can you use Roth IRA money for anything?
What can you do with your Roth IRA?
Can I use my Roth IRA to buy a house?
At what point is a Roth IRA not worth it?

You cannot deduct contributions to a Roth IRA.
If you satisfy the requirements, qualified distributions are tax-free.
You can make contributions to your Roth IRA after you reach age 70 ½.
You can leave amounts in your Roth IRA as long as you live.
The account or annuity must be designated as a Roth IRA when it is set up.

The same combined contribution limit applies to all of your Roth and traditional IRAs.

Limits on Roth IRA contributions based on modified AGI

Your Roth IRA contribution might be limited based on your filing status and income.

2023 - Amount of Roth IRA Contributions You Can Make for 2023
2022 - Amount of Roth IRA Contributions You Can Make for 2022

Additional resources

Details about Roth IRAs are contained in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) and Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) and include:
- Setting up your Roth IRA;
- Contributions to your Roth IRA; and
- Distributions (withdrawals) from your Roth IRA.
Differences Between Roth IRAs and Designated Roth Accounts
Individual Retirement Arrangements (IRAs)

*The 5-year holding period for Roth IRAs starts on the earlier of: (1) the date you first contributed directly to the IRA, (2) the date you rolled over a Roth 401(k) or Roth 403(b) to the Roth IRA, or (3) the date you converted a traditional IRA to the Roth IRA. If you're under age 59½ and you have one Roth IRA that holds proceeds from multiple conversions, you're required to keep track of the 5-year holding period for each conversion separately.

**If you inherit a Roth IRA, you must take RMDs, but they're tax-free as long as the original account owner held the account for at least 5 years.

**When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

You may wish to consult a tax advisor about your situation.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

1. You get tax-free growth

One of the benefits of a Roth IRA is that the money you invest in a Roth IRA grows tax-free, so you don’t have to worry about reporting investment earnings—the money your money makes—when you file your taxes. By comparison, if you invest in a nonretirement account, your earnings are subject to federal, state, and local taxes each year.

2. You can take tax-free withdrawals in retirement

If you’re age 59½ or older and have owned your account for at least 5 years,* you can withdraw money—contributions plus earnings—from your Roth IRA without paying any penalties or taxes.
So even if you take a lump-sum withdrawal in retirement, your retirement income won’t be affected. This is a valuable benefit because your income affects how much you pay in taxes—including the taxation of Social Security benefits—as well as Medicare Parts B and D premiums.

3. You decide when, if, and how to take withdrawals

Unlike a traditional IRA, a Roth IRA has no lifetime required minimum distribution. You’re eligible for tax-free and penalty-free early withdrawals on what you’ve contributed at any time. But, if you’re under age 59½ and you withdraw earnings on your contributions, you may be subject to taxes and withdrawal penalties on that amount. It's smart to contribute to your Roth IRA and let compounding—when your contributions generate returns—work its magic. But if you need to take distributions from your Roth IRA, that's okay too.

Even if you withdraw your contributions, that money generated earnings while it was invested in your account. And those earnings will be yours to withdraw (also free and clear) when you're retired. However, you'll still be subject to IRA annual contribution limits, so you can't "replace" the money you withdrew and contribute the maximum amount to your IRA in the same contribution year.

4. You may qualify for additional tax credits

Investors who make eligible contributions to an employer-sponsored 401(k), Roth IRA, or other retirement fund, may qualify for the Retirement Savings Contribution Credit, or Saver’s Credit. Eligibility depends on a number of factors, including your adjusted gross income and how much you’ve contributed to your Roth IRA or other retirement plan.

5. You may be eligible for a “backdoor Roth IRA” conversion

If your income is too high for a Roth IRA, you could get into a Roth through the “back door.”

To use this strategy, you’d make non-tax deductible contributions to a traditional IRA—which has no income limits. Then you’d move that money into a Roth IRA using a Roth conversion. You may want to consult you financial advisor and tax professional to understand the tax consequences before making a move because a Roth conversion is permanent.

6. Your beneficiaries won’t be taxed

The people who inherit your Roth IRA—your beneficiaries—will have to take RMDs (required minimum distributions), but they won’t have to pay any federal income tax on their withdrawals as long as the account’s been open for at least 5 years. We can help guide you through the process, but seek the advice of your financial advisor if you have any questions.

7. You may be eligible to invest in both a Roth IRA and a 401(k)

You don’t have to think IRA versus 401(k). You may be eligible to contribute to both, as long as you’re qualified and heed the contribution and income limits. Combining these plans may set you up for more wealth in retirement, and that’s good news.

8. Choose from a wide variety of investment options

Another benefit of a Roth IRA is that you have lots of investment choices. For example, at Vanguard, you can choose from our broad range of low-cost mutual funds and ETFs (exchange-traded funds), as well as individual stocks and bonds and funds from other companies.

Can you use Roth IRA money for anything?

Yes. A Roth IRA can double as an emergency savings account, which means you can withdraw contributed sums at any time without taxes or penalties.

What can you do with your Roth IRA?

A Roth IRA is an individual retirement account (IRA) that allows you to withdraw money (without paying a penalty) on a tax-free basis after age 59½, and after you have owned the account for its five-year holding period.

Can I use my Roth IRA to buy a house?

Roth IRA Withdrawal Rules “As long as your Roth IRA has been established for at least five years, you can use that money penalty-free for a home down payment as long as it qualifies as a first-time home purchase,” Levine said.

At what point is a Roth IRA not worth it?

Key Takeaways A Roth IRA or 401(k) makes the most sense if you're confident of having a higher income in retirement than you do now. If you expect your income (and tax rate) to be higher at present and lower in retirement, a traditional IRA or 401(k) is likely the better bet.