USing ROTH IRA for home buying?

[Guest gandhimn]

I am planning buy the house (First-time) in next 3-4 month. Is it possible for me to invest $4000 (For me and my wife) in Roth IRA in January and withdraw it after 3-4 months for buying house? I already have traditional IRA account , but it has only $4000, can I combine this new ROTH IRA account withold Traditional IRA account (total $8000) and take the money out for home buying?

Thanks a lot!

Manoj

[JAMES PATRICK]

Doing what you suggest for 3 or 4 months makes NO sense. Any earnings on the Roth will be taxable and subject to 10% penalty, although it would not amount to more than a few dollars.

If your plan was for 5 or 6 years than it would be a GREAT IDEA.

[Guest gandhimn]

Thanks a lot Jim. Isn't it true, that, I don't have to pay penalty (10%) if I withdraw money from my traditional IRA or ROTH IRA to buy a house (first-time). I am not sure, how long I have wait for qualified withdrawl (For Roth it is 5 year but for traditional IRA they haven't mentioned any limit).

Thanks

Manoj

[JAMES PATRICK]

You are right on the 10% penalty being waived for 1st time home buyer. The point I was trying to make is that it does nothing for you to put money in a Roth and take it out 3 or 4 months later to buy a house. Assuming you have the money sitting in a savings account now it would be the same if you left it there as it would by putting it in a Roth. You would pay taxes on the earnings and would be no better off.

As for the Traditional IRA there is no time you can withdraw the earnings tax free as with a Qualified withdrawal from a Roth, that is one of the benefits of a Roth which makes it such a GREAT DEAL.