What would you do if:
1. Just getting started in REI
2. Don't have a huge cash reserve (<$10K)
3. I don't currently have an IRA nor do I have any 401(k) funds I'm currently able to roll over
Vote simply "Cash" or "IRA" . Feel free to explain why (but not necessary)
I'm guessing just keeping it liquid and uncomplicated is best at this point. If you agree, at what point would you consider contributing to an IRA? (assuming I retain my job and can't touch my 401k, I am planning on borrowing from it for REI - I can borrow up to 50%)
Either way is fine. I’d probably vote to put it in. Main because you add an extra step to spending it.
@Sean Rafferty , as most answers are, it depends on what your goal is. A way of getting the best of both worlds might be a Roth IRA. While all contributions to a Roth IRA are after tax, you can withdraw any/all of your contributions (but not your gains) tax and penalty free. That way your money can grow while you're saving up for a down payment.
Note: if you do take a loan from your 401(k) and you plan to leave your job, you will have to pay the loan back when you leave
A Roth IRA can also be invested in alternative investments like notes, tax liens and real estate.
@Sean Rafferty Depends. How much are six months of expenses for you? If you don't have that saved up my vote is cash.
If you do have an emergency fund I vote Roth IRA, assuming your marginal tax bracket now is 12%.
Per your instructions I'll vote "Cash", but read below too. The answer is always "it depends".
I'll second the emergency fund option first. Get that foundation set, including paying off bad debt, and dial in spending. Then figure out what to do with your excess cash. Does your employer offer any kind of retirement benefit? How long do you have before retirement? What unique circumstance exists in your life that makes everything we've said above invalid for you?
Everyone is different...hence why none of us are giving professional advice here.
I'd recommend picking up a copy of Set for Life by Scott Trench. It won't give you specifics, but it is a great starting point on your financial adventure....I made that sound a little cheesy, but I'll stick with it.
Appreciate the responses guys. Something to chew on.
Having cash in the short term to invest in real estate is better than giving up the use of that money until you are 60 years old. If you can accumulate 10 rental properties that are debt free in the next 15 years, you really won't need an IRA.
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