Slowing/Stopping Roth/Stock Investments

5 Replies

Hey yall!

Was doing a little thinking today, and wanted to solicit some advice/discussion.

Currently, my wife and I put $17,000 into Roth/Mutual Funds for Retirement a year(also do matched 401K contributions but I refuse to give up matching), Because the stock market is at record highs AGAIN, I am debating discontinuing these contributions for the next year or two which could easily turn into another investment downpayment. Thought process being that if the market corrects I will have the cash on hand, untouched, and can turn it into a guaranteed property in 1-2yrs. Then, if/when the market dips again, I will begin the contributions again. Wanted to gather some input because obviously upfront it sounds like a good idea, but there are ALOT of you on here smarter than me. Just thinking of ways to maximize our money while we are young an can afford to take a few risks.

All comments welcome! Would love for this to turn into a great discussion to learn from.

@Karl McGarvey

You should look into the roth rules. From everything I can tell, you can withdraw all of your contributions anytime you like without any penalty because you've already paid taxes on them.

I don't know how long you've been contributing but chances are if you've been doing this a while, you already have more than enough in there for the down payment you might need.

@Karl McGarvey I think it's good to point out that there's a bit of a middle ground between stocks and cash. Within your Roth you could get more conservative with stocks and add in bonds or other low volatility investments and cash. Timing the market is really tough to do because you have to be right twice. Once when you take the money out, and again when you put the money back in. Another thing to do to prepare for a downturn is to make sure you have lines of credit set up now. Credit is pretty easy to come by now, but if we go into a recession credit can be a lot harder to get. So, get your HELOC or presonal line of credit set up, and ask credit card providers to raise your limits.

@Geordy Rostad is correct. you can take out 100% of your contributions at any time without tax or penalties. If you have money in a Roth IRA from a conversion that can be withdrawn after 5 years.

@Scott Jensen 100% agree on needing to be right twice. I am not very familiar with lines of credit, however I am guessing since I am a first time investor it is not something that I am going to be able to get yet. @Geordy Rostad makes a good point about being able to use the ROTH funds, however in the name of diversification I wanted to have hands in all of the markets so that if one goes bad the other will "hopefully" be just fine. I always thought there was a penalty for withdrawing from a ROTH though, so I will need to look into it so that if it becomes an option I am better educated. Biggest idea now was to STOP contributions for a year or two which would give me cash for an extra buy and hold property, in hopes that in a year or two, the markets for stocks are a little cheaper meaning I don't lose money while investing on what seems to be the "top" but can get into mortgage rates while they are at the "bottom"

@Karl McGarvey

I am not sure if you have ever heard of a self-directed IRA or 401(K), but these types of accounts would allow you to meet both your goals of receiving the matching employer contributions and using those funds to invest in real estate.

In short, a self-directed IRA (SDIRA) follows all the same rules and regulations as a normal IRA, but allows you to use your retirement account to invest in things like real estate, notes, mortgages and private lending. There are some rules regarding these types, but many investors like the control they get from hand picking their investments and doing their own due diligence.

I cannot offer any advice because I am a licensed investment advisor as well, but I can tell you that there is a 10% penalty if you withdraw your ROTH before your 59.5 years old.  There are some exceptions to that but make sure to speak to a licensed advisor in your state. 

Now you may want to check into a Self Directed IRA if you want to do that. But again, you'll need to speak to a licensed investment advisor in your state.

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