The moment you turn 59 1/2 years old, you can tap into your Roth IRA without any penalty fees. That account also has to be open for at least five years.
These details became important for a 63-year-old who is planning home renovations and is considering using Roth IRA funds to cover the purchase. This individual still earns money, but we don’t know anything about their income and expenses. The 63-year-old wants to know if it’s a mistake to use Roth IRA funds. While a clearer answer would be possible if we knew everything about the 63-year-old’s finances, considering a few key components can help the 63-year-old make the right decision.
The Roth IRA Is The Best Place To Keep Money
It’s best to keep your money in a Roth IRA if you can. The money that grows in this account isn’t subject to any taxes. You can double your investment in a Roth IRA and not have to worry about any capital gains taxes. This is a unique set-up that makes it easier to grow your nest egg and sell when needed.
The 63-year-old should consider other options before tapping into their Roth IRA. However, it’s still better to use a Roth IRA than to take out a personal loan. The individual may want to consider withdrawing from a traditional retirement account instead. This decision will result in a higher tax bill, but your Roth IRA will continue to grow undisturbed. Knowing how the 63-year-old has their finances allocated across multiple retirement accounts, brokerage accounts, and bank accounts can lead to a better decision.
Is The Renovation Worth It?
Some home renovations are absolutely necessary. If you have mold in your kitchen, you will probably need to get the entire room renovated. However, if the renovation is more for aesthetics and isn’t necessary, you may want to put it on the back burner.
The Roth IRA may be the 63-year-old’s only nest egg, and it’s important to preserve wealth as you get older. Holding off on renovations allows you to keep your nest egg intact, and it will also continue to grow undisturbed.
You should see if you have enough money in your Roth IRA to cover the renovation and keep up with expenses after retirement. The 63-year-old still earns money, but it’s unclear how soon this individual may retire. While some people plan to work forever, some people are forced to retire due to health concerns and other factors.
Speak With A Financial Advisor
A home renovation is a major financial decision, especially with Roth IRA funds at stake. IT’s possible to make these moves on your own, but consulting with a financial advisor can give you a better perspective.
A financial advisor can help you create a plan for covering the home renovation while having enough for retirement. This professional can also let you know if it makes sense to renovate your home now or if it’s better to save some more money first.
If you work with a financial advisor, make sure the professional is a fiduciary. These advisors are required to serve in your best interests. The problem with commission-based financial advisors is that they may recommend products and solutions that give them the highest commission. In other words, commission-based advisors may look out for their commissions before your best interests.
You don’t need to have a financial advisor manage your portfolio. A brief consultation can give you all of the answers you need for your current situation.
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