Roth Ira….good Strategy?
IF I put 3000 in a Roth…. in 5 years when I can take that 3000 out without penalty- do so… leaving whatever interest it has made in there to continue to grow tax free. Isn’t that pretty much letting free money make more free money?
How much could I expect to have in there in “free money” after 25 years at a rate of 7%?
this makes sense only if your “after retirement” tax rate
is HIGHER than your present tax rate
You have to be careful of one thing your Roth IRA will probable have a Minuman balance. in 5 years you will earn about $1207 @ 7% in interest, if your minuman balance is $1500 you will have to leave $300 in it or pay huge fees that will eat up your interest.
I am doing the same thing, well counting everything over the minuman balance as a rainy day fund, and I hope it never rains. I found an IRA at ing direct with a minumum balance of $250.
$4670 but this is not free money it is tax free money. There is a difference.
If you put in $3,000 then after 5 years getting 7% you would have $4,252.89
If you take out $3,000 you have $1,252.89 after 25 years at 7% you would have $7,173.24
If after 5 years you leave $3,000 in and let it grow at 7% for 25 more years you would have $24,349.69