Quote:
Originally posted by 84porsche
I would say it depends on your total financial situation. If you are going to need the money in the near future for anything then you may want to keep it liquid. Once your in an IRA/Roth IRA, the money is technically locked until retirement. You can invest in mutual funds or stocks for that matter but mutual funds will offer a little bit more security.
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Good points about considering the total financial situation, but I'd add this about a Roth IRA: Only your capital gains are "technically locked until retirement" -- after the account has been open for (if I remember correctly) 5 years, you can withdraw any
principal you've put into the account with no penalties.
That means, if you put the $4,000 into a Roth now and, if you are successful in growing that to some amount greater than $4000 in 5 years, you can withdraw the original $4,000 with no penalties or taxes due on the money.
You also can withdraw up to $10,000 tax and penalty free of any gains for a "first-time" (IRS has their own definitions of "first-time") home purchase.
The biggest disadvantage I can see with a Roth for a younger person: Being younger and investing, you'll probably be willing to take greater risks with your money. You'll probably be looking for higher returns -- higher risk investments might mean you will have losses. It is more difficult to use your losses suffered in a Roth IRA to off-set gains, or against ordinary income.
Here's my suggestion:
Keep your $4000 ready in a local bank. Get up every morning and search the classified ads for anyone selling a low-priced car with collector interest (I like Porsches for this) within reasonable driving/towing distance from your home. Often times non-"car" people won't understand the parts (or "collector") value in their "old car" so you can buy it for substantially less than what you can part-it-out for (or re-sell it for). If you pay attention to what cars and parts are desirable, know their values, and have a place where you can park, work on, or part-out a car -- and assuming the opportunity to buy actually presents itself (and you can get to it before someone else does), you'll be on your way to seeing your $4000 grow.