Ask Terry Questions Liquid assets held in ROTH instead of checking

Liquid assets held in ROTH instead of checking

By Terry Savage on October 27, 2024 | Financial Planning / Retirement

Hi Terry,
Please share your thoughts:
We occasionally take funds from our Traditional IRA(pay taxes) and move them into our checking.
We then take the checking funds and purchase T-Bills for 6 months to have liquid assets available and earning some interest. We realized that we then pay taxes on the interest. We are being taxed twice (first time moving funds from Trad. IRA and second time on interest from T-Bills. It seems to make more sense to take the funds out of Traditional IRA and deposit into ROTH IRA. Purchase the T-Bills from the ROTH IRA and not pay the second tax hit on interest.
Would that be your recommendation?
Thanks.

Terry Says

No, you can’t contribute to a Roth IRA unless you have earned income. AND, if you do have earned income and contribute to a Roth, the money must stay there for 5 years to come out tax free.
Looks like you are doing everything backwards! You can take as much money as you need out of your IRA — but should think about how long it will last if you keep doing that!
If you’re 73, you MUST start taking distributions from your traditional IRA.

Take the money out when you need it and not before, so it can keep growing inside your IRA.
And if you need “liquidity” then roll part of your IRA to a bank money market fund, and withdraw from that as needed.

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