Should I take contributions out of my Roth IRA to live off of?
Take another job.  From a personal finance perspective this is the wrong reason to dip into a retirement account.  You will lose so much ground towards actually retiring.  Sure you won't be taxed, but you will be missing so much opportunity where that money won't be working for your retirement. The off-topic answer to take to the start-ups stackexchange site is:  don't quit your day job until your business plan is written out and you have an idea of where to get your startup capital. That's up to you, but I wouldn't play around with my retirement money if I was in your situation. Your earning potential during your retirement years will likely be at its nadir. Do you really want to risk being forced to be a Wal-Mart greeter when you are 80? Also, considering your earning potential now is probably at or near the peak, your opportunity cost for each hour of your life is much higher now than it will be later. So ultimately you'd be working a little harder now or a lot harder later for less money.
"Basically, the idea of an IRA is that the money is earned by you and would normally be taxed at the individual rate, but the government is allowing you to avoid paying the taxes on it now by instead putting it in the account. This ""tax deferral"" encourages retirement savings by reducing your current taxable income (providing a short-term ""carrot"").  However, the government will want their cut; specifically, when you begin withdrawing from that account, the principal which wasn't taxed when you put it in will be taxed at the current individual rate when you take it out. When you think about it, that's only fair; you didn't pay taxes on it when it came out of your paycheck, so you should pay that tax once you're withdrawing it to live on. Here's the rub; the interest is also taxed at the individual rate. At the time, that was a good thing; the capital gains rate in 1976 (when the Regular IRA was established) was 35%, the highest it's ever been. Now, that's not looking so good because the current cap gains rate is only 15%. However, these rates rise and fall, cap gains more than individual rates, and so by contributing to a Traditional IRA you simplify your tax bill; the principal and interest is taxed at the individual rate as if you were still making a paycheck. A Roth IRA is basically the government trying to get money now by giving up money later. You pay the marginal individual rate on the contributions as you earn them (it becomes a ""post-tax deduction"") but then that money is completely yours, and the kicker is that the government won't tax the interest on it if you don't withdraw it before retirement age. This makes Roths very attractive to retirement investors as a hedge against higher overall tax rates later in life. If you think that, for any reason, you'll be paying more taxes in 30 years than you would be paying for the same money now, you should be investing in a Roth. A normal (non-IRA) investment account, at first, seems to be the worst of both worlds; you pay individual tax on all earned wages that you invest, then capital gains on the money your investment earns (stock gains and dividends, bond interest, etc) whenever you cash out. However, a traditional account has the most flexibility; you can keep your money in and take your money out on a timeline you choose. This means you can react both to market moves AND to tax changes; when a conservative administration slashes tax rates on capital gains, you can cash out, pay that low rate on the money you made from your account, and then the money's yours to spend or to reinvest. You can, if you're market- and tax-savvy, use all three of these instruments to your overall advantage. When tax rates are high now, contribute to a traditional IRA, and then withdraw the money during your retirement in times where individual tax rates are low. When tax rates are low (like right now), max out your Roth contributions, and use that money after retirement when tax rates are high. Use a regular investment account as an overage to Roth contributions when taxes are low; contribute when the individual rate is low, then capitalize and reinvest during times when capital gains taxes are low (perhaps replacing a paycheck deduction in annual contributions to a Roth, or you can simply fold it back into the investment account). This isn't as good as a Roth but is better than a Traditional; by capitalizing at an advantageous time, you turn interest earned into principal invested and pay a low tax on it at that time to avoid a higher tax later. However, the market and the tax structure have to coincide to make ordinary investing pay off; you may have bought in in the early 90s, taking advantage of the lowest individual rates since the Great Depression. While now, capital gains taxes are the lowest they've ever been, if you cash out you may not be realizing much of a gain in the first place." Something that's come up in comments and been alluded to in answers, but not explicit as far as I can tell: Even if your marginal tax rate now were equal to your marginal tax rate in retirement, or even lower, a traditional IRA may have advantages.  That's because it's your effective tax rate that matters on withdrawls. (Based on TY 2014, single person, but applies at higher numbers for other arrangements): You pay 0 taxes on the first $6200 of income, and then pay 10% on the next $9075, then 15% on $27825, then 25% on the total amount over that up to $89530, etc.  As such, even if your marginal rate is 25% (say you earn $80k), your effective rate is much less: for example, $80k income, you pay taxes on $73800.  That ends up being $14,600, for an effective rate in total of 17.9%. Let's say you had the same salary, $80k, from 20 to 65, and for 45 years saved up 10k a year, plus earned enough returns to pay you out $80k a year in retirement.  In a Roth, you pay 25% on all $10k.  In a traditional, you save that $2500 a year (because it comes off the top, the amount over $36900), and then pay 17.9% during retirement (your effective tax rate, because it's the amount in total that matters).   So for Roth you had 7500*(returns), while for Traditional the correct amount isn't 10k*(returns)*0.75, but 10k*(returns)*0.821.  You make the difference between .75 and .82 back even with the identical income.  [Of course, if your $10k would take you down a marginal bracket, then it also has an 'effective' tax rate of something between the two rates.] Thus, Roth makes sense if you expect your effective tax rate to be higher in retirement than it is now.  This is very possible, still, because for people like me with a mortgage, high property taxes, two kids, and student loans, my marginal tax rate is pretty low - even with a reasonably nice salary I still pay 15% on the stuff that's heading into my IRA.  (Sadly, my employer has only a traditional 401k, but they also contribute to it without requiring a match so I won't complain too much.)  Since I expect my eventual tax rate to be in that 18-20% at a minimum, I'd benefit from a Roth IRA right now. This matters more for people in the middle brackets - earning high 5 figure salaries as individuals or low 6 figure as a couple - because the big difference is relevant when a large percentage of your income is in the 15% and below brackets.  If you're earning $200k, then so much of your income is taxed at 28-33% it doesn't make nearly as much of a difference, and odds are you can play various tricks when you're retiring to avoid having as high of a tax rate. If your budget allows for it, max out both plans!  However, in my opinion, you're on the right path: The advantage of also contributing to the Roth 401(k) in this case would be: This second point is the main reason that you should also invest in a 401(k), using that as a retirement savings vehicle alongside your Roth IRA. One caveat is that you should ensure that you'll have sufficient savings so that you won't need to dip into either plan - it'd be a shame to reduce the investment base from which you can grow your savings tax free. Personally, I'd view my contributions in the Roth IRA as an emergency fund to be used only in the direst circumstances. Edited in response to JoeTaxpayer's comment and OP Tim's additional question. To add to and clarify a little what littleadv has said, and to answer  OP Tim's next question: As far as the IRS is concerned, you have at most one Individual Retirement Account of each type (Traditional, Roth) though the money in each IRA can be invested with as many different custodians (brokerages, banks, etc.) and different investments as you like. Thus, the maximum $5000 ($6000 for older folks) that you can contribute each year can be split up and invested any which way you like, and when in later years you take a Required Minimum Distribution (RMD) from a Traditional IRA, you can get the money by selling just one of the investments, or from several investments; all that the IRS cares is that the total amount that is distributed to you is at least as large as the RMD. An important corollary is that  the balance in your IRA is the   sum total of the value of all the investments that various custodians are holding   for you in IRA accounts. There is no loss in an IRA until every penny has been withdrawn from every investment in your IRA and  distributed to you, thus making your IRA balance zero.  As long as you have a positive balance, there is no loss: everything has to come out. After the last distribution from your Roth IRA (the one that empties your entire Roth IRA, no matter where it is invested and reduces your Roth IRA balance (see definition  above) to zero), total up all the amounts that you have received as  distributions from your Roth IRA. If this is less  than the total amount of money you contributed to your Roth IRA  (this includes rollovers from a Traditional IRA or Roth 401k  etc., but not the earnings within the Roth IRA that you re-invested inside the Roth IRA), you have a loss that can be deducted on Schedule A as a Miscellaneous Deduction subject to the 2% AGI limit. This 2% is not a cap (in the sense that no more than 2% of your AGI can be deducted in this category)  but rather a threshold: you can only deduct whatever part of your total Miscellaneous Deductions exceeds  2% of your AGI. Not many people have Miscellaneous Deductions whose total exceeds 2% of their AGI, and so they end up not being able to deduct anything in this category. If you ever made nondeductible contributions to your  Traditional IRA because you were ineligible to make a  deductible contribution (income too high, pension plan  coverage at work etc), then the sum of all these contributions is your basis in your  Traditional IRA. Note that your deductible contributions, if any, are not part of the basis.  The above rules apply to  your basis in your Traditional IRA as well.  After the last distribution from your Traditional IRA (the one that empties  all your Traditional IRA accounts and reduces your Traditional IRA balance to zero), total up all the distributions that you received (don't forget to include the nontaxable part of each distribution that represents a return of the basis). If the sum total is less than your basis, you have a loss that can be deducted on Schedule A as a Miscellaneous  Deduction subject to the 2% AGI threshold. You can only deposit cash into an IRA and take a distribution in cash from an IRA. Now, as JoeTaxpayer points out, if your IRA owns stock, you can take a distribution by having the  shares transferred from your IRA account in your brokerage to your personal account in the brokerage.  However, the amount of the distribution, as reported by the brokerage to the IRS, is the value of the shares transferred as of the time of the transfer, (more generally  the fair market value of the property that is transferred out of the IRA) and this is the amount you report on your income  tax return. Any capital gain or loss on those shares remains inside the IRA because your basis (in your personal account) in the  shares that came out of the IRA is the amount of the distribution.  If you sell these shares at a later date, you will have a (taxable) gain or loss depending on whether you sold the shares for more or less than your basis. In effect, the share transfer transaction is as if you sold the shares in the IRA, took the proceeds as a cash distribution and immediately bought the same shares in your personal account, but you saved the transaction fees for the sale and the purchase and avoided paying the  difference between the buying and selling price of the shares as well as any changes in these in the microseconds that would have elapsed between the execution of the sell-shares-in-Tim's-IRA-account, distribute-cash-to-Tim, and buy-shares-in-Tim's-personal account transactions.  Of course, your broker will likely charge a fee for transferring ownership of the shares from your IRA to you.  But the important point is that any capital gain or loss within the IRA cannot be used to offset a gain or loss in your taxable accounts.  What happens inside the IRA stays inside the IRA. This is a great idea and I can't think of any downside. The best part about it is in the future when you have built up your emergency fund beyond the maximum contributions to the Roth IRA, you can then move your Roth funds into a higher yielding investment. I might take it a step further. In addition to this, try to get a line of credit from your bank (with no annual fee). In case of emergency, you can decide if you want to take the money from your Roth or borrow from the line and pay some interest temporarily. Depending on the situation it may actually make sense to pay a little bit of interest and leave the money in the Roth, since over the long run the future earnings of that money could easily make you more than the interest you'll pay for (let's hope) a short amount of time. To really hit home why your idea is fantastic: Years before retirement isn't related at all to the Pretax IRA/Roth IRA decision, except insomuch as income typically trends up over time for most people.  If tax rates were constant (both at income levels and over time!), Roth and Pretax would be identical.  Say you designate 100k for contribution, 20% tax rate.  80k contributed in Roth vs. 100k contributed in Pretax, then 20% tax rate on withdrawal, ends up with the same amount in your bank account after withdrawal - you're just moving the 20% tax grab from one time to another.   If you choose Roth, it's either because you like some of the flexibility (like taking out contributions after 5 years), or because you are currently paying a lower marginal rate than you expect you will be in the future - either because you aren't making all that much this year, or because you are expecting rates to rise due to political changes in our society.  Best is likely a diversified approach - some of your money pretax, some posttax.  At least some should be in a pretax IRA, because you get some tax-free money each year thanks to the personal exemption.  If you're working off of 100% post-tax, you are paying more tax than you ought unless you're getting enough Social Security to cover the whole 0% bucket (and probably the 10% bucket, also). So for example, you're thinking you want 70k a year.  Assuming single and ignoring social security (as it's a very complicated issue - Joe Taxpayer has a nice blog article regarding it that he links to in his answer), you get $10k or so tax-free, then another $9k or so at 10% - almost certainly lower than what you pay now.  So you could aim to get $19k out of your pre-tax IRA, then, and 51k out of your post-tax IRA, meaning you only pay $900 in taxes on your income.  Of course, if you're in the 25% bucket now, you may want to use more pretax, since you could then take that out - all the way to around $50k (standard exemption + $40k or so point where 25% hits).  But on the other hand, Social Security would probably change that equation back to using primarily Roth if you're getting a decent Social Security check. There's no additional income tax burden created when you decide to make Roth IRA contributions, your Roth IRA contributions are taxed at the same time all your income is taxed. If you earned that $100 by working a job, then your employer likely withheld taxes when they paid you. If you earned it through self-employment, then you'll pay estimated taxes on that income quarterly, etc. In any case when you file your annual tax return the actual taxes owed vs taxes paid gets reconciled and you're left with a refund or owe an additional sum. You can take out the contributions to your Roth tax and penalty free.  That's the good thing. Anything above the amount you contributed that you withdraw early will cost you ordinary income tax (which is higher than capital gains tax) plus a 10 percent penalty on that amount. So if you have $15,000 in the account and $5,000 is gains and you withdraw $11,000, then you owe tax and penalty on $1,000.  The penalty is 10% and your taxes (high taxes!) are added to that.  Pretty bad deal. If you kept it in a normal account and paid capital gains tax, you just pay 15% (or whatever) on your gains and you get to offset income tax with your losses via tax loss harvesting. So back to your question: your idea works even better than you suggested if you only withdraw up to the amount that you contributed (you pay no tax!).  Take out any of the gains and you will be penalized more than you would if you just paid capital gains on them.  Leave those in until you are old enough to take them out penalty and tax free. To me, contributing to a Roth, making a bunch of gains on it, and withdrawing only the contribution part whenever you want seems to make good sense.