First time home buyer: Can you withdraw funds from a Roth 401k for a first time home purchase?
The rules are quite different.  There is no special home purchase penalty-free withdrawal.  In the case that your account has been open for five years, you can withdraw the principal (but not the earnings) without penalty.  You may want to talk to a professional for further details. The real question is: why do you want to borrow against your future to finance your present?  Your down payment funds should come from another source than your retirement.  Retirement funds should only be touched in the direst financial straights.
First thing to do right now, is to see if there's somewhere equally liquid, equally risk free you can park your cash for higher rate of return. You can do this now, and decide how much to move into less liquid investments on your own pace. When I was in grad school, I opened a Roth IRA. These are fantastic things for young people who want to keep their options open. You can withdraw the contributions without penalty any time. The earnings are tax free on retirement, or for qualified withdrawls after five years. Down payments on a first home qualify for example. As do medical expenses. Or you can leave it for retirement, and you'll not pay any taxes on it. So Roth is pretty flexible, but what might that investment look like? It in depends on your time horizon; five years is pretty short so you probably don't want to be too stock market weighted. Just recognize that safe short term investments are very poorly rewarded right now. However, you can only contribute earnings in the year they are made, up to a 5000 annual maximum. And the deadline for 2010 is gone. So you'll have to move this into an IRA over a number of years, and have the earnings to back it. So in the meanwhile, the obvious advice to pay down your credit card bills & save for emergencies applies. It's also worth looking at health and dental insurance, as college students are among the least likely to have decent insurance. Also keep a good chunk on hand in liquid accounts like savings or checking for emergencies and general poor planning. You don't want to pay bank fees like I once did because I mis-timed a money transfer. It's also great for negotiating when you can pay in cash up front; my car insurance for example, will charge you more for monthly payments than for every six months. Or putting a huge chunk down on a car will pretty much guarantee the best available dealer financing. "Whether you contribute to an IRA (Traditional or Roth) and whether you contribute to a 401k (Traditional or Roth) are independent. IRAs have one contribution limit, and 401ks have another contribution limits, and these limits are independent. I see no reason why you wouldn't maximize the amount of money in tax-advantaged accounts, if you can afford to. In your first year of work, especially if you only work for part of the year, you're likely in a lower tax bracket than in the future, so Roth is better than Traditional. Another thing to note is that the money in the Roth IRA can be part of your ""safety net"" -- contributions to a Roth IRA (but not earnings) can be withdrawn at any time without tax or penalty. So if there is an emergency you can withdraw it, and it wouldn't be any worse than in a taxable account. And if you don't need it, then it will enjoy the tax benefits of being in the IRA." "So many complicated answers for a straight forward question. First to this point ""I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund..."" An IRA can be invested in a mutual fund.  The IRA benefit over standard mutual fund is pre-tax contribution lowering your current tax liability. The advantage of an IRA over a 401k is control.  Your employer controls where the 401k is invested, you control where your IRA is invested.  Often employers have a very small number of options, because this keeps their costs with the brokerage low. 401k is AMAZING if you have employer matched contributions.  Use them to the maximum your employer will match.  After that OWN your IRA.  Control is key when it comes to your money. On IRA's. Buy ROTH first.  Contribute the calendar maximum.  Then get a traditional.  The benefit of ROTH is that you already paid taxes on the contribution so your withdrawal is not taxed AND they do not tax the interest earned like they do on a standard mutual fund." The primary advantage of an IRA or 401k is you get taxed effectively one time on the money (when you contribute for Roth, or when you withdraw for Traditional), whereas you get taxed effectively multiple times on some of the money in a taxable account (on all the money when you contribute, plus on the earnings part when you withdraw). Of course, you have to be able to withdraw without penalty for it to be optimally advantageous. And you said you want to retire decades early, so that is probably not retirement age. However, withdrawing early does not necessarily mean you have a penalty. For example: you can withdraw contributions to a Roth IRA at any time without tax or penalty; Roth 401k can be rolled over into Roth IRA; other types of accounts can be converted to Roth IRA and the principal of the conversion can be withdrawn after 5 years without penalty. You cannot withdraw funds from a 401(k) while still employed with your company. To access your contributions, that would be treated as a loan against the 401(k), in which case you'd pay an upfront fee, and then have to repay the amount loaned, plus interest, over a set period of time. (In essence, you are paying back yourself.) Typically, there is also a minimum amount you must take out as a loan. Should you leave the job and still have an outstanding loan against your 401(k), it will be treated as a withdrawal after a certain date, at which point a 10% penalty plus taxes applies, unless you pay back the full amount of the loan remaining before that certain date. Your friends should seriously consider contributing the minimum amount necessary to get that full 50% matching amount. It's free money. As you said, it's like leaving money on the table. Why are you saving your emergency fund in a Roth-IRA? That type of fund should be for retirement. I know you can pull out your principal but that would mean in a crisis you will be destroying your retirement fund.  Remember there is an annual limit, it could take years to replenish it if you have to pay for a big repair, or period of unemployment. The emergency fund should be kept in a very safe account. I would just keep in a high yeild account at a Credit Union I think you're missing several key issues here. First for the facts: IRA contributions are $5500 a year maximum (currently, it changes with inflation), i.e.: you cannot deposit $10K in an IRA account in a single year. IRA withdrawals can only be made if you have something liquid in the IRA. You cannot withdraw from Lending Club IRA unless you manage to sell the notes currently held by you there. Roth IRA is funded with after-tax money, and you can withdraw your deposits in Roth IRA any time for any reason. No 10K limit there, only limited by what you deposited. However the main thing you're missing is this: You can withdraw up to $10K from your IRA for first home purchase without penalty. Pay attention: not without tax but without penalty. So what is the point in depositing $10k into IRA just to withdraw it the next year? Try to avoid actually pulling money out of your retirement savings. Not only are you paying that stiff penalty today, but you're actually stealing form your future. Many 457 plans allow you to borrow against the balance, usually up to 50% of the plan balance. I'd roll the 401k into the 457 and borrow against it if you really need the money. Borrow a little extra to help you make the first few payments if you need to.