conversation: User (rodiraskol): "I currently work as an engineer, but I am planning to go back to school full-time in the Fall 2019 or Spring 2020 semesters. I'm planning to open a Roth IRA and start contributing every paycheck. When I go back to being a student, I will most likely withdraw all or most of those contributions (I will avoid withdrawing gains if at all possible).\n\nIs there any downside to this plan that I'm not seeing?"
  Self: "With a Roth, you can withdraw contributions at any time with no penalty. However, as far as I'm aware, there's no way to replace what you've withdrawn without using up the current year's contribution limit."
  User (rodiraskol): "Good to know, but I'll have little or no income during that timeframe."
  Happylime (Happylime): "Any tax deferred plan has a penalty for early withdrawals. If you know you're going to school soon and need liquidity a roth is a really bad account to put too much money into."
  User (rodiraskol): "I thought the penalty only applied to earnings, not the principal?"
  Happylime (Happylime): "Contributions to a Roth IRA are always made with after-tax income, but the earnings are tax-free if you follow the rules for withdrawals: You must be at least 59½ and your account must have been open at least five years. What's more, with a Roth IRA you're not required to withdraw your money at any age—you can pass the entire account on to your heirs if you choose. And you can continue to contribute to a Roth as long as you have earned income, no matter how old you are. Contribution levels for a Roth are the same as those for a traditional IRA. However, there are income restrictions associated with contributing to a Roth IRA. Both you and your spouse can each establish your own Roth IRAs. -FINRA \n\nYou have to follow the rules."
  pantstofry (pantstofry): "The OP is right though, he won't get penalized for withdrawing his contributions."
  Happylime (Happylime): "If the withdrawal is qualified and the account meets the requirements. If you open a Roth tomorrow and pull money out in July it's going to be penalized because it's a no qualified withdrawal."
  pantstofry (pantstofry): "Yes you need 5 years, but there are exceptions for school expenses which OP should look into."
  Happylime (Happylime): "Or he could use a 3 year strategy of investments in bonds and then money market funds increasing liquidity of assets and allowing him to realize earnings without penalty."
  pantstofry (pantstofry): "Sure. But with such a short time frame I don't think the gains would be so great after tax. I probably would do the same, but I don't think OP is losing much at all by doing the Roth IRA plan. I just don't psychologically enjoy the idea of withdrawing contributions from what is supposed to be my retirement "
  Happylime (Happylime): "He loses 40% just about of any gain he receives, that's not a good when he has other options. I just don't like PFs obsessed nature on Roth's."
  pantstofry (pantstofry): "Roths are a great tool for retirement especially for those in a lower tax bracket. You just can't touch your earnings, which is fair. Again, my approach would not be to use my Roth for anything until I hit 60. But I just don't think it's doomsday if OP wants to go down this route. Especially if he doesn't have another retirement vehicle where he can "make up" those lost contributions, which is additionally more difficult due to lost time."
  Happylime (Happylime): "Short term need generally takes precedence over long term capital appreciation when it comes to money, and Roth's are fine if you're assuming taxes will be higher for you when you retire but you are risking benefit now vs benefit later and the government is kind of random in what it does."
  pantstofry (pantstofry): "Fairly true but I think even with government variation the tax structure will always have the same trend, and most young people expect to be in a higher bracket for retirement (at least compared to their 20s, maybe not 50s). Roth IRAs can be huge by the time you're ready to retire if you do it right, and it gives you a diversified way to withdraw (I.e. if you have a 401k you can allocate in the most tax efficient way possible)"
  Happylime (Happylime): "It can be good but the rules can change and people don't consider that enough sometimes. Obviously Roth and 401k will likely comprise of the majority of someone's retirement but 401ks are really talked down on this sub compared to Roth's."
  pantstofry (pantstofry): "I think that's just a matter of demographics. I would argue the majority of people on this sub are under 30 and making well under Roth contribution limits. So for them it's advantageous to have a Roth. I haven't really seen 401ks talked down ever, only maybe given less precedence when there's no employer match, which depending on the situation can be viable."
  Happylime (Happylime): "I think the issue I primarily have is the assumption that we'll make more money down the line.(have more taxable income later than we do now.) If you're 60% sure that you'll make more you're still better off with the immediate reward of a 401(k) because it leaves so much up to chance."
  pantstofry (pantstofry): "If you're 20 and don't make more money by the time you're 50, you're really doing something wrong."
  Happylime (Happylime): "Or it's just not one of your goals. You really need to take goals into account for the individual. I'd much rather be doing something I love in twenty years than making money hand over fist."
  pantstofry (pantstofry): "Okay of course, but we're on r/personalfinance here. The assumption is financial. Of course you should do what you love, just the vast majority here want to make more or save more and provide for a significant other or family."
  Happylime (Happylime): "Well true but I mean if you're doing retirement planning all day it's hard to flip that switch from "what is this individual person going to have goal wise" to "yep yep vanguard small cap maximum growth potential no need to play it safe!""
  pantstofry (pantstofry): "I mean you look at each OPs situation and take it from there. There are plenty of one size fits all sites that will recommend whatever, we're here to aid specific queries."
  