Roth for Home Purchase Advice

[Fallout552]

Has anyone here put money in a Roth explicitly to grow and use for the first time home buyer exception (vs. dipping into retirement)?

I.e. Knowingly depositing money into it to take advantage of the tax rules so that any withdrawal isn't "raiding" but instead a conscious choice?

I'm considering this but am curious whether others have had any luck/experience doing so.

Main retirement is funded and regularly contributed to--this is just a way to build up a down payment.

Thanks

[Watty]

It is a bit different but some people use a Roth as an emergency fund.

https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

[marti038]

No, but I didn't know about the 1st time homebuyer exception until after we bought our first house.

At the time, I was disappointed that I hadn't used that money for a larger down payment.

Looking back, I'm glad I didn't. The return on investment was stronger than our interest rate on the house and you can't replace the money once you take it out.

I'd put money in the roth whether you use it for a house or not (assuming you are in a tax bracket that makes sense for it).

[PFInterest]

No. Roth space is too valuable for us.

[aristotelian]

I don't really see the point. The appropriate investment for a downpayment fund (assuming an intermediate 0-5 year timeframe) would be something stable which is not likely to make much money. The tax benefit is going to be pretty small. I would rather use retirement account for retirement and savings for savings to maximize the tax benefit of the retirement account.

Putting your downpayment fund in stocks would make sense from a tax perspective but not from a risk perspective.

[NorCalDad]

I'd check the rules. You can always withdraw your contributions regardless of what you plan to spend on. But if you want to withdraw earnings for a first home, I think you're limited to $10,000 and only after you've had your Roth account for five years.

What's your purpose in doing this? Tax-free gains of $10,000 toward a home? Assuming you want to buy sooner rather than later, you'd have to take too much risk to see that much gain when you can only contribute $5,500 a year.

The main benefit I see is that if you really think you won't tap the Roth for your home and have a larger savings account that will serve as your main down payment fund. By telling yourself you can use the Roth for your home, at least you're compelled to save in tax-advantaged space when you might not otherwise.

[Fallout552]

I don't really see the point. The appropriate investment for a downpayment fund (assuming an intermediate 0-5 year timeframe) would be something stable which is not likely to make much money.

Putting your downpayment fund in stocks would make sense from a tax perspective but not from a risk perspective.

My thought was something like adding money in the form of some bond index funds. Far more stable than stocks but better than your standard savings rates. Then if you're adding some of your contributions with the explicit purpose of withdrawing for a home you're able to pull the extra earnings ($20k if it's two people, which in CA we need all we can get) and you're not robbing your retirement really since that money was going to a house fund anyway.
My wife and I max out our 401ks so I'm not worried about lost retirement. Just an extra boost really, even if it's modest.