[Jim Kuhn]

I would strongly suggest a Roth IRA if you have the cash. You can place up to $4000 this year in a Roth. You pay taxes on the money up front but withdraw all without paying taxes (earnings are tax free). The principal can be withdrawn at any time but the earnings must be kept for retirement or a penalty is assessed.

The Roth is also a good place for an emergency fund. Experts suggest you keep 3-6 months expenses in case something comes up. This is also a good place to start saving for a down payment on a house.

IRA's and 401k's are non-liquid in that you must keep all money in until you reach retirement age (I think 59 1/2) or pay penalties and taxes. Those accounts you fund tax free but pay taxes on principal and earning upon withdrawal. A Roth you pay taxes up front but withdraw principal and earnings tax free. Thus, the earnings are never taxed and principal can be withdrawn at any time.

Thank you,

Jim Kuhn
Catfish4u
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