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efla t1_j2brjtm wrote

Reply to comment by DestinationForever in I’m having trouble getting started with what I should do with my money. Have I saved enough? What direction do I need to take next? by DestinationForever

Store your emergency fund in a HYSA, yes. You can pull money out of the Roth IRA any time, but earnings are subject to taxes and penalties if you withdraw before you’re 59.5 years old. There are some exceptions to that, such as first time house purchases, but generally it’s just a tax-advantaged retirement savings account.

I haven’t looked too hard into why the roth ira is recommended before increasing 401k contributions, since I’m not there myself yet.

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DestinationForever OP t1_j2budlo wrote

What makes Roth any different from a HYSA besides withdrawal repercussions before the age of 59? Also, with HYSA can you withdraw any amount anytime?

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efla t1_j2bvioc wrote

An IRA is an investment account, a HYSA is a savings account. You’d be hard pressed to even meet inflation in a HYSA, let alone make any real earnings. You put your emergency fund in a HYSA because you don’t want it to be invested. The goal of an emergency fund is not to make money, but to have access to a few month’s expenses in case of an emergency like losing your job. You do want to invest your retirement savings, as you can make a good chunk of money by letting it grow in the market for a few decades. Having that money sit in a HYSA is a ton of missed potential.

You can withdraw from a HYSA any time. It’s just a decent savings account at a bank or credit union.

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