I am considering keeping my emergency fund in a Roth IRA (as described in this question) in order to maximize the amount of capital I can potentially invest tax free in the future. However, this would involve a significant chance of having to make early withdrawals of my Roth IRA contributions.
This could lead to a few confusing situations:
- (A) I could contribute money, earn some interest, and then have withdraw some or all of the contributions made so far in the year.
- (B) I could end up withdrawing contributions from a previous year, and then pay it back.
- (C) I could contribute some, have to withdraw it all & more, and then want to return some (or all) before the end of the year.
In case (A):
- What happens to the interest my contributions earned in the Roth IRA (and which remain behind in the account) between the time of my contribution & my withdrawal
- Does the money I contributed at the beginning of the year still count against my contribution limit after it is withdrawn (Say I deposited $5,500 in January and withdrew $5,500 in June. Can I put the money back in by December)?
In case (B): Does the money I return to the Roth IRA count against my contribution limit?
What about case (C)?
Forgive me if this question is a little long, the whole thing just seems so confusing.