Buy land, they aren’t making anymore of it. – Mark Twain

I am a firm believer in the learning curve. A learning curve is the rate of a person’s progress in gaining experience or new skills. Through time and experience will your ever-increasing knowledge and skills grow to help you make better and wiser decisions. That includes not only in your personal life, but in your financial life as well.

This post was inspired on an episode from the television series Supergirl (2015-2021). In an early Season One episode, two or three, Supergirl (Kara Danvers played by actress Melissa Benoist) is having a talk with her boss, Cat Grant, at her job with the company CatCo.

See the events of that exchange below.

Cat penned an article for the Tribune on Supergirl’s blunder at the port and ordered Kara to get it ready for posting. Kara wondered why Cat was constantly criticizing Supergirl, claiming that Superman never faced such heavy backlash. Cat expressed that women need to work twice as hard as men to succeed, pointing out that Supergirl, despite her good intentions, is still a novice; she left Flight 237 in the bay after saving it and now caused an oil spill while trying to prevent a fire. Since Supergirl’s job is a learning curve, Cat advised her to start with smaller targets and work her way up, similar to how the latter rose through the ranks at the Daily Planet.

Put simply, no one starts in at the top. You have to work your way there. Wealth building requires the same.

You have to learn to manage one dollar before you can manage one million. You start small and work your way up. Then it hit me. You can use one wealth building tool to help you build another. They are both levers that can be used to help you scale up your wealth.

It is like the S meaning on Supergirl’s costume. It is the family crest for the House of El; it means Stronger Together.

Both your Roth IRA and home investment can help you build wealth faster. They are both stronger together.  

The major fortunes in America have been made in land. – John D. Rockefeller

Buying a home takes money. You generally need money for two items: Down payment and closing costs. You can use funds from your Roth IRA to do this.

Roth IRA withdrawal rules allow you to take out up to $10,000 earnings tax and penalty-free as long as you use them for a first-time home purchase and you first contributed to a Roth account at least five years ago.

Normally you would need to wait until you are age 59 1/2 to start withdrawing funds. If you withdraw money from the account before age 59 1/2, you will typically have to pay a 10% penalty on the amount withdrawn. The distribution will also be subject to taxes. However, there are certain circumstances in which you might be able to take out funds from the account before reaching age 59 1/2 and not incur penalties.

One exception to the early withdrawal penalty is for the purchase of a first home. To be considered a first-time homebuyer, you cannot have owned a primary residence at any time during the previous two years.

This $10,000 exception is available for every individual, so a married couple can withdraw $10,000 from each of their IRAs for a total of $20,000 that can be used for a down payment.

In addition to purchasing your own home, you may qualify to help others buy their first house. IRA owners can withdraw funds penalty-free to help their first-time home buying children, grandchildren or parents purchase a home. Sweet!

However, $10,000 is the lifetime maximum for first-time homebuyer withdrawals. Therefore, the total of your withdrawals must remain under the $10,000 mark to avoid the early withdrawal penalty.

Many of you out there may say why not a traditional IRA. There is a method to my madness. Bear with me.

The reason for using a Roth versus Traditional IRA is that while there will not be a penalty on early IRA distributions for a first home purchase, you can expect to pay taxes on the amount withdrawn when using a traditional IRA.

For example, if you are in the 22% tax bracket, a $10,000 withdrawal for a home purchase will lead to $2,200 in taxes. For a couple in the 24% tax bracket who withdraws $20,000, the taxes due would come to $4,800.

However, this is not the case for the Roth because you have already paid taxes on that money so you owe no income taxes on money that is withdrawn for a first time home purchase.

So if you are all in on this plan, then let’s get down to business.

Ninety percent of all millionaires become so through owning real estate. – Andrew Carnegie

The rules for using a Roth IRA rather than a traditional IRA are slightly different. You can withdraw any contributions (not earnings) at any time from your Roth IRA before retirement age without penalties as long as the account is at least five years old. You will be able to withdraw any amount up to the total amount you contributed without being subject to taxes.

In addition to your Roth IRA contributions, you might opt to take out some of the earnings in the Roth IRA. You can withdraw an additional $10,000 from the earnings under the first-time homebuyer exemption.

This is where the withdrawal exception comes into play. You may withdraw a combination of both contributions and earnings or just earnings to use toward your home purchase.

Just remember that if you are only using earnings the cap is $10,000. Any penny above that will trigger the 10% penalty in a traditional IRA or just the the income taxes in a Roth IRA.

You can always take out funds above the $10,000 threshold if you are taking out contributions only or in addition to earnings.

Again, simple math can help you build wealth.

We don’t have to be smarter than the rest. We have to be more disciplined than the rest. – Warren Buffett

My method of using the Roth IRA early withdrawal exception.

First, I did some research and found out that if you qualify as a first-time homebuyer, you can withdraw up to $10,000 from your traditional IRA and use the money to buy, build, or rebuild a home.

Second, I learned that with a Roth IRA, you can withdraw your contributions tax- and penalty-free at any time, for any reason, as long as you have held the account for at least five years.

This got me thinking. At the time, I was renting. I had opened up a Roth IRA more than five years ago. I had been squirreling away cash in it since opening it up with T Rowe Price starting with $50 dollars a month.

I also opened up a second Roth IRA with another brokerage at another time as not to mess with the good thing I had going with the first one as you could no longer open a Roth IRA with T Rowe and continue with an automatic contribution of $50 per month.

Do not scoff or turn your nose up at investing small sums of money. Over the years dealing with both accounts and after regular and sporadic contributions over time my T Rowe account grew to over $10,000 as did my other one. I had well over $25,000 in both not counting my 401(k), Rollover IRA, or other cash and investments.

I was skeptical about moving forward at first with this decision to buy property. My first. Then, I thought about what Wayne Gretzy and Michael Jordan said, “You miss 100% of every shot you don’t take.”

This quote helped me as well. Progress always involves risk. You can’t steal 2nd base and keep your foot on 1st.– Fred Wilcox

Therefore, I went for it.

I started by combining both accounts. Then, I cashed out $13,000 of of my Roth IRA.

The first $3,000 was in contributions and the additional $10,000 was in earnings. After, using the funds for closing costs and a small part of it for renovations, I ending up paying taxes on a tiny portion. The grand total: $238.

I was shocked! I couldn’t believe it. I felt like I should have taken the plunge long ago.

Alas, we cannot look backwards, we can only go forward. Within a few months of me owning the property it had increased in value by $14,000. That is more than what I withdrew to get the place.

And owning gave me such a sense of peace. That right there is priceless. I decided to do some updates and renovations to feel better about the space I was in. It took some hard work and time, but it was worth it in the end.

I got inspiration from several places. I knew I wanted the feel of how I always felt every time I walked into a Restoration Hardware.

I got the idea to base my bathroom feel and design on the Marriott and Caesar’s Palace in Vegas. Clean lines, white, simple and elegant. I also went with frosted sliding shower doors that you could not see through.

My bedroom is my center and place of peace. I call it my home base. I also always have a mini home office in my bedroom as I like to roll out of bed in my pajamas and write, work and check the stock quotes.

And I love an organized closet. I got inspiration for mine from the Container Store. Although, mine does not look like this, I did make sure it was organized with all of my suits, shoes, and sweaters together like in the picture below.

Lastly, the heart of the home. The kitchen was inspired by honey + lime. Stainless steel appliances and organized kitchen cabinets make life easier. Again, although my kitchen does not look like this, it was done with something like the picture shown in mind.

Every time I think back and ask myself if I made the right decision I think of this quote from FDR.

Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world. – Franklin D. Roosevelt

Amen.