Assumption: you bought your current residence as an investment with the intent of selling it for a profit at some point.
- Both are purchased with after tax money
- No capital gains taxes due when the gains are realized
- Not taxable as income when the gains are realized
- No guaranteed rate of appreciation
- Roth IRA has a $5k/year limit on how much you can invest, but your home doesn’t
- You can’t touch the gains of your Roth without penalty until you are 59.5, but you can get the gains from your residence whenever you choose without penalty
- While you aren’t guaranteed appreciation in either vehicle, if your home has a mortgage you are guaranteed a percentage of interest savings by paying down (investing) the principal early. True, you lessen the tax deduction on the interest, but does it really make sense to pay the bank $100 so that you don’t have to pay the gov’ment $25 anyway?
- Any improvement-type investments you make into your home (for instance, a foreclosure that needed a lot of work) can be enjoyed by you immediately while you wait for the market to appreciate and can also help you sell quickly and for a higher price later on.