This is a question I get a lot. An opportunity came up, such a finding a new home, or you came into some hard times, and you want to know if you can use assets from your IRA.
First thing: these situations vary widely given personal circumstances. So please talk to your advisor. The information I’m providing here is simply to give you some understanding of the elements at play.
Things to consider when deciding if an IRA withdrawal is an option for your current needs:
- How old are you? Typically, you will pay a 10% penalty to the IRS if you take distributions before age 59 ½.
- What type of IRA is it? Roth IRAs may have more favorable withdrawal options than a traditional IRA due to different tax treatment of contributions.
- What type of investment does this IRA hold? A simple brokerage account will likely have lower fees related to a withdrawal than an annuity, for example.
- Will you disrupt any related guarantees or riders on that account? This again usually pertains to annuity contracts that are often chosen precisely for available guarantees or other benefits.
- What’s your current tax bracket? Remember that a distribution from a traditional IRA or an early distribution of gains from a Roth IRA will result in taxable income.
- You may qualify for an exemption from the 10% penalty under certain hardship circumstances. You can learn more about that here: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions.
- Finally, you can’t “re-pay” an early distribution from an IRA, like you would with a loan from a 401(k). You will still be subject to the contribution limitations going forward.
Need to know more? Contact me for a complimentary consultation! https://www.planningforgood.net/contact-me-or-get-on-my-calendar
Please note that this information is provided by me, Karen Melo Ticas, CFP®, strictly as general advice based solely on my personal education and years of experience in the financial services industry, unless otherwise noted. When making decisions, consider working with a professional that is well informed about your individual circumstances.)
Karen Melo Ticas is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC. Member SIPC. www.SIPC.org. Home office: 200 Clarendon Street, 19th & 25th Floors, Boston, MA 02116. 617-585-4500. The information provided is not written or intended as specific tax or legal advice. You are encouraged to seek guidance from your own tax or legal professional before making any decisions. © 2019 Karen Melo Ticas. All rights reserved. CRN202104-246635