Six Easy Ways to Get Withdraw Cash from your IRA and Save 10%While Doing It!
Believe it or not, the government has given all of us ways to borrow money from an IRA retirement account without paying any penalty. Maybe like many others in America, you’re finances have been bruised and beaten by this latest economy meltdown and a simple withdrawal from your IRA is looking mighty attractive right now. Spend any time considering the use of this account to help with a current situation and you’re facing a big financial hit.
First the bad news. If you’re under 59 ½ years old, taking money from a traditional IRA is considered a distribution. There’s no loan option where you can borrow money from an ira. To complicate things a little more, as the money is considered tax deferred, you will need to pay taxes on any funds removed from the account.
So under 59 ½ and taking money from an IRA account results not only in additional taxes being owed but also a 10% penalty is assessed. Typically, this means a loss of at least 25% minimum assuming a 15% income tax rate and a 10% penalty and sometimes as high as 38%!
This means that for every 10,000 dollars withdrawn from your IRA account, you can expect to end with a maximum of about 7,500 dollars after the taxes and penalties are paid. If you have almost any family income, expect to pay even more in taxes!
There are specific reasons why you CAN make an IRA withdrawal without incurring the usual penalty. For more detailed information on borrowing exceptions visit how to withdraw from an ira without penalty
These exceptions include:
• Hardship – Cashing out your IRA to cover current insurance premiums if you become permanently disabled or during periods of unemployment qualify as exceptions that remove the 10% penalty.
• Paying unreimbursed medical expenses is another exception that can save you the 10% penalty. You can even make an IRA early withdrawal without penalty to pay medical insurance premiums
• Thinking about going to school or helping a close relative with school related expenses? You’re free to cash out an ira early without owing the 10% penalty if the funds are used for books, tuition or other school related supplies as long as the school qualifies, and almost all of them do.
• If you’re in the military service after September 11th and are on active duty 180 days or more, the penalty to cash out ira in your situation is ZERO!
• Want to buy your first home and need a down payment but have money in your IRA? No penalty is assessed if you make that IRA withdrawal for the purposes of buying a home. If you haven’t owned residential real estate for the last 2 years, this may be an option.
Making any IRA early withdrawal and cashing out an ira early without the penalty is possible but the key to most exceptions to the IRS regulations depend on how you plan to use the money. The intent of an IRA is to supplement Social security when retired and cashing in an ira early doesn’t support this intent.
Remember you cannot borrow from a traditional IRA and early cash withdrawals are considered a distribution. This means that the money is considered permanently removed from your account and you do not need to pay it back.
If you’re looking for other ways to save on the tax and penalty bite and need the money for any other reason, visit IRA early withdrawal and ask for the free strategies used by the wealthy to pay less taxes then the rest of us ebook white paper. Considering the penalties and taxes owed from a simple early withdrawal, you owe it to yourself to structure your finances to maximize the money you keep.