Lost your job? Unexpected HIGH expense? Unless you have a good nest egg put away for a rainy day, you might be scrambling for funds to cover unexpected expenses, and your IRA might be a place to look for that needed cash.
Are you aware that funds withdrawn from an IRA are taxable, and if you are under 59-1/2, you will pay a federal penalty of 10% and possibly a state penalty too?
Withdrawing funds early from your IRA will affect your standard of living when you retire. We hope that you never have to do that, but if you do, here are a few ways to beat the early-withdrawal penalty. (Of course, you still need to deal with the IRS and income taxes – no way to get around that)
· Annuitize: Under IRC Sec. 72(t) you can avoid penalties by taking a series of substantially equal periodic payments until you are 59-1/2 (but not less than five years). To estimate how much you can withdraw each year, use the 72(t) calculator at Bankrate.com (See:: http://www.bankrate.com/calculators/retirement/72-t-distribution-calculator.aspx
· Buy a Home: If you have been renting, had alternative living arrangements, and have not owned a home for at least two years, you can withdraw up to $10,000 to buy a house in your name or in the name of a spouse, child or grandchild.
· Pay for Education: You can go back to school, or withdraw funds for college tuition and related expenses (books, materials, fees) for your spouse, children or grandchildren. Be aware that certain income limits apply.
· Cover Medical Expenses: If your medical expenses (for you, your spouse or dependant) exceeds 75% of your income, you can withdraw from your IRA penalty-free.
· Pay Medical Insurance Premiums: If you have been unemployed for at least twelve (12) weeks, and receive unemployment compensation, you are eligible to withdraw funds to pay for your medical insurance premiums.
· Pay Back Taxes to the IRS: If the IRS has placed a levy against your IRA, you can withdraw funds to pay the back taxes.
· Disability: If you are “totally and permanently disabled” by IRS definition, you can take distributions from your IRA without penalty.
· Death: Did you know that when you die, your beneficiaries must begin taking distributions from your IRA, and there will be no penalty to them.
This blog is written based on my observations and experience. I am and not a CPA, tax planner or tax attorney. I am a mediator and former family law attorney. All data and information provided on this site is for informational purposes only. wpthemesplugin.com makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.