- What is an IRA?
- What's the difference between Roth and traditional IRAs?
- Why is an IRA a good deal?
- Who can put money into an IRA?
- How much should I put into an IRA?
- When can I access money in my IRA?
- When are IRA withdrawals penalty-free?
- When do I have to start taking the money out of an IRA?
- What if I need the money in my IRA before retirement?
- How should I invest the money?
- How do my IRA withdrawals get taxed in retirement?
- Where should I open an IRA?
- Should I take money from my IRA to pay off debt
Taking withdrawals from an IRA before you're retired is something you should do only as a last resort. There are a few reasons why.
If you withdraw money from a traditional IRA before you turn 59 ½, you must pay a 10% tax penalty (with a few exceptions), in addition to regular income taxes. Plus, the IRA withdrawal would be taxed as regular income, and could possibly propel you into a higher tax bracket, costing you even more.
Though the feds allow you to withdraw contributions from a Roth IRA without incurring a penalty, you will owe a penalty (and taxes) if you withdraw the earnings on those contributions.
In addition, money you take out of an IRA cannot be replaced, since you would still be restricted to yearly contribution limits for future contributions. So even if you withdraw only a small amount, factor in the years of compounding interest you would be forgoing, and that small withdrawal could end up costing you a small fortune in your golden years.
