IRS Rules On Ira Withdrawals
March 12th, 2006
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Question: How can I avoid the IRA early withdrawal fee?
I’m much less that 59 years old but am facing financial difficulty. I’m struggling to make my mortgage payment and am eat up with credit card debt (which I’ve now cut up). I’ve decided that I must access my IRA to make these payments in order to avoid further damage to my credit score.
Is there an IRS rule that will help me avoid the 10% penalty for hardship withdrawals?
Would you agree that even if I must occur the penalty, that is better than ruining my credit and paying credt card late fees?
Answer: Someone asked Suze Ormann the very same question & she went ballistic & then I saw Michael Clark on Sat on CNN & someone called in the same question & he couldn’t answer quick enough. Basically, they had the same answer — they asked how much mtg was owed & at what rate & how long it was for, etc (all the informaion they needed to give a wise answer).
1st – you should not – NEVER -withdraw at any cost any money from your IRA. Not only is there a 10% penalty to pay (can’t get arund it) but the income taxes on the money withdrawn will be taxed at 20 to 30 % — that’s not worth it for sure.
2nd – they both said to go back to your bank and renegotiate your mortgage. Obama’s recovery plan has made it very easy for banks to work with their customers and this is the very first thing they suggest to do. You should be able to get a lower rate & reduce your monthly payments. Some banks even provide for a grace period for people up to 6 months late (I believe).
3. They suggest you get a part time job for extra income besides cutting back on spending, etc –all the things you should know by now.
4. They said not to pay for any credit counseling because you can get it for free & they can negotiate deals with the credit card companies for you whereby you can make smaller payments without penalties.
5. Anything you can sell like a car? bike? or electronic stuff?
6. Would it be possible for you to rent out a room to a college student, or someone just starting out or a relative who is also having problems?
Try to go on the Michael Clark website fon CNN to see what advice he’s given to others in the same predictament. Also, if you could renegotiate your mortgage with the bank & say your current mtg is $150K — a credit counseler may suggest you borrow $175K (new mtg and terms) keep some for savings, emergency money & some to help you pay off y our bills.
The government is also providing free job training if needed to enter a new line of work. There are many agencies out there to help families in need. You need to do some research & forget about your IRA, Even if you suspend contributions for a while, just leave it alone until life turns around for you.
I wish you luck and will say a prayer for your recovery. I’m sorry for you & all those caught up in this horrible Depression we’re in. It’s not fair but if it helps, you have a lot of company now.
RMD Rules for Retirees
The tax man forces you to take payouts from your retirement accounts.
Finance & Investment Tips : Early Withdrawal Penalty on a CD Held in an IRA
Posted in 
Tags: