Financial Focus: What To Know About Early IRA Withdrawals – InsuranceNewsNet

InsuranceNewsNet — Your Industry. One Source.™

Sign in
  • Subscribe
  • About
  • Advertise
  • Contact
Home Now reading Newswires
Topics
    • Life Insurance
    • Annuity News
    • Health/Employee Benefits
    • Property and Casualty
    • Advisor News
    • Washington Wire
    • Regulation News
    • Sponsored Content
    • Webinars
    • Monthly Focus
  • INN Exclusives
  • NewsWires
  • Magazine
  • Free Newsletters
Sign in or register to be an INNsider.
  • INN Exclusives
  • NewsWires
  • Magazine
  • Free Newsletters
  • Insider
  • About
  • Advertise
  • Editorial Staff
  • Contact
  • Newsletters

Get Social

  • Facebook
  • Twitter
  • LinkedIn
Advisor News
Newswires RSS Get our newsletter
Order Prints
November 23, 2021 Newswires No comments
Share
Share
Tweet
Email

Financial Focus: What To Know About Early IRA Withdrawals

Capital Journal (Pierre, SD)
While you're working, you may be contributing to an individual retirement account (IRA), which can provide a tax-advantaged way to save for your future. So, is it ever a good idea to tap into your IRA before you retire?

Ideally, you should leave this account intact until your retirement. After all, you could spend two or more decades in retirement, so you'll need a lot of financial resources. Still, life is unpredictable, so there may be times you'll consider taking money from your IRA.

You'll need to be aware, though, that if you withdraw funds before you turn 59.5 years old, you will generally trigger a 10 percent penalty. Plus, you'll be taxed on whatever you take out, thereby losing, at least in part, the benefits of tax-deferred earnings offered by a traditional IRA. With a Roth IRA, you can withdraw your contributions free of taxes and penalties, but the earnings may be taxed and penalized if you take them out before you're 59.5.

If you need to withdraw funds from your IRA before you're 59.5, you may be able to avoid the 10 percent early withdrawal penalty if you meet an exception.

Exceptions include paying for college, buying a first home, having a child and covering medical expenses.

Paying for college

You are allowed to take penalty-free withdrawals to pay for tuition and other qualified higher education expenses for you, your spouse, children or grandchildren. However, since the withdrawals may be considered taxable income, they could reduce the student's eligibility for financial aid.

First home

You and your spouse can each withdraw up to $10,000 from your respective IRAs to buy your first home. To qualify as a first-time homebuyer, you - and your spouse - need to have not owned a home for the two years preceding your home purchase.

Having a child

Following the birth or adoption of a child, you and your co-parent can each withdraw up to $5,000 from your respective IRA without paying the 10 percent penalty.

Medical expenses

You may be able to avoid the early withdrawal penalty if you use the money to pay for unreimbursed medical expenses - for you, your spouse or dependents - that exceed 7.5 percent of your adjusted gross income. You may also qualify to take a withdrawal without penalty to pay for health insurance premiums if you are unemployed. In the case of a disability, the 10 percent early withdrawal penalty also may not apply.

These aren't the only exceptions to the 10 percent withdrawal penalty, but they do cover many of the common reasons that people may consider an early withdrawal from their IRAs. And if you do need to take an early withdrawal, consult with your tax advisor to determine your eligibility for avoiding the 10 percent penalty.

Keep in mind, though, that you do have ways to potentially reduce the necessity of withdrawing from your IRA early. One proven technique is to build an emergency fund containing at least three to six months' worth of living expenses, with the money kept in a liquid account.

You might also consider opening a line of credit. A financial professional can help you explore other options, as well.

Ultimately, if you can leave your IRA intact until you retire, you'll be helping yourself greatly. But if you do need to tap into your account early, at least be familiar with the possible drawbacks – and how you might avoid them.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, Member SIPC.

Older

More Americans Say They Don’t Want Kids — This Is The No. 1 Reason Why

Newer

Speed Bumps Aren’t Likely To Stop Powell’s Fed Nomination

Advisor News

  • ‘Spring Cleaning’ Includes Your Client’s Finances, Too
  • Retirement Savers Remain Confident Despite Short-Term Woes
  • City of Memphis Helps Employees With Financial Wellness Programs
  • IRI CEO: ‘I Am Optimistic for Our Industry’s Future’
  • 2/3 Of Near-Retirees Failed Or Barely Passed A Basic Social Security Quiz
More Advisor News

Annuity News

  • Nationwide To Pay $5.6M For Annuity Violations, NY Regulators Say
  • LibertyMark Freedom Fixed Indexed Annuities Launch
  • Nationwide Adds BNP Paribas Global H-Factor Index To FIA
  • Transamerica Launches Structured Index Advantage Annuity
  • Recommending FIAs: Start With The Client’s Objective
Sponsor
More Annuity News

Health/Employee Benefits News

  • Insurance execs and others weigh in on the industry’s critical talent gap
  • Medicaid Managed Care Bill Wins Approval Of Oklahoma Lawmakers
  • EBRI Studies Expanding Pre-Deductible Coverage For Chronic Conditions
  • Most Consumers Choose To Pay Higher LTCi Premiums
  • CMS Creates More User-Friendly Medicare Website
More Health/Employee Benefits News

Life Insurance

  • Industry Looks To Extend COVID-Related Life Insurance Sales Boom
  • The 5 Secrets To Retaining Financial Sales Professionals
  • Life Insurance Activity Continues Dip In April But Still Stronger Than 2021, MIB Reports
  • Transamerica Adds Execs To Annuity And Life Insurance Team
  • Northwestern Mutual Invests $5M In Black-Led Financial Institutions
More Life Insurance

- Presented By -

How to Write For InsuranceNewsNet

Find out how you can submit content for publishing on our website.
View Guidelines

FEATURED OFFERS

Get Linked INN to your industry Connect with INN on LinkedIn to be first on all the news and insights that matter to your industry.

Press ReleasesAll press releases

  • OneAmerica Commits $1 Million Toward Financial Literacy
  • Transamerica Structured Index Advantage Annuity Offers Investors More Certainty with Upside Growth and Downside Protection
  • Senior Market Sales Creates First-of-Its-Kind Lead Acquisition Platform
  • Growing financial services firm Kuvare opens Des Moines office in East Village, continuing expansion in Iowa
  • BetterLife Selects iPipeline® to Digitally Transform Its Business & Better Serve Future Generations
Add your Press Release >

Topics

  • Life Insurance
  • Annuity News
  • Health/Employee Benefits
  • Property and Casualty
  • Advisor News
  • Washington Wire
  • Regulation News
  • Sponsored Content
  • Webinars
  • Monthly Focus

Top Sections

  • Life Insurance
  • Annuity News
  • Health/Employee Benefits News
  • Property and Casualty News
  • AdvisorNews
  • Washington Wire
  • Insurance Webinars

Our Company

  • About
  • Editorial Staff
  • Magazine
  • Write for INN
  • Advertise
  • Contact

Sign up for our FREE e-Newsletter!

Get breaking news, exclusive stories, and money- making insights straight into your inbox.

select Newsletter Options
Facebook Linkedin Twitter
© 2022 InsuranceNewsNet.com, Inc. All rights reserved.
  • Terms & Conditions
  • Privacy Policy
  • Sitemap
  • AdvisorNews

Sign in with your INNsider Account

Not registered? Become an INNsider.