With life more expensive now than it has ever been before, there are many families that are feeling the financial pinch. When you are barely making ends meet and a large financial the burden pops up, it is tempting to withdraw from the retirement account you have been painstakingly building. While there are some situations where withdrawing from your retirement account makes sense, you certainly want to make sure the benefits outweigh the setbacks before you take a withdrawal. Mark Dicus & Company is here to talk about some of the things you might want to consider before taking an early withdrawal from your retirement accounts.
Know Early Withdrawal Penalties
If you are taking a withdrawal from your retirement account before you are 59 ½, it is considered an early withdrawal. If you decide to do this, you might be facing a 10% tax penalty issued by the IRS on that money. When you withdraw money and pay this penalty, you might find that you aren’t left with nearly as much money as you originally had thought or hoped you would be. If you are unaware of this penalty before withdrawing money, you might be surprised by it.
Why People Take Early Withdrawals From Retirement
There are several reasons why people choose to take a withdrawal from their retirement account before they have reached the age of 59 ½. Whether it is due to a family emergency, tackling looming debt, or to help with a large purchase, many people find themselves tempted to touch this money they might wish they had saved for later in life. The best way to make sure this is the right move for your finances, is to know what the penalties will look like and decide if you are willing to pay them.
Consider Reinvesting the Money
Some retirement accounts will allow you to take out money and not penalize you when you roll it over into another, similar retirement account. However, some people have tried to take out money and give it to another trustee which is not something that will go without penalty. You have to put the money into a similar account within 60 days to avoid the penalty fee. It should also be noted that you can only do this one time within a year from when the money was distributed.
Some Distributions Can Be Made Without Penalty
There are some instances where you can withdraw money without penalty:
– First time home purchase
– Total or permanent disability
– You are the beneficiary of a deceased IRA owner
– Higher education expenses
Tax Preparation, Filing, Planning & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
If you have questions about your retirement accounts and what an early withdraw can mean for your taxes, you can turn to Mark Dicus & Company to answer all of your questions. We will help you weight the pros and cons to an early distribution from your retirement account. Call us today!