Penalty for liquidating ira account delonte west dating gloria james
Whether you are withdrawing early or during retirement, you’ll pay income tax on the full withdrawal.
You end up with just 65% of the withdrawal; a terrible price to pay to try and pay off some debt.
When you are facing a pile of debt that you just can’t seem to shake it can be tempting to look toward your retirement accounts as a way to escape.
Retirement is a long time off and your debt impacts your life now, so why not withdraw money from your nest egg accounts in order to straighten up your finances right now?
Using our example ,000 withdrawal, here’s what you would pay: The Traditional IRA has opposite tax treatment from the Roth IRA.
You don’t pay taxes up front so that your money has time to grow before being hit with taxes.
Lastly, you could take a loan from your 401k plan instead of doing an early withdrawal.
There are risks here, too, (namely you losing your job and the full loan being due within 60 days), but any interest you pay is deposited into your 401k account.
Here are two examples assuming a 7% annual growth rate.
Another option is to use the 72T rules to escape the penalty burden.
The following examples assume you don’t qualify for any of the random exemptions.
If you repeat the cycle the next time there won’t be a retirement account to tap to bail you out. You might take a hit on the dollar value, but clean out your house and sell all of your unnecessary items in order to pay off debt.
Fix the spending problem now, earn more income, or even better do both to truly fix your financial situation. Save your retirement accounts as the very last thing you look to touch.
There also may be an ongoing need for more cash flow after the divorce than ones salary, child support, and/or alimony can provide.