{"id":1153,"date":"2011-04-11T12:35:53","date_gmt":"2011-04-11T17:35:53","guid":{"rendered":"http:\/\/www.billlosey.com\/?p=1153"},"modified":"2011-04-11T12:35:53","modified_gmt":"2011-04-11T17:35:53","slug":"2-reasons-not-to-take-early-withdrawals-from-your-retirement-accounts","status":"publish","type":"post","link":"https:\/\/billlosey.com\/knowledge-center\/2-reasons-not-to-take-early-withdrawals-from-your-retirement-accounts\/","title":{"rendered":"2 Reasons NOT To Take Early Withdrawals From Your Retirement Accounts"},"content":{"rendered":"<p>There  are times when people really need money \u2013 and in those times, a  retirement account may seem like a conveniently liquid resource to tap.  What\u2019s the harm in taking an early distribution from a tax-deferred  retirement plan? Well, the tax bite could be considerable.<\/p>\n<p><strong>Big taxes may await you.<\/strong> If you are younger than 59\u00bd, working, and you withdraw funds from your  401(k) or IRA just as you would from a bank account, you might really  feel the pain next April. An early distribution from an IRA or a  qualified retirement plan must usually be included in your taxable  income. So your federal tax bill could balloon for the year in which you  take the distribution. (If you take an early distribution from a Roth  IRA, you won\u2019t be taxed on the amount of your contributions. Any amount  above that which is attributable to the Roth IRA\u2019s earnings will be  subject to tax.)<\/p>\n<p><strong>An additional 10% tax penalty may also apply.<\/strong> The federal government really, really doesn\u2019t want taxpayers to raid  their Roth and traditional IRAs, 401(k)s and 403(b)s when they are far  from retirement age, so an additional 10% early withdrawal penalty is in  place to further discourage premature distributions.<\/p>\n<p>There are some exceptions to this. This 10% penalty may not apply if you are using the money you withdraw to pay for<\/p>\n<ul>\n<li>Deductible medical expenses (documented medical expenses that exceed 7.5% of your adjusted gross income).<\/li>\n<li>Higher education expenses (for you, your spouse, or children or grandchildren either of you may have).<\/li>\n<li>The purchase of your first home, or the building or rebuilding of a first home.<\/li>\n<\/ul>\n<p>You  are also exempt from the 10% penalty on premature distributions if you  are \u201ctotally and permanently\u201d disabled, in the words of IRS Publication  575.<\/p>\n<p>Another  notable exception: the 10% penalty on early distributions does not  apply if you are the beneficiary of a deceased IRA owner. If a  traditional IRA owner dies before age 59\u00bd, neither the owner\u2019s estate  nor the beneficiary will face the 10% early distribution penalty when  those IRA assets are distributed. However, if your spouse dies and you  decide to treat an IRA you inherit from him or her as your own, any  distribution you take from it before your reach age 59\u00bd may be subject  to the 10% penalty.<\/p>\n<p><sup> <\/sup><\/p>\n<p><strong>Do you really want to do this?<\/strong> As you can see, an early distribution from an IRA or a qualified  retirement plan may amount to some very expensive money. It also reduces  the invested assets within that retirement account \u2013 assets that could  potentially grow and compound mightily over time.<\/p>\n<p>This  is why financial consultants may commonly warn their clients against  making such a move. Sometimes couples and families feel they have no  choice but to draw down their retirement savings, but a conversation  with an advisor they know and trust may reveal other options.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There are times when people really need money \u2013 and in those times, a retirement account may seem like a conveniently liquid resource to tap. What\u2019s the harm in taking an early distribution from a tax-deferred retirement plan? Well, the [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":["post-1153","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1153","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/comments?post=1153"}],"version-history":[{"count":0,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1153\/revisions"}],"wp:attachment":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/media?parent=1153"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/categories?post=1153"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/tags?post=1153"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}