Considerations for Withdrawing From an IRA

Taking money out of IRA – Consider the penalties associated with it

Taking out money from your IRA account or the Roth IRA can subject you to tax related penalties. The entire amount that you may take out from an IRA account is almost entirely taxable depending on the time when you are planning to withdraw the amount. If you withdraw the money before turning 59 and half years or 60, you will be required to pay taxes on the withdrawn amount – that is the rule. There is however an exception to this rule and that is, if you have been putting money into the IRA account without making the claim of tax deduction on the contribution, you may not be required to pay tax on that.

Penalty with regards to IRA withdrawal

If your age is lower than that of 59-1/2 and if you withdraw money from the IRA account, you will be required to pay extra tax of 10 percent as penalty against the IRA distribution; that is this is based on the actual taxable portion of your withdrawal. This tax penalty however is not in any way applicable to any of the nontaxable distributions. That means, if you are going to withdraw money only agaisnt the contributions from the Roth IRA account, you are not supposed to owe any penalty as tax against that.

There are some other exceptions too under which you may not be required to pay any tax agaisnt the withdrawal from IRA account. If there are any taxable early distributions under your name with regards to the IRA account, with some of the exceptions like that of a permanent disability or that of the IRS levy, it may be possible for you to somehow avoid the penalty to be paid.

There are some other exceptions too like those of the medical expenses. That is, if you make early withdrawals against the IRA account so as to pay for the different and complex medical expenses you may not be required to pay taxes. This is with an excess of at least 7.5 percent of your adjusted gross income, medical insurance premiums, disability, a first-time home purchase, college expenses, IRS seizure of IRA funds to pay taxes, and a few other uses, this is non-taxable.

So, you can see that there is no point using the fund from IRA to use it for the debt payments or any other such costs without the exceptional cases. If you are hard pressed for money so as to save your home, avoid withdrawing money from the IRA retirement account. Otherwise, you may have to face various painful and legal consequences. In some cases, allowing your home to get foreclosed is considered to be your best option. If you let the house foreclose, it can help you to get out of a really bad mortgage and this is also going to help you conserve money which you may be able to use for some other purpose.