Can you tap IRA funds before retirement?
In our last post, we highlighted a few things that could clarify misconceptions about IRAs, such as whether you have to open a new account for each annual contribution, and how important the beneficiary form can be. But we also understand that some of our readers may wonder if they could, or should, tap their IRAs before they reach retirement age.
After all, one’s IRA could be like a bank, where you could borrow from it under certain circumstances and repay the loan under much more austere terms than a traditional bank., or simply make withdrawals without severe penalties and taxes. Through this post, we will highlight the instances where you could make qualified withdrawals.
Educational costs – According to the Internal Revenue Service, you may withdraw funds without tax penalties if the funds are used towards an approved institution, such as a college or university. Money could be used to pay for tuition, books, and common expenses.
First time home purchases – Also, the IRS will not assess taxes for IRA funds being used to purchase a home for first-time homebuyers. The rules allow for up to $10,000 to be put towards a home purchase. If you are married, the amount to be used goes up to $20,000.
Hardship withdrawals – Indeed, an IRA is not supposed to be an emergency fund, but there are some circumstances where the IRS will allow withdrawals for specific hardships, such as the payment of excessive unreimbursed medical expenses, payment of medical insurance premiums while you are unemployed, and distributions if you are totally and permanently disabled.