What are the disadvantages of taking money out of your traditional IRA account at age 26?

Question

anyone, anyone!

Answer 1

You will owe income tax plus a 10% penalty tax on withdrawals. If money is tight and you need to take money out of the IRA, then do it. But if you can find some other way to get money, then leave the IRA alone.

You can avoid the 10% penalty if you use it for one of these following reasons:
1) You may make withdrawals before age 59 1/2 if you become permanently disabled.
2) If you die before age 59 1/2, your estate or your beneficiary will not be affected by the rule.
3) You may make withdrawals to pay for non-reimbursed medical expenses IF AND ONLY IF the expenses exceeds 7.5% of you adjusted gross income (AGI, which means your gross income after all qualifying deductions are made)
4) You may make withdrawals up to $10,000 for purchase, building, or rebuilding of your first home. This can include children, grandchildren, and your spouse if you already bought your first home.
5) You may make withdrawals to pay for higher education expenses. This can include you, your children, and your grandchildren.
6) If you are out of a job and have medical insurance, you may make withdrawals to pay the premium.

Answer 2

Let's say you're making just 11% on your money, which is an average stock market. Every dollar in your IRA now will become about $128 when you retire (look up the Rule of 72). Also, you have to pay a penalty which means the money goes to the government not to you. What could be worth doing that?

Answer 3

The obvious problem is the 10% penalty you will pay for doing so, plus the fact that you have to pay taxes on your profits (if any) at your current income tax rate. The primary reason for having a traditional IRA is to defer the profits on your gains until you're 59.5 or older, when (assuming you're retired) your tax rate will be lower. Deferring the taxes would be a good idea even if your tax rate didn't drop when you were older, too.

Answer 4

If you withdraw funds from your IRA before the age of 59 1/2, you are subject to penalties; not to mention the decrease in your retirement savings.

Answer 5

You'll pay an additional 10% penalty tax on the distribution. And you'll lose the tax deferred accumulation of the funds.

Answer 6

specific, you could take money out of your IRA. it truly is going to likely be taxed as "undemanding income" and you will additionally might desire to pay a 10% penalty for taking money out of your IRA early. sturdy luck.

Answer 7

Taxes, tax penalties, and no money at retirement.

Answer 8

taxes and penalties, loss of growth, and if it's a loan - you have to pay it back.