Early Withdrawal

Archive for May, 2005

Question: Better to withdraw funds from a 401K or IRA?

Assuming you can withdraw early from an IRA account.

Answer: Neither is good to withdraw from. You are looking at about 40% in fees and penalties. And if you loose your job (where the 401k) is at and you haven’t paid back the loan, the government will assume you did an emergency withdraw.

I urge you to try and scrimp and save for what ever your emergency is (or ask for a payment plan with what you need to do).

Will Your 401k Be The Next Victim of Failed Government?

Question: Is there a penalty for withdrawing from a Roth IRA to pay a student loan?

I know there is usually a penalty for Early Withdrawal but isn’t that waived for education expenses?

Answer: There is no penalty exception for withdrawing funds to pay for a student loan.

That being said, you would be able to withdraw a portion of your Roth IRA savings without paying taxes or penalties. With a ROTH, you can withdraw, without penalty, up to the dollar amount that you have contributed to the plan. Any earnings would be subject to taxes and penalties if withdrawn.

Example:
Let’s say you contributed $20,000 over the years to a ROTH. That $20,000 has grown to $25,000. You would be able to withdraw up to $20,000 penalty free… but if you were to withdraw more than the $20,000, taxes + penalties would apply.

Hope this helps!

Self Directed IRA Part 6 Private Lending

Question: Ira Withdrawal for education?

Is there any difference between Traditional and Roth IRA when it comes to avoiding 10% withdrawal penalty for qualified higher education expense

Answer: You will still pay taxes on a traditional Ira Withdrawal for eduction. There is no 10% penalty but there are still taxes.

With a Roth, you can always take the contributions out tax and penalty free. The taxes kick in if you touch the earnings in the Roth.

Investing Early For Retirement