I'm 25, and I have been out of work for eight months. I only got paid for less than a week this year. My emergency funds are gone. My family is suggesting I pull money from my traditional IRA to pay bills since no one has hired me yet. Should I listen to them?
To help you decide if this is a good option for you, I will outline the costs associated with an IRA withdrawal. If you made only deductible contributions to a traditional IRA, then any distributions from that IRA are fully taxable to you (the owner) as ordinary income. If an individual is under age 59 ½ (like you), a distribution from a traditional IRA is generally subject to a 10 percent additional tax on early distributions.
For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.
Answered by: Richard L. Ward, CPA, is president and CEO of Capital Configuration LLC in Pittsburgh.