With the economy what it is, unemployment up, and prices higher, it is becoming more and more difficult to make ends meet. One area many people rely on as their “emergency fund” is their IRA. Should you tap into your IRA?

Pros: If you are younger than 59 ½ and you have had your IRA for more than 5 years, you may be able to make a penalty-free withdrawal to pay for certain things such as your home or medical expenses. To see if you qualify, go to the irs.gov site and search for Publication 590. Also, there is a provision that allows you to withdraw money from an IRA so long as you roll it over into a new IRA or redeposit it back to the same account within 60 days.

Cons: You lose the potential for investment gains, just as you do when you borrow from a 401(k). You can take advantage of a one time 60 day window only once a year, and if the money doesn’t find its way back into the IRA within 60 days, you will owe tax and a 10% penalty if you are younger than 59 ½.

The bottom line here is that this your financial future—if you can avoid tapping your IRA then don’t tap into it!

For more information or if you have additional questions on this subject, visit www.theentrustgroup.com.

This entry was posted on Wednesday, October 29th, 2008 at 4:00 am and is filed under Self-Directed IRA. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.