Does anyone here have a simple Ira account? Do you know what your penalty is for withdrawing cash? On what terms?
Thanks!
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It may depend on the plan but I think it's 10%, plus you have to pay tax on it.
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It's pretty hefty considering you have to pay taxes on it. I'm not sure of your situation but if you own a home, it may be better to take out a small equity line than to take money out of your IRA if you need cash.
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Not sure but I know for 401 k accounts u can take out free? For medical, mortgage? Etc...
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http://www.investopedia.com/university/retirementplans/simpleira/simpleira3.asp#axzz28AGGEQH0
If that is accurate it looks pretty steep!
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@mediagirl: how much would taxes be?
We're going to be dropping a good chunk on counter tops and appliances soon. With the state of my job we'll rather keep the cash on hand. Which is why we're exploring the option of withdrawing from my Simple IRA. We just bought this new home so a home equity loan is not an option. -
@regberadaisy: In my opinion, I would never withdraw money from my retirement funds for something like home upgrades. It just costs way too much. I would probably only pull from my retirement if I was laid off and had no other choice to keep paying my bills.
If you really want to get these appliances and counter tops, can you do a no interest for 6 months type of deal from where you're getting them?
The biggest drawbacks are that you would pay a 10% early withdrawal fee, taxes and you lose the ability for that invested money to gain in value.
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@mediagirl: yea, the only reason why we're even exploring it is because his co-workers told him that their retirement plan there is NO penalties whatsoever for withdrawing. Even for non medical/mortgage reasons. With the penalties it's definitely not worth it...
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I agree with mediagirl completely – I would only take cash out of a retirement fund in a dire circumstance; it’s a last-available-source of funding when all other options are tapped out. If you need the appliances but want to keep cash on hand, can you get a personal loan for the appliances? (I know many banks don’t offer personal loans like they used to, but my credit union does and the rates are at 4%+ depending on credit). Then, you could pay the loan off early if/when your job becomes more secure.
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You have to pay taxes on it no matter when you take it out (unless it's ROTH and you already paid the taxes)--but yes the penalty is pretty hefty, to the point where you are probably better off taking out a loan than dipping into your IRA.
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