What to know about early IRA withdrawals

Submitted by Edward JonesPrint Story | Email Story
While you're working, you may be contributing to an individual retirement account (IRA), which can provide a tax-advantaged way to save for your future. So, is it ever a good idea to tap into your IRA before you retire?
 
Ideally, you should leave this account intact until your retirement. After all, you could spend two or more decades in retirement, so you'll need a lot of financial resources. Still, life is unpredictable, so there may be times you'll consider taking money from your IRA. You'll need to be aware, though, that if you withdraw funds before you turn 59½, you will generally trigger a 10 percent penalty. Plus, you'll be taxed on whatever you take out, thereby losing, at least in part, the benefits of tax-deferred earnings offered by a traditional IRA. (With a Roth IRA, you can withdraw your contributions free of taxes and penalties, but the earnings may be taxed and penalized if you take them out before you're 59½.)
 
If you need to withdraw funds from your IRA before you're 59½, you may be able to avoid the 10 percent early withdrawal penalty if you meet an exception, such as one of these:
 
  • Paying for college – You are allowed to take penalty-free withdrawals to pay for tuition and other qualified higher education expenses for you, your spouse, children or grandchildren. However, since the withdrawals may be considered taxable income, they could reduce the student's eligibility for financial aid.
  • Buying a first home – You and your spouse can each withdraw up to $10,000 from your respective IRAs to buy your first home. To qualify as a first-time homebuyer, you (and your spouse) need to have not owned a home for the two years preceding your home purchase.
  • Having a child – Following the birth or adoption of a child, you and your coparent can each withdraw up to $5,000 from your respective IRA without paying the 10 percent penalty.
  • Covering medical expenses – You may be able to avoid the early withdrawal penalty if you use the money to pay for unreimbursed medical expenses (for you, your spouse or dependents) that exceed 7.5 percent of your adjusted gross income. You may also qualify to take a withdrawal without penalty to pay for health insurance premiums if you are unemployed. In the case of a disability, the 10 percent early withdrawal penalty also may not apply.
  • These aren't the only exceptions to the 10percent  withdrawal penalty, but they do cover many of the common reasons that people may consider an early withdrawal from their IRAs. And if you do need to take an early withdrawal, consult with your tax advisor to determine your eligibility for avoiding the 10percent  penalty.

Keep in mind, though, that you do have ways to potentially reduce the necessity of withdrawing from your IRA early. One proven technique is to build an emergency fund containing at least three to six months' worth of living expenses, with the money kept in a liquid account. You might also consider opening a line of credit. A financial professional can help you explore other options, as well.

Ultimately, if you can leave your IRA intact until you retire, you'll be helping yourself greatly. But if you do need to tap into your account early, at least be familiar with the possible drawbacks – and how you might avoid them.

This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information, see This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information go to www.edwardjones.com/rob-adams.

 

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North Adams Library Suspends In-Person Events

By Jack GuerinoiBerkshires Staff
NORTH ADAMS, Mass. — The library will reevaluate whether or not they will resume in-person events at the end of the month.
 
Library Director Sarah Sanfilippo told the trustees Wednesday that all in-person events and activities in the library have been suspended as they monitor the recent COVID-19 surge.
 
"We decided to do this for the month of January, and we will reevaluate in a couple of weeks just to keep things on the safe side," she said. "Not everybody but a number of libraries are doing the same thing." 
 
She then reviewed a recent staff development day and although they were unable to undergo the crisis management portion of the training, they did receive a presentation from Berkshire Harm Reduction.
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