topic Early Traditional IRA Withdrawal? Good or Bad Idea? in Rebuilding Your Credit

Early Traditional IRA Withdrawal? Good or Bad Idea?

PhilL — Thu, 17 Oct 2024 12:02:24 GMT

I am currently dealing with a considerable amount of credit card debt, and I'm in the process of consolidating costs, etc.

I have a traditional IRA, and I'm an early withdrawal from it to put towards a couple of my balances. How bad of an idea is it?

I know that leveraging against your retirement is usually not a good idea.

I figure striking my balance on these cards would significantly improve my FICO and overall scores. It has also been a while since I've used these cards and put them away in a drawer.

Regarding the early withdrawal, the amount I can take out is pretty limited but enough to make a difference.

My main question is that there is a 10% tax penalty for early withdrawals. Is this tax imposed during the withdrawal or tax time in the new year?

Thank you for your advice!

Re: Early Traditional IRA Withdrawal? Good or Bad Idea?

FireMedic1 — Thu, 17 Oct 2024 14:41:00 GMT

No, you shouldn’t pull money out of your 401(k) or IRA—even to pay off debt. Not only will you get hit with outrageous early withdrawal penalties and have to pay taxes on anything you take out, but you’re also stealing from your future self! The only time you should even consider taking money out of your retirement accounts early is to avoid a bankruptcy or foreclosure. When you do the math, you’ll see that you’re better off leaving your retirement investments alone and finding other ways to get rid of your debt.

Re: Early Traditional IRA Withdrawal? Good or Bad Idea?

DebbsSeattle — Sun, 19 Jan 2025 17:41:00 GMT

No. You should not withdraw from retirement funds unless you are saving your primary home or the literal life of a loved one.