An IRA is a good way to save money for retirement. For many people, it is their most significant investment outside of their home. But sometimes, life happens and you may need to tap your resources to deal with financial difficulties. While the rules governing IRAs and Roth IRAs call for significant penalties and taxes for withdrawals implemented before retirement age.
However, the rules carve out some important exemptions that can help people who are in a temporary pinch. This post will highlight a few.
Education expenses – You can use your IRA to pay for qualifying school expenses, including tuition, books and administrative expenses. The payments must go towards a college, university or a vocational school. Also, an IRA can be used for your expenses if you are going back to school, or for your spouse or child.
First time home purchases – No penalties will accrue for payments made from an IRA for the down payment on a first home. Up to $10,000 may be used for a home if you are single, and $20,000 if you are married. Even better, you can use your IRA even if you are not purchasing your first home, as long as you did not a own a home in the past two years.
Hardship circumstances – As we alluded to earlier, unexpected expenses, especially if you are unemployed, can be difficult to endure. Because of this, the rules allow for penalty-free withdrawals to pay for some unreimbursed medical expenses, medical insurance premiums while you are unemployed, and living expenses if you are totally disabled.