Most of the people who undergo retirement process want to become debt free and considering withdrawal from Roth IRA is the best option for them. But, what they really don’t know is that, withdrawing money from your Roth Ira to pay all of your debt is not a good action to consider. It is because there are lots of reasons why this is not a good option for you.
To help you have more knowledge about this issue, here are some reasons why you don’t need to withdraw your Roth IRA to pay down all your debts.
- You will pay penalty once you withdraw from your Roth IRA. Even though you are allowed to withdraw in your contributions to Roth IRA, you will still be penalized once you withdraw your earnings unless you have qualified distribution of earnings. To make your earnings qualified, you should reach 59 ½ of age to make you become disable for withdrawal and should be used for buying your first home. Or your earnings should be five tax years or more after your first contributions. But if you are not qualified you will be subject to additional penalty on your tax upon your withdrawal.
- You will become unprepared during your retirement. Since the Roth IRA is specifically design for helping people to pay their daily living expenses once you decide to stop working, withdrawing your money will increase your odds to impoverish your retirement.
- You will lessen the interest of your withdrawal from your Roth IRA. Even if you have qualified distribution, you will just get small balance once you withdraw. This will provide you results that you will get less amount of money on your earning interest and lessen your own returns over a period of time. Thus, once you decide to withdraw your contributions, you will never reinvest it again.
- You will have bad financial pattern. Withdrawing your money from your Roth IRA is easy however, it will provide you bad financial pattern if you take out your cask in early distribution. This will provide you to hit your retirement goals once you decide to tap your retirement contributions just to pay your debt.
In Roth IRA contributions, all the things are provided equally if you will avoid withdrawing your money just to pay down all of your debts. In case you have no more resources to help you pay your debts, you should try other ways and create good plan to ensure that you will have good future and avoid the withdrawal process in early contribution.
But if you really want to opt for this kind of decision, it is highly recommended that you just get your contributions from Roth IRA and not your actual earnings of your retirement. Just allow your earnings to continuously grow for you to prevent paying for penalty taxes from early withdrawal of your contributions most especially if it is under non – qualifying event. Through this way, there is still good future that awaits you.