If you can avoid withdrawing the funds, I'd strongly recommend it. You'd be subject to having the funds taxed as ordinary income, and depending on your age you might be subject to an additional 10% penalty for withdrawing the funds early (I believe its if you're younger than 59 1/2).
You might THINK you want to do that, but after you do the Math (unless you are crazy) you will change your mind...I'm not in any way suggesting you do this, but it would COST you less to "take out another loan" to pay your debts, LOL!
Early withdrawals from a tax-deferred account are subject to a 10% penalty right off the top, then are taxed at your "prevailing rate" for that year INCLUDING your income from the withdrawal....so if you "cash out" you'll lose the 10% PLUS you may owe Income tax at a higher rate on the REST of your income!
Furthermore, you lose all the potential growth those dollars WOULD have made....
Typically you'll end up 50-70% down on the deal, and if you have debts costing you that much in interest, you are already in more trouble than you will ever escape from!
Leave your IRA alone, and find the money somewhere else...thirty years from now you'll be so glad you did!
Best wishes...
If you are under age 59 1/2, you will be subject to a 10% penalty if you withdraw any money. But there are exceptions where you can avoid the penalty (first time home buyers, medical, etc see IRS website for details).
I worked with an employer for one year, made monthly contributions to an IRA, left the organization and would like to withdrawal the money in order pay off some debts.
What are the rules and regulations? Like a checking account, can I withdrawl the balance and close?
Or if my employer contributed X and myself Y, can I only take out my earnings?
Thank you,
