Taking an IRA withdrawal

[Anonymous]

I need to take a $100,000 withdrawal from my IRA. I know this is a bad idea, but I have no other options (no savings, no home equity, no family help, and not enough in my 401k because I started a new job in June), and I need to come up with this money ASAP.

Is there any way to reduce some of the blow of taxes/penalties? If I withdraw the money now, will I pay the taxes in April with my regular taxes?

[Anonymous]

If you’re younger than 59 1/2, there is a 10% early withdrawal tax penalty. But there are hardship distributions that can reduce or eliminate this penalty. The most important update is SECURE 2.0. If you do need to make a withdrawal, you can “self-certify,” meaning the administrator can take your word for it that there is a qualifying hardship and that you have no other funds available to address it. You need to speak with your retirement plan administrator to request a hardship withdrawal (distribution). Equally important to work with your accountant.

Hardships including new additions SECURE 2.0:
1. Higher education
2. Medical emergency
3. 1st time home buyer
4. Funeral expenses
5. Disaster
6. Terminal illness
7. Domestic abuse
—And more!

Best to read these links. Hopefully you have a great accountant. If not, find one. Good luck. I had to take an early withdrawal in 2022. Was able to reduce the penalty tax from 10% to 3%.

https://www.aarp.org/retirement/planning-for-retirement/info-2023/savers-guide-to-secure-two-point-zero.html

https://www.aarp.org/money/taxes/info-2023/pay-no-penalty-hardship-withdrawals.html

https://www.aarp.org/retirement/planning-for-retirement/info-2023/ways-to-avoid-early-withdrawal-tax-penalty.html

[Anonymous]

For that amount I would definitely consult an accountant. I believe you can take your original contributions back penalty-free on a Roth. That's probably not $100k worth but could be part of the puzzle.

[Anonymous]

Can you spread it across two years? Take some now and some in January?

[Anonymous]

Anonymous wrote:Can you spread it across two years? Take some now and some in January?

I might be able to do this.

[Anonymous]

If I withdraw the money now, will I pay the taxes in April with my regular taxes?

17:22 again. Yes, you’ll file 2023 taxes in 2024? If you withdraw only what you need to get through this year, do it only if the hardship carries into 2024. Do you have a CPA? Again, look at the hardships in the links and new SECURE 2.0 additions to see if you match multiples hardships. Start with IRA plan administrator and accountant. If your 59 1/2, there is no 10% tax penalty.

[Anonymous]

Anonymous wrote:If you’re younger than 59 1/2, there is a 10% early withdrawal tax penalty. But there are hardship distributions that can reduce or eliminate this penalty. The most important update is SECURE 2.0. If you do need to make a withdrawal, you can “self-certify,” meaning the administrator can take your word for it that there is a qualifying hardship and that you have no other funds available to address it. You need to speak with your retirement plan administrator to request a hardship withdrawal (distribution). Equally important to work with your accountant.

Hardships including new additions SECURE 2.0:
1. Higher education
2. Medical emergency
3. 1st time home buyer
4. Funeral expenses
5. Disaster
6. Terminal illness
7. Domestic abuse
—And more!

Best to read these links. Hopefully you have a great accountant. If not, find one. Good luck. I had to take an early withdrawal in 2022. Was able to reduce the penalty tax from 10% to 3%.

https://www.aarp.org/retirement/planning-for-retirement/info-2023/savers-guide-to-secure-two-point-zero.html

https://www.aarp.org/money/taxes/info-2023/pay-no-penalty-hardship-withdrawals.html

https://www.aarp.org/retirement/planning-for-retirement/info-2023/ways-to-avoid-early-withdrawal-tax-penalty.html

Real good info pp

[Anonymous]

Thank you PPs. I am still in my 40s. I will find a good accountant tomorrow. Are accountants state-specific like lawyers?

[Anonymous]

Anonymous wrote:Thank you PPs. I am still in my 40s. I will find a good accountant tomorrow. Are accountants state-specific like lawyers?

They have to pick a state to be licensed in— college town, state where they live and practice, but they can have clients in other states. I’m not sure if it’s called reciprocity or mobility, and not all states are. I think for basic tax returns it’s uncomplicated. Just ask whoever your vetting.

[Anonymous]

Let us help you. What do you need it for? Can you take a loan? Have you asked your family? Can you take a second job like drive for uber? Can you sell a car or cars?

[Anonymous]

You may be able to have taxes withheld from the withdrawal, but, if not, you may need to pay quarterly estimated taxes. Withholding is a lot easier.