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Author: TchrP Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308722  
Subject: Re: Which Option is Best? Date: 3/1/2007 8:22 PM
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My theory is that I can put the funds back into my IRA with the money that I was using to pay the Min. on the CCs.

If you withdraw money early from an IRA, you cannot simply replace it. Later on, when you have income to qualify, you can make new contributions, but those are the contributions allowed in future years, not replacements for your previous contributions.

For example, if you contributed money to your IRA in 2004 and you withdraw it now, you can never re-contribute the 2004 amount. That opportunity is gone for good. If you have income in 2008 and have the cash available, whatever you deposit in 2008 goes against the limit for 2008, not for prior years.

Worse, if you withdraw money from your IRA, you also lose all the future gain on that money. While this is a bird in the bush, not one in the hand, it is almost always better to leave money to grow in an IRA even if the result is that you have to slow down future contributions. The best idea is to find a job and earn enough that you can also make new IRA contributions.

Worst of all, if it's a traditional IRA (not Roth), any early withdrawal will be subject both to income tax and to a penalty.
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