Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
But I also have about $5200 of debt on one of my credit cards. It occurred to me to instead take an early withdrawal and use the proceeds to pay off the credit card.

I now that if I do that, I have to pay taxes AND a penalty, but how much is the penalty?

If the penalty is small, it might be less than the interest I'll end up paying on the credit card.


The penalty is 10%. You end up paying it even if your total income, including the IRA withdrawal, is low enough that you don't have a federal income tax liability.

You also need to be aware that the proposed $5100 of IRA withdrawal is not earned income. Depending on how the numbers shake out, it could have a negative impact on any EIC you might qualify for.

Is there a reason you haven't considered, or have rejected, the idea of either leaving the Simple IRA in place or rolling it to a traditional IRA for no tax impact?

Patzer
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.