I am 50 and have more than $200,000 in my 403(b). I expect to work another 15 years at least. I also have a lot of money invested in stocks and have about $60,000 in a Roth IRA. However, my wife and I live from paycheck to paycheck and can barely pay the bills. Some months I wonder if we will have the money to pay the bills, such as the electric bill or the property taxes And we have no emergency fund at all, and I need to repay a $5000 debt. I want to withdraw money to make sure we can keep paying the bills and to start an emergency fund. I am concerned about tax liability from the withdrawal Would it be best to sell stocks or withdraw money from my 403(b) or Roth IRA? Thank you.
Depending on where you live and your income tax rate, the 10% withdrawal penalty plus fed, state and local taxes can end up taking 50% of the money you withdraw from a protected account.If you have money invested in stocks, selling those can be most attractive assuming your gains are long term and taxed a capital gains rates.How are you fixed for retirement? Don't let those withdrawals get to be a habit. Why not sell some stocks and buy instead some income stocks, stocks with dividends, etc for added income.Can you borrow from your 403b to repay your debt? Then no penalty. No tax liability.
Thanks, Pauleckler. I do own income stocks, and those are the ones I am thinking about selling because I need the money. But if I sell them, I won't continue to let the investment grow or reinvest the dividends. And they are not doing well. My stocks, such as ED and SO, have not been going up at all the last year or two.I have a lot of money in my 403(b) but need to take money out without borrowing it or paying a penalty. I was thinking of selling some of the mutual funds in my Roth IRA but only if I don't have to pay taxes on the sale; I am not 59 yet. I am not concerned right now about my retirement because I have enough for that and intend to keep working for 15 years. I am much more concerned about the present because I can't pay my bills now and have no emergency fund.
I have a lot of money in my 403(b) but need to take money out without borrowing it or paying a penalty. I was thinking of selling some of the mutual funds in my Roth IRA but only if I don't have to pay taxes on the sale; I am not 59 yet. There is never a tax effect of a sale in an IRA. The only thing that matters is withdrawals. As long as you withdraw no more that the total of your contributions there will be no tax or penalty. See Chapter 2 of Publication 590.I am not concerned right now about my retirement because I have enough for that and intend to keep working for 15 years. I am much more concerned about the present because I can't pay my bills now and have no emergency fund. What you should be concerned about in the present is the fact that you're living beyond your means. You need to set some financial goals, e.g., pay off your debt and build up an emergency fund. The you have to produce a budget that gets you there. Then you have to live by it.The short story is that you need either more income or less spending. Figure it out, or you'll never get out of this situation.PhilRule Your Retirement Home Fool
Thank you, Phil You make a good point. We are living beyond our means. Part of the budgetary problem is that I have two children with learning disabilities; they go to private school. The private school tuition is eating away at our budget, preventing us from having any emergency fund and causing us to live from paycheck to paycheck. I do want to have an emergency fund, so that is why I want to know if it's best to take (not borrow) money from a 403(b) or a Roth IRA.
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