Single Parent Finances & Impact of Early Roth IRA Withdrawal

We are in a distressed economy and, as a result, more and more single parents are re-evaluating their financial situation in terms of retirement. If you are struggling with a burden of debt, and if you are approaching retirement, it is important to become familiar with the risks associated with some financial transactions, including risks involved with early Roth IRA withdrawal.

Traditionally, the Roth IRA has been a safe financial vehicle used for retirement. In recently years, however, more and more single parents are turning away from retirement investments and, instead, paying down debts and working to overcome complications involved with immediate financial needs. If you are considering an early Roth IRA withdrawal for this reason, a financial planner should be consulted first.

While we agree that the economy is in distress, the removal of any of your personal investments from retirement programs is typically not recommended. Even with surmounting debt, most financial planners will advise that your money should remain in the Roth IRA due to the overwhelming benefit in terms of taxes, coupled with long term growth in the stock market. If you are still considering pulling your money out of a Roth IRA, then first consider other options for paying of your immediate debt and managing short term needs.

The tax disadvantages to pulling out of a Roth IRA can, at times, negate any benefit you may have in the short term by making this withdrawal. By first consulting with a financial planner, you can acquire assistance in calculating the taxes and penalties you will face and what you can do to mitigate those risks and overcome the short term needs. Often, the financial planner will have other methods for acquiring funds in the short term, and avoid early withdrawal from your retirement plans.

No matter what the economy is doing, always stay focused on your long term retirement goals. Remember that Roth IRA programs are a great way to save for retirement. While easy to cash in and utilize the funds for immediate needs, they are not going to provide a benefit in the short term when weight against taxes and penalties. Consult a financial planner first, for these reasons.

Sources: The Gospel of Roth, by John Bledsoe

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