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Q.Why early withdrawals from your retirement accounts (IRAs, SEPs, 401k) should be avoided?
A.Unless absolutely necessary, your retirement accounts (IRAs, SEP-IRAs, 401(k)s, Etc.) should be the very last place you look for needed money prior to retirement. The cost of taking an early withdrawal from your retirement account goes well beyond the regular income tax and 10% penalty on the withdrawn amount. The fact is that the amount withdrawn will no longer continue to earn tax-free additional monies to fund your retirement and that can amount to losses in the hundreds of thousands of dollars on a single withdrawal of just $30,000 around the age of 35.
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this web site is not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed on a taxpayer under the U.S. Internal Revenue Service.
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