Removing money from your IRA account is not difficult, regardless of the purpose for the withdrawal. It is simply a matter of making a withdrawal request with the financial institution that holds your IRA account and having them issue you a check.
If you will be using the money for higher educational purposes, then you would not owe the 10% early withdrawal penalty, which would normally apply to withdrawals made prior to age 59-1/2. But you would still owe income tax
on the amount withdrawn. The actual tax
you end up owing will depend on your overall income for the year, as that what determines the tax bracket you are in. If you only plan to have a part time job, then chances are your income tax bracket will only be 10%.
There are both pros and cons to taking the money out of your IRA for these expenses. Obviously the positive side is that you would not have a loan to worry about repaying. And with the market being in a depressed state right now, it would be difficult to imagine that your IRA account could earn anywhere close to 6.8% if you are keeping this in liquid investments such as money markets or short term CD's. So from that standpoint it would be better to use money from your IRA, since it is not earning as much as the interest you would be charged on the loan.
On the other hand, any time that you take money out of your IRA account, it is money that you cannot replace, except by making additional contributions in future years. But you cannot go back and re-contribute money for prior years. The more you can keep in your IRA, the better off you are for the future, if you are considered at this point about planning
for your retirement. Even though the market is not doing very well right now, it should eventually rebound. When it does, the more money you have in your IRA account, the more you stand to gain, as all of those earnings will be tax deferred.
But getting back to your original question of whether or not this money is difficult to withdraw, it is not difficult at all. You just need to make the withdrawal request and have your IRA custodian issue you the check. If your IRA is with a local
bank or with an investment firm that has a local branch office in your area, you should be able to get the check the same day as you make the withdrawal request.
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Thank you Marloe.