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I was just contacted by a previous employer that I I had a small amount of retirement set up that they are cancelling the policy on and I need to move it or cash out. It's only about $8K or $9K. I recently got married this year (filed separate this year but not next) bought a house and was thinking is it better to put this in a Roth IRA or maybe cash out to pay some debt or some home improvements to maybe eliminate the PMI we are paying on the house.Is there just too much penalty to cash out even on a small amount or should would it help in this case?
State/Country relating to question: Louisiana
Presuming this retirement account is a regular retirement account and not roth, you can rollover the proceeds to an IRA without any tax implications.YOu can withdraw the funds but you will owe tax on the amount you take out as distribution and also owe additional 10% early withdrawal penalty.Tax on the amount will depend on your overall taxable income and tax bracket.
Certified Public Accountant (CPA)
CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..