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Should I take money from my IRA to pay off debt

Taking withdrawals from an IRA before you're retired is something you should do only as a last resort. There are a few reasons why.

If you withdraw money from a traditional IRA before you turn 59 ½, you must pay a 10% tax penalty (with a few exceptions), in addition to regular income taxes. Plus, the IRA withdrawal would be taxed as regular income, and could possibly propel you into a higher tax bracket, costing you even more.

Though the feds allow you to withdraw contributions from a Roth IRA without incurring a penalty, you will owe a penalty (and taxes) if you withdraw the earnings on those contributions.

In addition, money you take out of an IRA cannot be replaced, since you would still be restricted to yearly contribution limits for future contributions. So even if you withdraw only a small amount, factor in the years of compounding interest you would be forgoing, and that small withdrawal could end up costing you a small fortune in your golden years. To top of page