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Should I take an early distribution from my retirement account?

Should I take an early distribution from my retirement account?

| June 19, 2018

 This question comes up a LOT, particularly when people change jobs, have a big unexpected expense, or wish to pay down debt. 

This way of thinking about it might be helpful:

For example, consider a 35-year-old taking out $50,000 from an IRA.  It might cost ordinary Federal income tax 22%, plus state at 7%, plus a penalty at 10% for a total of an estimated 39% (or more). 

This translates into a hard cost to your future of $19,500.00 today, plus much more in lost future appreciation.

If instead, your IRA grew untouched at an average of 7%, even without even putting more money in; it could be worth well over $380,000.00 at age 65! 

Now there is obviously a lot to this decision, and there are no guarantees, but it does illustrate how seemingly small decisions early on could make a big impact to your retirement. 

Please don’t add to the statistic of people that hurt their future retired self by overspending today.  I just met with yet another person torturing themselves with the regretful “shoulda coulda woulda’s,” trust me it’s not an outcome you want. 

Thanks for taking a look!

Tom Gartner, MSAPM, CFP®

This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.