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I’m much less that 59 years old but am facing financial difficulty. I’m struggling to make my mortgage payment and am eat up with credit card debt (which I’ve now cut up). I’ve decided that I must access my IRA to make these payments in order to avoid further damage to my credit score.

Is there an IRS rule that will help me avoid the 10% penalty for hardship withdrawals?

Would you agree that even if I must occur the penalty, that is better than ruining my credit and paying credt card late fees?

7 Thoughts on How can I avoid the IRA early withdrawal fee?
  1. Reply
    Helen, EA in PA
    November 16, 2012 at 2:37 pm

    There is no exception to the penalty for what you are using the money for.

    Helen, EA in PA

  2. Reply
    November 16, 2012 at 2:44 pm

    Your early with drawl fee is probably going to be less than all of the late charges you could incur. I think the best thing to do would be to contact whoever you have you IRA with and ask them what the best option is; also ask them if they could figure out what your early with drawl fee would be if you decided to take some money out of your IRA. Hope this is useful.

  3. Reply
    November 16, 2012 at 2:50 pm

    Charles J. Givens says in his book “More Wealth Without Risk.”:

    “But what if I told you that your money can be taken out of your plan anytime you wish for any purpose and you would pay no tax or penalties, no matter what your age?”
    Congress included a little-known but powerful option in retirement plan tax rules that allows you to borrow up to $ 50,000 from your 401(k), 403(b), or SEP both tax free and penalty free.

    Page 250

  4. Reply
    November 16, 2012 at 3:46 pm

    I’d call your local IRS office to double-check, as certain rules that normally apply, such as the usual minimum mandatory IRA distributions, have been suspended in context of economic stimulus, but I don’t believe distributions made before age 59 1/2 are normally subject to the hardship exceptions rule applicable to distributions from 401(k) accounts, for example. As to the calculation of what’s preferable – covering your debts by way of incurring a tax penalty on the distribution or not paying your debts and accruing ruinously high finance charges, I think most advisors would suggest discharging the debt by whatever means are available to you. You’re in a difficult position, but you have options, and you have time ahead to recoup. If you’re healthy, count your blessings among the challenges, and do the right thing. You have a lot of company.

  5. Reply
    November 16, 2012 at 4:18 pm

    Medical emergency or furthering education were exemptions for the penalty, but now it may be allowed to stave of foreclosure, too. See what you can find about this at

  6. Reply
    November 16, 2012 at 4:29 pm

    Someone asked Suze Ormann the very same question & she went ballistic & then I saw Michael Clark on Sat on CNN & someone called in the same question & he couldn’t answer quick enough. Basically, they had the same answer — they asked how much mtg was owed & at what rate & how long it was for, etc (all the informaion they needed to give a wise answer).

    1st – you should not – NEVER -withdraw at any cost any money from your IRA. Not only is there a 10% penalty to pay (can’t get arund it) but the income taxes on the money withdrawn will be taxed at 20 to 30 % — that’s not worth it for sure.

    2nd – they both said to go back to your bank and renegotiate your mortgage. Obama’s recovery plan has made it very easy for banks to work with their customers and this is the very first thing they suggest to do. You should be able to get a lower rate & reduce your monthly payments. Some banks even provide for a grace period for people up to 6 months late (I believe).

    3. They suggest you get a part time job for extra income besides cutting back on spending, etc –all the things you should know by now.

    4. They said not to pay for any credit counseling because you can get it for free & they can negotiate deals with the credit card companies for you whereby you can make smaller payments without penalties.

    5. Anything you can sell like a car? bike? or electronic stuff?

    6. Would it be possible for you to rent out a room to a college student, or someone just starting out or a relative who is also having problems?

    Try to go on the Michael Clark website fon CNN to see what advice he’s given to others in the same predictament. Also, if you could renegotiate your mortgage with the bank & say your current mtg is $ 150K — a credit counseler may suggest you borrow $ 175K (new mtg and terms) keep some for savings, emergency money & some to help you pay off y our bills.

    The government is also providing free job training if needed to enter a new line of work. There are many agencies out there to help families in need. You need to do some research & forget about your IRA, Even if you suspend contributions for a while, just leave it alone until life turns around for you.

    I wish you luck and will say a prayer for your recovery. I’m sorry for you & all those caught up in this horrible Depression we’re in. It’s not fair but if it helps, you have a lot of company now.

  7. Reply
    November 16, 2012 at 5:22 pm

    The 10% penalty may end up being much more than the credit card late fees.

    Also what are you going to do when you do get to be old enough to retire and have a good chunk of your retirement savings depleted.

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