How Do You Cash Out An IRA?
Cashing out an IRA is a decision that should not be made lightly. Taking funds from an IRA to avoid debt now can affect your lifestyle choices when you retire. Understand all the risks and benefits before you cash out. Look at how penalties for early withdrawal will decrease the value of funds withdrawn. Cash out without paying a penalty with a “qualified distribution.” As of 2008, if your distributions are considered qualified, they might not be subject to taxes if you deposited the 2008 economic stimulus payment into the IRA and are now withdrawing the amount you deposited or you are a qualified reservist. Distributions also can be qualified if the IRA is more than five years old and you meet one of the following: It’s used to buy or rebuild your first home; you are disabled; you received this IRA as part of an inheritance; you have qualifying medical expenses; or you have qualifying higher education expenses. If you meet these requirements, go to Step 6. Determine if you contributed
