How to Avoid the Withdrawal Penalty from Your IRA?

IRA plans can become the reliable source of income in your old age. It is very important to consider such plans when you are planning for your retirement. Many have rightly chosen this plan to help them in their future in the form of a savings plan. But sometimes situation drives us to need money in emergencies. You cannot withdraw from your IRA account without paying a penalty of heavy amounts. In some cases, you can avoid paying such penalties.

How to avoid the PENALTY?

The tax code permits taxpayers to avoid paying early withdrawal penalty in varied cases. It means if you come under one in each of the seven categories, you can just pay the federal and state tax on the money you are taking out of your IRA, and you are not subjected to extra 100% penalties otherwise assessed by the office.

IRA plans

Here are the seven categories through which you can avoid the penalty:

Dismissed paying Medical Insurance:

Losing your job can be very stressful, both financially and emotionally. But you can get help in the form of your IRA account. If you have been dismissed for quite some time, you can use your IRA to continue paying your medical insurance premiums and avoid the ten early withdrawal penalties.

First-time home buyer:

If you utilize your IRA cash to get the acquisition price of your first home, you can be penalty free. To qualify, the funds you are taking out should be used to pay qualified acquisition prices at intervals of one hundred twenty days once you withdraw the money. And it should be used to pay qualified acquisition prices for the home of a first-time buyer like you. This exemption applies to most withdrawal. In addition, you are able to just use this exemption once in a while.

Payment of un-reimbursed medical expenses:

In case of medical trouble that ends up in un-reimbursed medical prices, the office can waive the first withdrawal penalty if those expenses are in far more than 7.5 % of your adjusted gross financial gain.

Educational activity prices:

If you want to withdraw money out of your IRA account to get an educational degree either for you or your spouse, your kids or your grandchildren, you don’t have to pay any type of penalty fees.

Permanent incapacity:

Money that is withdrawn from IRA account when the IRA owner becomes permanently disabled is protected of the penalty fees.


IRA account holders, who die before reaching their retirement age, won’t be fined with the withdrawal penalty fee.

Payment of Back taxes:

If you owe some money in case of your tax dues and a levy has been placed against your IRA, the government won’t assess 100% penalty on the amount of money you are taking out from the IRA to pay back those back taxes.

If you use your IRA, you don’t have to be subjected to early withdrawal penalties. So, don’t rush to pay the penalty fees before you examine your situation.


Young Generation Does Not Use Credit Cards. How Could They?

Credit cards are now not as popular as they used to be. More than 60 percent of young people under the age of 30 have no credit card, and only 20 percent use only one card.

The influence of Great Recession

The one possible explanation is that this generation was brought up in a difficult financial situation. They were just beginning their first steps in real financial life when their parents had hardships and lived in need. So now they can be just afraid of really big and important steps, and using credit cards is just another restriction they have made to themselves.

credit card

And this is not a surprise, because we have certain data about the economic situation of that period. Parents of these people have no appropriate work, and the level of unemployment among young generation was up to 15 percent. So there is no wonder why today these people do not even think about being in debt and try to reduce any unnecessary spending. They are living in a different way and can even change the society of consumerism.

A big student loan debt

Unfortunately, the Great Recession is not the one historical event that made young people be against any financial obligations. The education that almost all of them got was not a cheap deal, and now they need to pay for it. I mean a student loan that made them dependent for many years. And now when they cannot find work with the appropriate level of salary they are just stuck in the debt. So they just do not want to add another debt to their list. And this is a right decision. However, according to the research some of them sometimes use instalment loans poor credit for some emergencies. This type of loan is short-term, so they do not put themselves into a debt hole.

How young generation leads their financial lives

Making financial life with no usage of credit shows a good knowledge, however, it also has its disadvantages. For example, todays world is built in such way when you cannot take any credit without having a credit history. This means that you need to have financial transactions recorded on your account. And this is not the only option. Also you need to have a good credit score because a bad one equals nearly no score at all.

However, there are some ways that can help us to avoid leading active credit life:

– You should make all necessary payments on time and cover all regular interest rates to avoid additional charges;

– Make a utility bill for the house for your name. It will be good for your credit history if you can make regular payments.

– Use a secured credit card instead of a traditional one. The funds with this card are backed by money the client deposits. So this can also make your credit score positive and also will never hurt your budget.

As a conclusion, I might say that such cautious attitude to credit cards may be considered as a good financial decision in the long run. Also, it helps you avoid any credit card debts. If the young generation has chosen a life without credit cards, it is their right. But also I think it can help to change our system with all these credit scores.