Buy a house
An IRA can also come in handy if you're ready to pursue the American dream but can't scare up the cash for a down payment.
The federal government allows first-time homebuyers to use up to $10,000 of their IRA assets to buy, build or rebuild a primary home without incurring a penalty.
First-time homebuyers are defined as anyone who has not owned a home in the past two years. If you and your spouse qualify as first-time buyers, you can each receive distributions of up to $10,000 without paying the early withdrawal penalty.
"I have no problem in this housing market telling clients to take $10,000 out of their IRA to purchase a home," says Balcom, who notes mortgage loans are considered good debt. "Prices have fallen substantially in many markets, so it's a great time to buy."
Give your heirs a tax-free gift
If you're looking to leave a little behind for your loved ones and your nest egg is comfortably feathered, your IRA can be used for estate-planning purposes.
By opening a Roth IRA (or converting a traditional IRA that you won't need for retirement funds into a Roth) and naming your kids or grandchildren as the beneficiaries, you'll be able to pass along that money to your heirs income-tax-free, says Mark Luscombe, a principal analyst with CCH, a tax and accounting firm in Riverwoods, Ill.
Those who inherit a traditional IRA will owe income tax on the distributions, since it was funded with pretax dollars.
A Roth is optimal for estate-planning purposes, says Luscombe, because you can continue to contribute to it after age 70½ as long you're still working, and there are no required minimum distributions. (Should you convert to a Roth IRA? Find out with MSN Money's calculator.)
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Retiring? Phhhhsht. In the real world..., you know the pay check to paycheck world?: People are going to work until they die. If they are unlucky enough to get sick right before that happens?: Then the Medical industry will drain what little we have saved. So all this retirement talk is to keep a run on the banks from happening. Because if people really knew how much they needed and how much they fall short? IRA investments would collapse and if you thought the 2008 financial crisis was bad????
If your medical expenses exceed 7.5% of your AGI, they are deductible and not taxable, whatever source you use to pay for it.
If you convert your conventional IRA to a Roth just so your heirs won't have to pay the income tax, you are probably paying more income tax than you need to. Leave it as a conventional and let your heirs - who are more likely to be in lower tax brackets - pay the tax.
Sheesh. Anyone can call themselves a financial planning expert.
This is a dangerous game to be playing, just so some professional can brag about how much he
knows? Distributions from IRA's are potentially harmful. If the money is kept in the IRA, it has
legal protections. And think of 2013. In 2013 the IRA penalty goes from 10% to 20% thanks
to Mr Obama.
Don't underestimate the tax implications. If someone takes 25,000 dollars out of their IRA, and
they make say 60,000 in salary and are married, they just went from a 15% tax bracket to a
25% tax bracket. Plus they must pay the tax on the 25,000. Potentially a very dangerous
situation. You do not want to be in debt to the IRS.
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