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Consumers should consider using a Roth IRA for a financial emergency 2010-04-30 Regardless of how prepared an individual may be for a financial emergency, unexpected expenses may hurt their finances. In the event that savings or an emergency fund will not cover the crisis, consumers may consider using contributions from a regular Roth IRA to foot the bill, as opposed to taking out a loan or eating up savings, according to Bankrate.com. Because taxes have already been paid on the IRA, consumers are permitted to withdraw their contributions without penalty, reports Bankrate.com. This rule only applies to contributions placed in a regular IRA as opposed to a converted IRA, in which a penalty will be incurred. Americans should avoid withdrawing IRA earnings, such as dividends and gains, as this can carry a penalty, Bankrate.com reports. Americans should keep in mind that withdrawing contributions from an IRA will still diminish retirement income and should only be used in true emergencies when taking out a loan would be more expensive in the long run. Seniors planning for retirement may benefit from opening an emergency fund for medical expenses, household repairs, or an unexpected bill in order to avoid using retirement income for a sudden financial crisis.  |
