Use IRA for Debt Relief?
Jason doesn't need to cash out his IRA to pay his bills - he needs to get a job!
QUESTION: Jason has filed a chapter 7 bankruptcy and recently lost his job in the technology industry. He has been approved for unemployment insurance, but that only comes to $1,600 gross each month. If he has $9,000 in an IRA, is it foolish to use that money as a way to pay the bills?
ANSWER: Yes. You will get hit with almost 40% in taxes and penalty fees if you use that money to pay the bills. You need to go out and get a job at UPS or delivering pizzas to make car and mortgage payments. The bottom line is that $9,000 doesn’t solve your problems. You need a long-term solution. You need to find a job instead of living off your IRA.