Imagine you withdraw $10,000 this year to buy a home and you don’t retire for another 30. If your IRA investments normally give you a 7% average annual return, by removing that $10,000, you’ll be $76,000 shy by the time you end your career.
2. Taking a CARES Act withdrawal when you have other options
The CARES Act, which was passed in March to provide financial relief during the coronavirus crisis, allows you to remove up to $100,000 from your IRA if you’ve been impacted by the pandemic. But if you have other ways to access money in a pinch, you’re better off doing so. We just saw how much an early $10,000 IRA withdrawal could impact your retirement income. Well, imagine if you were to take out more than that. You could wind up with a serious shortfall on your hands as a senior.
Before you tap your IRA, see if it’s possible to borrow money affordably, whether via a home equity loan or a personal loan. Though you’ll pay some interest on that debt, it could still make sense, financially speaking, to go that route rather than lose out on what could be substantial growth in your IRA.
3. Pausing contributions when you still have a job
Read More: 3 IRA Moves You May Be Tempted to Make This Year – But Shouldn’t | Personal