The tough job market has hit me hard, but I have a job start in 3 months. That said, I am looking at having a hard time paying my next mortgage payment. I have $200+K in my IRA. I believe that I should withdraw money to insure that I pay my mortgage, however, a friend says NEVER withdraw from IRA. What is worse, missing my mortgage payment or withdrawing from my IRA. My credit is otherwise good at 755.
As a general rule, yes, your friend is correct about not using your retirement fund as an emergency fund; however, there are exceptions to the rule.
First, you didn’t say if this is a Roth IRA or a Traditional IRA. You can withdraw your Roth IRA contributions at any time, without taxes or penalty. So a Roth IRA withdrawal is a good option in this case. However, if we are talking about a Traditional IRA, you will have to pay a 10% early withdrawal penalty and income taxes on the withdrawal — so this means you will have to withdraw more than what you need to cover penalty and taxes.
You can read more about the penalty here: What is an Early Withdrawal Penalty? and be sure to read related articles.
If you do decide to go this route, withdraw the least amount possible to get by.
Alternatively, you may want to consider taking out a short-term loan (you did mention that you have a good credit score).
- Take a look at this article, The Best Places to Borrow Money, to get some ideas on where you might find short-term money to get you through the next 3 months.
- Your best option might be borrowing money from peer-to-peer lending networks. You can apply online and get the money relatively quick. The payment is fixed over 3 years or 5 years, the loan is unsecured, and you will likely pay less interest than borrowing from a bank or a credit card.
- Lastly, consider borrowing money from friends and family. Be sure to have the loan repayment term in writing so that they know you’re serious about paying them back — and be sure you can follow through with the repayment plan!
I hope this helps and good luck!
Please remember that our answers are opinions and should not be considered professional advice and we assume no responsibility of any kind. Please consult a financial expert as needed.