Dr. Friday discusses the tax implications of early IRA withdrawals, emphasizing the need to account for penalties and tax brackets accurately. If you’re under 59 ½, expect a 10% penalty in addition to your tax bracket rate. Don’t rely on default withholdings—get professional help to avoid underpayment issues and surprises at tax time.
Transcript:
G’day, I’m Dr. Friday, president of Dr. Friday’s Tax and Financial Firm. To get more info, go to www.drfriday.com. This is a one-minute moment.
If you’re 40 years old and you see your IRA over there and it’s got lots of money and you’re having a hardship and you’re like, okay, I’m going to take some money out of there so I can pay this money off. And then when you get ready to do your taxes, because they took out 20%, so I pay taxes. 20% isn’t enough, people. 10% of it was a penalty. You’ve really only paid 10 and you’re in the 25% tax bracket. So there you go. So you need to make sure if you’re going to take money out of an IRA and you’re going to do it under the age of 59 1⁄2, you need to calculate 10% above whatever tax bracket you’re in. If you need help, 615-367-0819.
You can catch the Dr. Friday Call-In Show live every Saturday afternoon from 2 to 3 p.m. right here on 99.7 WTN.