Six More Uses for an IRA
Since its inception more than three decades ago, the individual retirement account, or IRA, has solidified its role as the investment tool of choice for long-term savers seeking tax-favored growth.
Some 46 million U.S. households, or 39%, own an IRA, according to the Investment Company Institute, most with the intent of using those dollars to supplement their income after they stop collecting a paycheck.
But the ubiquitous IRA can flex far more muscle than that.
From estate-planning vehicle to emergency reserve to college savings plan, assets held within an IRA can be deployed for a multitude of reasons, often without penalty.
“There are so many exceptions to the early withdrawal penalty that there’s a lot of flexibility in how you can use an IRA,” says Tom Balcom, a CFP with 1650 Wealth Management in Boca Raton, Fla.
You can use your IRA, for example, to pay unreimbursed medical expenses for any amount that exceeds 7.5% of your adjusted gross income — without getting hit with the 10% early withdrawal penalty that normally applies to distributions taken before age 59½. More