IRA SAVINGS -TRADITIONAL 3 Answers as of December 29, 2010

I have lost my job from our plant closing. I have been collecting unemployment for a year and half. I have been on unemployment extension for a while. Right now I have to use some of my IRA , my savings is low. Can I declare a hardship and save any penalties? Also, how will this effect my unemployment benefit. I am 54 yrs. old. Thank you very much.

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Mankus & Marchan, LTD
Mankus & Marchan, LTD | Tony Mankus
Early withdrawal of IRA funds is subject to income tax, as well as early withdrawal penalty. To my knowledge, there is no hardship exception. It should not affect your unemployment benefits, although I would check with the Unemployment Agency in your State, to be on the safe side.
Answer Applies to: Illinois
Replied: 12/29/2010
LT Pepper Law
LT Pepper Law | Luke T. Pepper
Unfortunately, there is not hardship exemption to avoid the 10% penalty on early IRS withdraws. Only time that would work is if they took IRA money to pay for medical expenses over 7.5% of there income, like insurance or cobra costs.
Answer Applies to: Pennsylvania
Replied: 12/22/2010
Givner & Kaye
Givner & Kaye | Bruce Givner
The Code (Section 72(t)) allows you to take distributions as part of a series of substantially equal periodic payments, not less frequently than annually, made for your life or the joint lives of you and your designated beneficiary after separation from employment without the 10% penalty. There is also an exception for distributions to unemployed people when the distributions are used to pay health insurance premiums. There is no specific hardship excuse from the 10% penalty.

I do not know how this will impact your unemployment benefits (that is not a tax question). Best regards.
Answer Applies to: California
Replied: 12/21/2010
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