What Is An IRA? And Considering A Different Way To Think About Investing In One
Today's installment defines the key tax-related points of these retirement accounts
In this newsletter post—
I made an argument against investing in retirement accounts, such as 401(k)s and IRAs:
So, sooner or later, I’m going to look at that money in my 401(k) and feel like I need it (even if I don’t). Or maybe I can make a case for needing it (even if I really don’t). Or maybe I actually really do need it (even if I really don’t). Or maybe I truly, sincerely and objectively need it (like really for real) …
So, come hell or high water, I’m withdrawing some or all of my 401(k) money, even with the tax penalty. Ten percent less than whatever I have in there is better than no sudden lump sum windfall of cash at all.
This in response to the growing number of people taking hardship withdrawals from their 401(k) plans.
Today, we focus on IRAs, which carry similar tax consequences for early withdrawals.
As we like to do around here, we turn conventional personal finance upside down and consider what might be the most effective way to approach Individual Retirement Accounts if you crave cash security (or not). After, of course, we define and detail the key components of the two main types of IRAs.