With the global pandemic causing record-breaking job losses and wreaking havoc on our economy, it can be tempting to withdraw large amounts of cash from your IRA to have on hand. But before you raid your IRA at any time, we encourage you to think carefully about how much you actually need

Individual Retirement accounts are are designed to provide additional financial security as we get older, but unlike a traditional bank account, access to the money in these accounts—particularly in times of financial crisis—can come at a significant cost. 

For this year, the CARES Act has eased some restrictions and penalties for qualifying individuals whose income has suffered as a result of COVID-19, like allowing taxes on IRA withdrawals to be spread over three years, but it is still recommended to exhaust other cash resources before tapping into retirement accounts for emergency funds. 

Consider this: Any withdrawal from your IRA is treated as income for that year. So substantially large distribution amounts could potentially bump you into a higher tax bracket, which translates into giving up more of your hard-earned savings than you intended.

And while there are no restrictions or requirements on IRA distributions between age 60 and 70½, the more you take out, the more income tax you will pay—most likely at a higher rate than if you wait until your required minimum distributions kick in. 

So before you make any additional withdrawals from your IRA, we recommend taking a moment to determine how much you actually need right now. While the idea of using your retirement account as a rainy day fund might seem attractive in the short term—particularly in uncertain times—the tax ramifications down the road can prove far more costly than riding out the storm.