5 Uses For An IRA That Don't Involve Retirement

An IRA (Individual Retirement Account) is more than just a convenient way to save for retirement. It can also serve as a backup plan for many life events. What are some of these events you can prepare for with an IRA? Here are five of the most common events you might want to use an IRA for.

1. Buying a House. IRA rules allow investors to withdraw (penalty-free) up to $10,000 to pay for a down payment on a house. You must be considered a first-time buyer, which generally means you have not owned a home in the prior two years. 

2. Balancing Risk. Use an IRA to help balance out your risk in other savings or investment methods. If you tend to hold a lot of cash in savings accounts, for instance, you may want to invest your IRA in funds that carry a higher rate of return (and therefore more risk), such as precious metals. Alternatively, safer investments in an IRA could balance out speculative investments elsewhere.

3. Covering Medical Expenses. The law permits some emergency use of an IRA to pay for certain types of expenses. If you have a medical crisis, for instance, you can withdraw from your IRA for qualified medical expenses that exceed 7.5% of your income. Someone with a documented medical disability is also allowed to withdraw penalty-free money from their account. 

4. Preparing for Recession. Recessions are normal parts of the economic cycle, but they can wreak havoc on Americans' finances. If you feel that a recession is likely in the near future, invest your IRA in recession-proof funds. This might include stocks that rise during economic crises, such as precious metals, or stocks with international exposure. If you do need to withdraw from this bulked-up IRA during a recession, you may have a penalty, but the added growth will help pay for that. 

5.  Leaving Money to Heirs. Roth IRAs are perfect for those who want to leave money to their heirs. Because a Roth IRA is funded with after-tax dollars, you can generally pass on these accounts without tax implications. You may use such an account to leave money to children, grandchildren, or even charities. 

Which use of an IRA could help your finances stay on track no matter what life brings? Whether you want to build a buffer within your investments, prepare for emergencies, or fund the future, an IRA is a good place to start. Learn more by consulting with an experienced financial planner today. 

For more information, contact a company like McAlvany ICA