Financial Questions and Insights

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Seventy-year-old Linda, hailing from Oak Forest, expressed concern over managing her retirement fund. She mentioned:

“In October 2025, I can withdraw from my IRA without facing penalties. I invested $50,000 over the last decade, but only earned $13,000. I feel like my financial advisor was using me, and I don’t want their guidance on my money right now.”

Understanding Early Withdrawal Penalties

Sarah Brady, a personal finance writer and contributor for the Sun Times, noted that withdrawing from a traditional individual retirement account (IRA) before a certain age generally incurs a penalty, typically around 10%.

At 70, Linda is nearing the age where she must start taking required minimum distributions, which for many accounts begins at 73.

“Even in the age bracket where penalty-free withdrawal is allowed, it’s vital to remember that received funds might still be subject to taxes,” Brady explained.

Consulting Your Financial Advisor

Brady also commented on Linda’s earnings of $13,000 over ten years, suggesting it’s relatively low.

“That’s an average return of just above 2% annually, which is really quite minimal,” she remarked. “I suspect your advisor might have invested your funds in very low-risk assets. It’s worth considering a discussion with them about this and inquiring about their fee structure.”

If there are concerns about potential fraud, Brady advised contacting the managing company directly and, if needed, filing a complaint with Finra.

Where to Allocate Your Funds

If withdrawing retirement funds for daily expenses, it’s wise to keep cash easily accessible in a checking account.

Brady recommends having at least three months’ worth of expenses set aside in a high-yield savings account, especially if lacking an emergency fund.

However, for those contemplating a trip in six months or planning to save for a few years, she suggested looking into low-risk investments that offer guaranteed returns, such as certificates of deposit (CDs) and Treasury bonds. “These options help avoid potential losses while locking in a decent rate,” she added.

For those eyeing unknown online banks, checking their legitimacy can be done via the federal deposit insurance company’s website.

Brady stated, “They offer a useful tool called BankFind Suite to check if a bank is currently operating.”

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