BAD IDEA No. 1 – Access your IRA with a Debit Card
Entrust Group launched a new service for IRA owners. Now you can access your IRA with the swipe of a debit card. Want that new pair of shoes – go ahead – use your IRA money. Want to go on vacation – use your IRA.
This is the worst idea I have heard in a long time. Phyllis Furman, writing for the Daily News: “The IRA Card is the new and improved way to access your Individual Retirement Account,” said Entrust CEO Hugh Bromma.
“It’s just like any other debit card. You can use it at a store, restaurant or travel agency.”
But critics of products like the IRA Card and 401 (k) cards warn they can be dangerous because they allow you to quickly tap into funds that should be locked away and growing for your retirement.
“Retirement money is to be used for retirement,” said John Graziano, a CPA with Future Financial Planners in Bayonne, N.J. “
If you use your IRA debit card, not only do you spend your retirement savings, but you have to pay income tax on the amount withdrawn and, if you are under 59-1/2, pay a 10% premature distribution penalty.
This is a product option to which we recommend you “Just Say No.”
Blogging credit to Neil Hendershot.