Does it make sense to contribute to a Roth IRA if you have multiple cancers?

Seeking Advice
1

I’m 52, male, with no family. I have enough savings to afford an $8,000 Roth IRA contribution for 2024 and whatever is allowed by the IRS for 2025 and beyond. I have both colon cancer and lung cancer. As of now, I am asymptomatic, and doctors are uncertain about the stages of my cancers.

If I contribute to a Roth IRA, can I withdraw:

  1. My principal and/or
  2. My interest earnings before turning 59½ without an IRS penalty to cover medical expenses?

I also have a Traditional IRA. How does the IRS allow early withdrawals from a Traditional IRA before 59½ if I need the money for medical expenses?

2

First off, I’m very sorry that you’re going through this. Cancer is awful, and I hope you overcome it.

Second, while others may have different opinions, I believe you’ll want all the cash you can save for the near future. Medical expenses can add up quickly, and you don’t want to be worrying about tax situations while recovering.

However, if you have access to an HSA (Health Savings Account), I’d max that out first. HSAs offer tax advantages and can be used tax-free for medical expenses.

3

Roth IRA Withdrawals:

  1. Contributions can be withdrawn tax- and penalty-free at any time for any reason.
  2. Earnings withdrawn before 59½ are subject to income tax and a 10% penalty, unless:
    • The withdrawal is used for unreimbursed medical expenses exceeding 7.5% of your adjusted gross income (AGI) (penalty waived, but taxed).

Traditional IRA Withdrawals:

  • Withdrawals before 59½ usually have a 10% penalty, but this penalty is waived for:
    • Unreimbursed medical expenses exceeding 7.5% of AGI (though withdrawals are still taxed as income).

If you need money for medical costs, withdrawing from a Traditional IRA first might make more sense since you’d pay taxes either way, but avoid additional penalties.

4

Keep your money liquid for now.

A High-Yield Savings Account (HYSA) might be a better option until you have a treatment plan in place. Treatments, recovery, and medications can be expensive, and cash on hand will help. Wishing you strength and good health.

5

I’m really sorry you’re dealing with this. Maybe wait until you have more details about your treatment plan before making any investment decisions.

6

Lily said:
I’m really sorry you’re dealing with this. Maybe wait until you have more details about your treatment plan before making any investment decisions.

And consider getting a second medical opinion.

7

Roth IRA:

  • You can withdraw contributions anytime without penalty.
  • Earnings withdrawals before 59½ are penalty-free for medical expenses exceeding 7.5% of AGI, but they are still taxed.

Health Insurance:

  • Review your health insurance plan’s out-of-pocket max—the most you’ll have to pay in a year.
  • Hospitals often offer zero-interest payment plans if you’re unable to pay medical bills upfront.

Disability Insurance:

  • If you’re still working, check whether you have short-term or long-term disability insurance.
8

I was diagnosed with Stage IV Pancreatic Cancer in 2021, and I’ve been in remission since then.

I struggled with financial decisions too. It’s really hard for cancer patients to allow themselves to have hope. But I decided to live as if I have a future, because our brains don’t function well in a constant state of hopelessness.

Don’t give up, my friend. Hope matters.

9

Take some of that money and do something you love. A trip, a hobby—something that brings you joy.

That said, I’d still keep most of it in savings for now.

10

How far along are you in the diagnosis process? If this is recent, I wouldn’t rush into financial decisions.

Consider these next steps:

  1. Make your 2024 Roth contribution (you can always withdraw contributions penalty-free).
  2. Wait on 2025 contributions until you need to make that decision.
  3. If your condition qualifies as a disability, you may have additional penalty-free withdrawal options.
  4. Consult with a CPA and estate lawyer to optimize your financial planning.

Here’s a resource for IRA hardship withdrawals: SmartAsset Guide.

11

You can always withdraw the principal from a Roth IRA without penalty. The 5-year rule only applies to earnings.

12

Is the lung cancer a metastasis of the colon cancer, or are they separate? If it’s a metastasis, you may want to prioritize spending your savings on experiences and comfort rather than long-term investments.