NEW YORK (MainStreet) — Consumers caught without enough savings may have to tap into their retirement savings to pay for everyday expenses when an emergency arises or a job loss occurs.

Borrowing money from your IRA account, after all, is a better solution than using credit cards with high interest rates, obtaining a home equity loan or seeking a loan from a payday lender or friends or family. But remember: once you take money out of an IRA, it is permanent, because you can’t repay it unlike a 401(k) loan. The majority of Americans are woefully not saving enough for retirement, so this decision could set them back even further. To boot, if you are not yet 59.5 years old, your IRA withdrawal could be subject to the 10% penalty tax. 

Still necessity can breed urgency, and there are four scenarios where it may make sense to dip into your IRA: even though you could be subject to ordinary income taxes you can avoid the 10% premature withdrawal tax penalty.

Health Insurance Premiums and Medial Expenses

If you lost your job recently, you are allowed to take funds out of your traditional IRA to pay for health insurance premiums, said Mark Tan, a financial advisor with Thrivent Financial, a Lake Forest, Ill.-based non-profit financial services company. In order to qualify, you need to have been collecting unemployment insurance for 12 weeks in a row.

Another option that qualifies is unreimbursed medical expenses exceeding 10% of your adjusted gross income.

“If there’s an emergency and you’ve exhausted other resources, this could be a decent option,” he said.

Educational Expenses

The IRS also allows you to withdraw money from your IRA withdrawal to pay for higher education. The only limit as to how much you can withdraw each year is the total amount of your "qualified" education expenses, Tan said. Consumers should consider other options such as a 529 or a life insurance policy with a cash value.

“If you do need to resort to tapping into an IRA for education purposes, I recommend withdrawing as little as possible,” he said.

Replacement income

If you were laid off, fired or took early retirement, you can receive substantially equal periodic payments from an IRA, also known as SEPPs for extra income. If you are no longer receiving unemployment benefits, the IRA could serve as a safety net, said Tan.

“It should only be considered as a very last resort in this situation,” he said.

Buying a home

While taking out money to purchase a home sounds like a better reason to borrow for your IRA, it might mean you need to just wait in order to save more money for a down payment. You can take out as much as $10,000 for an individual or $20,000 for a couple to pay for a home. This exception includes anyone who hasn't owned a home in the last two years.

“If you’re in a situation where you need to tap into your retirement savings to buy a home, maybe you’re not ready to buy a home,” Tan said. “There are so many other expenses to consider when buying a home such as taxes and maintenance, so a person so cash-strapped that they would withdraw from their retirement to finance it, should really reconsider the purchase.”

Personal “Loan”

While the money in your IRA should be left alone until retirement, it can come in handy if you are facing serious issues or need the money in a pinch. Whether you funded your IRA with deductible contributions, roll-overs from qualified plans or non-deductible contributions, you can get access to the IRA amounts, including the growth on the investments at any time, said Jamie Hopkins, a retirement professor at the American College of Financial Services in Bryn Mawr, Pa.

The IRS allows you to tap into your IRA money for 60 days and roll it back over into the same IRA. Although there are no loans from an IRA, this exception “effectively allows people to use the money for 60 days and put it back without any negative tax consequences,” he said.

This can be a good short-term solution if you need the money for less than two months. Replacing the money back in the IRA is paramount. If you fail to do so, the money will be treated as a distribution and could subject you to the 10% tax and ordinary income tax on the amounts withdrawn.

Before you chose this option, see if you can take a loan from your 401(k) or use any Roth IRA contributions first since those choices will likely not subject you to any further taxes, Hopkins said.

Instead of thinking of an IRA as a “source of liquidity,” it should remain solely as a way to save for retirement, said Scott Thoma, an investment strategist for Edward Jones, the financial institution based in Des Peres, Mo.

“It should be viewed as something that you do not touch and it is not accessible for other uses because it is for retirement,” he said.

Taking money out of your retirement plan to fund expenses such as education or a down payment is seldom a good idea, said Anthony Criscuolo, a certified financial planner with Palisades Hudson Financial Group in Fort Lauderdale, Fla.

“By taking money out early, not only are you reducing your retirement nest egg in the present, but you may be paying a larger price than you realize once you factor in the opportunity cost of tax-deferred growth and possible income tax consequences,” he said.

--Written by Ellen Chang for MainStreet