The typical American family often struggles to juggle mortgages, the kids’ schooling costs and other household expenses. But the baffling decision by Sen. Marco Rubio, a presidential candidate, to cash out a $68,000 IRA last year is widely seen as much costlier than it should have been.
Rubio, a Florida Republican, said this past weekend that he needed the funds to pay for a new refrigerator, air-conditioning unit, and his kids’ private-school tuition, among other expenses.
Raiding a retirement account is universally seen as an unwise and costly move, especially if there are other cash reserves or low-interest lines of credit available, as was the case with Rubio.
If Rubio’s was a a traditional IRA, he owes both income taxes and a 10 percent early withdrawal penalty on the money (only if you’re 59-1/2 or older do you avoid the penalty; Rubio is not). In Rubio’s case, this means he’d lose more than 40 percent of his money in the account. If it was a Roth IRA, he might catch a bit of a break. The senator would still owe taxes and a 10 percent penalty on any investment growth in the account — but not on his contributions since those were already taxed.
Nonetheless, such a retirement vehicle is not the smartest choice from which to retrieve quick cash to cover costs seemingly not related to a more typical financial emergency, such as expenses tied to unforeseen health issues or a job loss.
‘My Refrigerator Broke Down’
Rubio told the following to Fox News: “It was just one specific account that we wanted to have access to cash in the coming year, both because I’m running for president, but, also, you know, my refrigerator broke down. That was $3,000. I had to replace the air conditioning unit in our home. My kids all go to school and they’re getting closer to college and school is getting more expensive.”
However, Rubio had other cash reserves available, according to his 2014 annual financial disclosure form. He reported having between $151,000 and $365,000 in checking and savings accounts and a $100,000 to $250,000 home equity line of credit at 7.25% interest.
In a Congress where most lawmakers are millionaires, Rubio’s income is fairly low. However, by the standards of the typical American Household, he’s doing pretty well. According to his financial disclosure form, in 2014 Rubio made $174,000 from his Senate salary and $52,000 from book royalties and his adjunct professorship at Florida International University.
Meanwhile, Rubio’s critics have pounced on these financial revelations. They’ve pointed out that while Rubio makes irresponsible federal spending a big campaign issue, he has had trouble managing his own debt and household budget. The Senator just recently paid off his student loan payments, and is still in the red as he pays down several mortgages.