As far as the tax hit, it depends on the amount of the IRA and if it would throw you into another tax bracket since it will count as income at the end of the year. There are penalties for early w/d, but if you fall into one of the exemption catagories than you can avoid the penalties. I withdrew a small IRA to help out with expenses when I first became a SAHM, but I also re-enrolled in school and was able to claim education expenses and avoid penalties. There is also an exemption for first home buyers for up to $10,000. Medical expenses are exempt. There are a few others, but you have to show where you paid for the exemption adn the money could have been used for that reason.
You may have to account for the highere taxes, but since it is early in teh year you could change you exemptions or just take a bit of teh money off the top for later. The usual penalty for middle income folks ends up being 20-25% off the amount of the IRA.
If this is not your primary retirement, you are young enough and are contributing at least 10% of your income to your current IRA, I would use this for debt. Are you saving for any dc's college? That may also be a consideration, rolling it into a 529 account.
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