Times are tough, sure enough, but if you’re pulling from your retirement now, what are you going to live on when you’re 65? With the uncertain future of social security benefits, retirement savings could be the only income we have in the coming years. That’s why it’s so important keep retirement funds untouchable.
A recent survey by Bank of America shows that 18% of respondents took an early withdrawal from their retirement funds because of the economic crisis. Of those that pulled from their funds, 25% withdrew money for credit card bills, 22% for mortgage payments, and 22% because of a job loss.
There’s another reason that to leave retirement savings alone – early withdrawal penalties. If you withdraw money from your retirement before you’re allowed, the withdrawal is taxed and subject to a 10% early withdrawal penalty. If the withdrawal comes from a SIMPLE IRA that you opened within the past two years, the penalty is 25%.
The early retirement withdrawal penalty and shortage of retirement funds aren’t worth it, especially when you have other options.
Do you have access to savings, non-retirement investments, or an emergency fund? Withdrawing money from any of these places is better than taking money out of your retirement.
Do you have valuable assets you can sell? Before you pull money from retirement, try selling some high-valued assets like jewelry or a vehicle. The profit may very well be enough to get you through the tough times leaving your retirement savings intact.
If you’ve recently been laid off through no fault of your own, you may be entitled to unemployment benefits from the government. A new law may allow you to receive up to 39 weeks of unemployment. Your state’s unemployment agency will be able to tell you whether you qualify for unemployment, the amount you’ll be able to receive, and how long you’ll receive the benefit.
If you are behind on your mortgage payments, click here.
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