VIEWS: 11 PAGES: 2 CATEGORY: Legal POSTED ON: 4/5/2012
During this time of economic woes, more people are turning to their retirement accounts for extra funds.
Is Taking Retirement Funds Early Safe? During this time of economic woes, more people are turning to their retirement accounts for extra funds. So, is this a safe option to help you get through a job loss or financial crisis? Before you withdraw your funds early you should consider the costs you may incur, if your situation may avoid some of those costs, and if there is an alternative to provide you with the same financial relief. Costs When you withdraw money from your retirement account before you reach the age of 59 ½, you may have to pay a ten percent penalty fee on the amount withdrawn. If your account holds pre-taxed funds, you will also owe income taxes at that time. If you are already financially strapped, a penalty fee and taxes may feel like a big hit. Withdrawing your money early may help you now, but it could leave you in financial distress in your later years. You might have to work longer, or if you are unable to work you may be financially strapped and find yourself selling personal belongings. Exclusions There are some cases where your retirement account holder may waive the early withdraw fee. These circumstances include disability, death and hardship. For hardship cases you will have to meet the standards of your financial institution to avoid the penalty fee. Alternatives If you have a 401K plan with your employer and you change jobs, you may have the option to withdraw your 401K funds. Avoid this, if you can. Instead, consider moving those funds into an IRA. If you don’t, you may be tempted to spend this money, robbing your elderly self of funds needed for medical bills and living expenses. If you must take money from your account, you may want to consider a retirement account loan instead. Some financial institutions offer such a plan with the stipulation that you pay the money back with interest within a few years. Experienced estate planning attorneys Seattle WA of the Byrd Garrett PLLC offers estate planning and business planning resources to residents of Seattle WA. To learn more about these free resources, please visit http://www.byrdgarrett.com today.
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