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.
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withdrawn.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
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.
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
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