For example, if you are twenty years away from retirement and you withdraw $25,000 from your 401k to make ends meet and pay off your debts, you will have lost approximately $201,558 in future cash which could have generated nearly $1,000 a month in retirement income for you without ever touching the principal. What will you get in exchange? Assuming you’re in the 25% bracket, with the added penalty, you’ll get $16,250 in cash today. Which would you rather have? Pay your bills now and feel a little better with the $16,250 in cash or wait and have a lump sum of $201,558 that can support an annuity stream for life? Instead, famed financial planners such as Suze Orman have recommended you open a credit card that has zero-percent interest for an extended period of time and live off of it until you can get another job. As long as you can take care of the bill before the interest rate reverts a higher level, you’ll end up with far, far more money in the long-run. That’s more money to help make you and your family’s dreams come true.
8 Steps to Dealing with Forced Retirement
By Joshua Kennon, About.com Guide
I don’t care if your house has burned down and you have gone through every dime of your savings – don’t ever take the money out of your 401k account early because you are having a short-term cash flow crisis. I’m going to say it: It’s STUPID. My apologies for being frank, but it comes from the same place of love as a father talking to his teenage daughter about the dangers of staying out late on prom night - we just want the best for you! Given that your withdrawals are not only going to be taxed at regular rates but have an additional ten percent penalty tax levied on top of them – not to mention that you’ve lost all of the compounding you would have earned in the meantime – and the true wealth foregone is absolutely staggering.
Prev
- How to Deal with Forced Retirement -
- The Old Paradigm of the “Company” Man or Woman is Dead
- Adjust Your Expense Structure Immediately
- Don’t Touch Your 401k! Seriously!
- Don’t Forget to Use a Rollover IRA
- Check Your Spouse or Partner’s Benefit Coverage
- Should You Take a Buyout?
- It’s Hard … But Don’t Take it Personally
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