Resist the Urge to Use Your Retirement Savings to Live Off

The things that are happening within the economy are very alarming such as the high unemployment rate, failing banks, a bear market, among other things. Everyone is looking for ways to make their money go just a little bit farther. If you check the news you will see that people are not shopping like they have done in the past. They are definitely avoiding those luxury items and only shopping for the basic necessities of life because these are very trying times.

Some are even considering the possibility of tapping into their 401K and other retirement money to meet living expenses and just survive.

Tapping into your 401k should be a last ditch effort if you just cannot come up with any other alternatives to meet your expenses. Once you borrow money from your 401k you are going to be subjected to some other expenses such as taxes, and there will be an early-withdrawal penalty. These charges alone can absorb roughly 30% of the money you take out according to the USA Today. You also put yourself in a position where your retirement savings is being reduced in terms of money available on hand for tax deferred growth.

There are certain situations that allow you to withdraw from your retirement savings without being subjected to early-withdrawal penalties. For example if you are using the money from your IRA to pay your health-insurance premiums during the time that you are unemployed then the IRS will waive the early-withdrawal penalty.

Speaking with a financial adviser or financial counselor would be a good idea before you make any withdrawals. They will provide you with the best possible avenues to pursue and they may even be able to come up with a source of income you may not have thought about, which could be less costly than the method you are pursuing.