Expert Retirement Planning

It can be tempting to dip into your 401-k plan for extra cash when it seems like retirement is eons away and you need money now. However, taking money out of your 401-k early can cost you a significant amount of money now, and in the future.

When you take money out of your 401-k plan before you reach retirement age, you will have to pay an early withdrawal penalty. Additionally, you will have to pay income tax on the money that you invested in the plan. Depending on your current tax bracket, you could literally lose as much as half the money you withdraw from your retirement account to taxes and penalties.

Additionally, withdrawing money from your IRA now can reduce your post-retirement benefits by a very significant amount. Left alone, the money in your 401-k can grow exponentially over time. A relatively small amount taken out today can actually cost you thousands and thousands of dollars at retirement time, depending on a number of different factors.

Taking money out of your retirement plan early can actually keep you from being able to retire when you would like to do so. By taking money from your 401-k early, you can be making a decision that causes you to have to stay in the workforce for several years longer than you would prefer.

Before you dip into your 401-k to take care of pre-retirement bills, it's important to investigate every possible alternative to this action. If you're thinking about pulling money out of your retirement accounts, you owe it to yourself to consult a financial advisor to see if there is any alternative to the situation in which you find yourself. In almost every occurrence, an individual is much better off leaving his or her 401-k alone rather than tapping into the funds early.