Personal Finance Advice

You made a wise decision if you started saving for your retirement early in life.  People who start saving for retirement in their early adult years usually find that by the time retirement rolls around they have a nice lump of money stashed away allowing them to stop working and enjoy their golden years.

In the interim, however, that retirement fund can seem pretty enticing when money gets tight.

It can be tough to know that there is money just sitting somewhere, waiting for you to hit a certain age before you’re supposed to withdraw any of it, particularly when something happens to stretch your personal finances a little thin.  If your car suddenly breaks down and you don’t have money in a savings account to cover the cost to repair it, you might find yourself eyeing the money sitting in your retirement fund.  It can seem even more tempting if you’re far from retirement because you probably figure you can replace the money in time.

Pulling money from your retirement fund before you retire is a bad financial move.  The government allows for certain perks for retirement accounts, and the second you start using those accounts contrary to how they are intended you’re going to get hit with massive fees and penalties.

In other words, you can’t just pull money out of a retirement account before you retire like you would pull money out of a traditional savings account.  It just doesn’t work that way.  Not only will you rob yourself of future funds when you actually do hit retirement, but you encounter a variety of penalties that will slash the amount of money you earn from your retirement fund considerably.  You will also encounter taxes on the amount you withdraw, further shrinking the total amount of money that lands in your hands.

There are exceptions, of course.  For example, in some instances you can use a portion of an IRA to fund the down payment on a house without incurring fees for the transaction.  When it comes to dipping into your retirement fund to pay for a vacation or consolidate your debt, however, you’re asking for financial trouble.

Dipping into your retirement savings should be a last resort.  It’s simply not a wise financial decision.  Remember that if necessary, you can borrow money secured by your retirement savings without penalties, but you can’t default on the loan otherwise you’re in for some real financial woes.