Comments on: The Real Cost of Withdrawing Retirement Funds Early

By: Sarah

Sarah — Sat, 17 May 2008 03:30:28 +0000

Oops, I got that wrong – you don’t get taxed when you borrow the money. But it’s still a bad idea

By: Sarah

Sarah — Mon, 12 May 2008 03:11:35 +0000

Borrowing is bad, too – you get taxed twice. Once when you borrow the money (it’s taxed as income), and then you pay it back with income you’ve been taxed on.

By: Ron@TheWisdomJournal

Ron@TheWisdomJournal — Fri, 09 May 2008 01:08:44 +0000

I’m just glad that I can’t withdraw anything on my retirement. As a participant in an ESOP, it isn’t even available to me. Woo Hoo!

By: Curious Cat Investing Blog

Curious Cat Investing Blog — Thu, 08 May 2008 22:40:01 +0000

Yes withdrawals from a retirement account should be an absolute last resort. Like many financial mistakes the time to avoid this mistake is not the day you make the decision but your actions for years in advance. So you have a ready source of emergency funds, and other savings… to draw on in tough times…

By: Mrs. Micah

Mrs. Micah — Thu, 08 May 2008 18:47:57 +0000

And depending on what you withdraw, it can bump you into a higher tax bracket, right?

By: Jesse

Jesse — Thu, 08 May 2008 17:41:37 +0000

One option if you absolutely have to have money is instead of withdrawing from your 401k, borrow from it. This assumes of course its for one of the IRS defined emergencies….not things like you mentioned (food, bills etc). In these kind of cases I think “extreme frugal” is the right course of action. When I got laid off Ramen soup with almost anything you can think of mixed in -10 for a dollar!

By: Dividend Investor

Dividend Investor — Thu, 08 May 2008 16:01:23 +0000

When I studyied commercial law in college some time ago, I remembered vividly that retirement account balances of up to 1,000,000 cannot be taken away from you in the case of bankruptcy. So if you really are in cash crunch, do what PAtrick told you to do.. Or apply for a loan at Prosper if you don’t want to get into credit card debt..

By: Emily

Emily — Thu, 08 May 2008 15:00:11 +0000

I know so many people who have been slammed by making this mistake. It’s the number one reason I think everyone has to have a backup plan for job loss. It’s inevitably the route people choose who have poor money management skills and don’t have a savings account to cover expenses for income loss.Of course, once you pull the trigger and do the withdrawal, it’s a huge cycle because you can’t afford the tax penalty and on and on and then oooooh the debt I’ve seen people have to dig out of because of it.