Don’t Use Retirement Savings Before You Retire
You might be tempted to tap your 401(k) when you change job or have an emergency, but in the long run, it won’t do your retirement any good. “Don’t ever do that,” Scott said. “That is very destructive to your retirement security.”
First of all, an early withdrawal comes with stiff state and federal income taxes as well as a ten percent withdrawal penalty. The more money you withdraw, the higher the penalty. Secondly, you won’t have much time left to replace what you took. In fact, most people don’t replace what is withdrawn, Scott warned. “You don’t want to be in a situation where you’re in an emergency and raid your retirement account,” she said. “That’s counterproductive.”
To make sure you stay away from your retirement savings, most financial experts recommend setting up an emergency fund that you can easily access in case of an unforeseen event.
