9 401(k) Mistakes & Solutions All Boomers Should Be Aware Of

June 30, 2020 · Personal finance

5^th Mistake: Taking a Withdrawal From Their 401(k) Plans

Sadly, 1 in 4 boomers has already taken withdrawals from their 401(k) plans. In most cases, the money was used to cover either medical expenses or debt. If you do so before the age of 59½ you will be faced with severe penalties, no matter the reason.

Experts say that due to penalties and taxes, seniors who make this dangerous move could lose as much as half their asset values. This has been an increasingly bigger issue for a lot of American households, especially since the closer they get to retirement the harder it’ll be to fill the gap. With less time on their hands to replenish their savings, it could leave some with tremendous losses over the course of what are supposed to be their golden years.

A decorative wooden box on a shelf, symbolizing the preservation of retirement funds. — A wooden box with a preservation tag sits on a shelf as a couple walks outside together.

What You Should Start Doing Now

Taking money from your 401(k) account should be the last resort. Until you reach that stage you should ensure you’ve crossed out all other options. Ideally, you should already have an account for rainy days that you can dip into, but assuming you don’t, let’s look at what else you can do.

Your course of action depends on your finances, but here are some other ideas if you’re in a pinch. You could use a 0% APR credit card, take out a personal loan, getting a home equity loan, or refinancing your mortgage loan.

Smart savers ensure that in the event of any emergencies, they’ll have a little bit of money set aside so they don’t need to ruin their long-term plans.