Don’t touch that 401(k)

Early withdrawals from a 401(k) can be disastrous to your retirement funding.

Talk to a professional about other options before you raid your 401(k). There are two negatives to pulling this money out early. The immediate penalty and taxes are one. The other is the loss of compounding interest over many, many years.

June 16, 2007
YOUR MONEY; The Nest Egg: Nibble
Early At Own Risk
By SHIRA BOSS
Conventional wisdom says not to pull money out of retirement accounts except for actual retirement. Most Americans have enough difficulty building up a nest egg, and cracking it prematurely could mean living on cat food (slang for Social Security) later.The Internal Revenue Service usually charges a 10 percent penalty for taking money before retirement age. What rattles financial planners most is that taking money early means investments earmarked for later in life vanish before they ripen through many more years of compounding.

‘’I would tell someone to work at Starbucks'’ before using retirement money (more…)