Think Before You Make A Withdrawal

Think before you make a withdrawal from your retirement account. Many people turn to their 401ks or IRAs when they have an emergency. Hey, it’s their money, and it’s easily accessible. Yet when you take money out of your account before the age of 59 ½ it will cost you in the long run. Only certain hardship withdrawals will qualify for an exemption from fees and additional tax penalties. Yet even the exceptions that qualify will be taxed as income. 

You will be better off to take a personal loan out at your bank than to take an early withdrawal from your retirement fund. If you need $5000 and don’t qualify for an exemption, you’ll pay a 10% early withdraw tax plus your regular income tax rate. If your income is taxed at 20% you will pay $1500 to withdraw $5000 from your retirement account. Not only will you pay to borrow money from yourself, but you’ll also reduce the amount of money that you have invested towards your future. 

To help you better understand what is at stake, TIAA has a calculator on their site that shows the withdraw amount compared to the savings lost over time. Think before you make a withdrawal! And do your research on the best personal loan option available. If you have an excellent credit rating, you’ll get a better deal on interest. Right now, Truist is advertising 6.24% - 24.89% APR on unsecured loans. This means you won’t need to put down collateral and the rate you pay will depend on the amount you borrow and your credit score. 

Alloy Wealth is passionate about helping people better understand and better navigate difficult financial decisions. We work with pre-retirees and retirees and have offices in Charlotte and Mint Hill, NC and Grenville, SC. If you need help, don’t hesitate to call us. 800-689-3935