When you are short of money - whether because of unemployment, disease, or just the desire to buy a new bike - it's easy to start eyeing your retirement funds
After all, you have contributed to them all these years .. and it's your money
If your account has increased in value -. Lucky you -. It may seem that you can afford to take a bit early
On the other hand, if you 've looked at your account go down, it's easy to think that it makes no difference. Why even try? Why not take one out and use your money now
There are many reasons why you should leave the money where it is :?
1. Sanctions
If you have not reached 59 ½ years, you might have to pay a penalty 10% on the money you withdraw.
Ouch!
There are exceptions.
you can avoid the penalty if you are totally and permanently disabled, you have very significant medical expenses, you use the money for higher education, or if you use the money to pay for the insurance when you are unemployed, for example.
Unfortunately, the sanctions are not all you have to worry about when you withdraw money from a traditional retirement account.
2. Income tax
You will probably also include withdrawals as income on your tax return.
If you take a significant amount of money at once, withdrawals may push you into a higher tax bracket.
In addition, you may lose the benefit of certain credits and deductions.
you have to pay tax on withdrawals from traditional retirement accounts, even if you are over 59 and a half years.
In other income and deductions, you could end up paying 25% or more of the withdrawal of income tax.
If you are also paying a penalty, withdraw money early starts to look a lot less attractive. There is not much!
If you wait until retirement to withdraw money from your retirement account, you'll still have to pay tax on income.
However, most people are in a lower bracket tax income after retirement.
Withdrawals from a Roth IRA or similar retirement account are not subject to income tax.
3. the time value of money
The beauty of compound interest is the way it makes your investment grow over time.
However, it takes time for compound interest to work.
If you put $ 10,000 in an account in 40 years, and you get a rate of return for the next 25 years by 6% without adding more to the account you have retired $ 42,919 65
If you wait until 50, however, that same $ 10,000 investment would be worth $ 23,966 when you're ready to trade your car for a ride golf cart.
Take money from your retirement fund, especially on a repeat basis, as is again.
it will just be much more difficult to raise enough money for when you need them.
4. Pension funds are legally protected
If you hit hard times financially; For example, if you get behind on your mortgage and other bills, your creditors may be able to take you to court and attach your assets, such as bank accounts, investments and wages.
However, in most cases, they can not access your retirement accounts. They are safe.
This is why a financial crisis is usually the last time you empty your retirement accounts.
If your finances are headed down the drain, do not send your retirement money with him
. 5. Pension funds are retired
This is the most important reason of all.
Too many people are still not saving enough for retirement.
In fact, a survey by the Consumer Federation of America and savings Council of American education found that only 49% of non-retired respondents believe they are saving enough for retirement.
Unless you can work forever, you'd better stay on good terms with the in-laws - when you are living on social security benefits, you might need their spare bedroom
Better yet, find another way to make ends meet during your working years
.. you put money aside for retirement, and it is what it is for .
How hard until you would have to be before you take money out of an early retirement?
photo credit: the pics- pam via photopin cc
0 Komentar