Pros and cons of taking money out of a 401(K) for cash-strapped households
May 19, 2022
There are many reasons why families might find themselves struggling to make ends meet, with today’s soaring inflation being just one of the possibilities. So for those families that prioritized saving for the future by funding a 401K, it may seem like a good source of emergency funding. Here are a few things to keep in mind if you find yourself in that situation:
- Check to see if your plan offers a hardship withdrawal — it’s a loan paid out from your 401K, but there are strict criteria around qualifying and paying it back.
- If you don’t qualify for a hardship withdrawal, you can still take money out in an early withdrawal, but there are high costs associated with that.
- Remember that your 401K is there for your future. Do what you can to reduce discretionary spending and cover your expenses without turning to your retirement plan, or you may find your future self wishing you had protected those funds.
To hear all of the insights I shared with Mark Roper of WMAR 2 News in Baltimore, watch the full interview here.
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