A recent survey found that 3 out of 10 people are currently withdrawing money from their retirement accounts to keep up with their bills. This is obviously due to the economic fallout from the pandemic. However, there are many reasons why this isn’t a good idea.
First of all, you will need that money when you retire! It is important to save as much as you can. The usual rule of thumb is to save 10% of your pretax income each year. If your employer offers a 401K, it’s a good idea to save that amount, or the amount the employer is willing to match. In reality, you should just save as much as you can, as soon as you can. You will need it.
Second, you need to know that none of your creditors can garnish funds that you’ve saved for your retirement, as long as they are saved in a qualified retirement account! IF you take money from your retirement account and deposit it in your checking account, your creditors may be able to take it from you.
Third, if you file bankruptcy, you can almost always keep the money that is in your retirement account. Again, it has to be in an appropriate retirement account, but it can be protected from the bankruptcy trustee and your creditors. It’s important to consult with an attorney to make sure that your retirement funds can be protected if you believe you’re facing garnishment or other creditor actions.
Please contact our office as soon as possible if you’re have having trouble making ends meet. We offer a free one hour consultation with an attorney. We can talk about your options and decide which is the best way to go.