Single Parent Finances & Impact of Early 401K Withdrawals
Personal Finance Implications
In an economy where we feel distressed over the opportunities to retire early, more and more single parents are turning attention to their 401(k) contributions to determine if they are really beneficial in the long term. If you are considering an early 401k withdrawal, it is important to meet with a financial planner as there may be risks associated with this financial transaction.
Traditionally, the 401k retirement plan has been designed to help single parent families prepare for retirement by investing in mutual funds through a designed broker. With employer contributions matching, in part, the contributions employees make, these types of retirement plans have, in the past, given more control over retirement timing for many single parents.
With the economy in distress, and with the number of adults concerned about unemployment, debt, and a growing economic crisis there is a rise in the number of transactions that involve early 401k withdrawal. Unfortunately, by withdrawing funds early, there are taxes that must be paid, penalties levied, and risks for losing vital opportunities to retire early.
When meeting with your financial planner about the opportunities for retirement, consider other options for tapping into money more quickly instead of 401(k) withdrawal. With your financial planner's guidance, there are often other opportunities for acquiring funds more readily. In fact, even taking up a part time job, in the interim, may be something to consider. Financial planners have a key role in helping you make smart financial decisions and, as a result, they should be utilized when making decisions about early withdrawals.
Taxes, penalties and general loss of income for retirement are all reasons to avoid withdrawing early from your 401K. Always consult a financial planner for these reasons as the financial planner can give you the pros and cons of each financial decision you make. Withdrawing without the input of a financial planner may only lead to further financial distress in the short term and delay your retirement opportunities.
Sources: 401(k)s for Dummies, by Ted Benna
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Published by Christine Cadena
Working on a graduate degree in psychology, Christine has both professional and educational background in health, wellness, insurance, and health finance. Finance expands to all facets of health and insuran... View profile
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