Most people don’t plan to pull from their retirement funds early — and that’s part of the problem.
44% of Americans have admitted to tapping their retirement savings early. By far, the majority of these same people said they dipped into their retirement funds to pay off debt or bills, according to a recent report by GoBankingRates.
After surveying nearly 2,000 people, GoBankingRates has determined the No. 1 reason most people raid their nest egg, is to pay off debt. The other most commonly cited reasons were to cover an unforeseen financial emergency or medical expense.
Less than 10 percent said it was to buy a home, and just said 3 percent said they tapped their retirement savings to pay college costs.
Tapping your retirement dollars early is almost always considered taboo, and at times, it can seem unavoidable. But for those with little or no savings, a lack of proper investment income and planning for the future leaves many Americans at the risk of retiring broke.
So, when is a good time to pull funds from your retirement savings? The simplest answer, when you retire. Or, at the very least, after the age of 59 and a half.
Retirement funds are designed to help the average Joe to avoid taxes when building up their reserves as they age. So, the IRS punishes people who withdraw cash out before they reach the age of 59 and a half. Pulling cash out from your IRA or 401k is taxed as normal income PLUS an additional 10 percent penalty on top. All things considered, a large withdrawal could bump you up a tax bracket even before the penalty hits, and the total costs can be higher than you originally planned — upwards of a third or more of the total money you’ve been saving for years.
Of course, there are unforeseen circumstances in which using retirement funds may be necessary in your situation. Medical & financial emergencies come without warning, and if you have a large amount of debt with high interest rates, dipping into your 401k or IRA may be tempting.
However, the best way to prevent a disaster in the future is to take the right steps early on, to secure your finances and freedom even in the face of an emergency. Investing your money to work for you early on, instead of you scrambling to come up with dollars at the end of the line, will reduce confusion, stress, and money lost.
With Tax Auction Investors, our mission is to educate people around us to work smarter, not harder, and to invest their money into solid deals that will return their investment with profit. For us, these solid deals come in the form of real estate investments, specifically tax deeds. Every month we travel to a different city and meet up with local students, to attend a LIVE AUCTION EXPERIENCE.
This 3-day experience allows us to show groups of people the ins and outs of tax auctions, and purchasing homes for incredible discounts that they can then use to sell for a profit. Through our training, students have learned how to get started in the real estate industry, and build generational wealth for themselves and their family, so they never have to worry about their income when retirement time comes.
If you’re interested in learning more about Tax Deeds, or you want to attend a LIVE AUCTION EXPERIENCE yourself, send us an email, or you can call us at 813-214-4618 any time and we’d be more than happy to help.
Thank you so much for reading and for being a part of the TAI Community!