Avoid This Mistake
Finding a way to live decades in retirement without worrying about running out of money can seem like an overwhelming task. That goal depends on many variables, including life expectancy, retirement age, lifetime earnings, retirement expenses, retirement income sources, investment rates of return, and future inflation. If you’re wrong on even one of those variables, funding your retirement could be in danger. With all the potential for missteps, what is the one mistake you want to avoid at all costs? Dipping into your retirement savings. Unfortunately, since the funds in your 401(k) plan or individual retirement account (IRA) belong to you, they often seem like a tempting place to get funds needed for other purposes. Tax laws don’t help, since they often provide tax-advantaged ways for you to access those funds. Loans from 401(k) plans are not taxable events. When leaving an employer, you can withdraw money from your 401(k) plan (you will have to pay income taxes and possibly a 10% early withdrawal penalty). Contributions to Roth IRAs can be withdrawn at any time with no tax consequences. Withdrawals from traditional IRAs before the age of 59½ can be made under certain circumstances, such as to purchase a home or pay for a child’s college education, without paying the 10% income tax penalty. Saving for retirement is a difficult task for most people, without making it more so by using retirement funds for other purposes. Even if the amount seems small, don’t withdraw funds from your retirement account. While it probably won’t add significantly to your lifestyle now, it can grow to large sums over the long term. For instance, assume you have $10,000 in your 401(k) plan. If you withdraw the funds and are in the 22% tax bracket, you’ll have $6,800 left after paying income taxes and the 10% federal tax penalty. Keep the funds invested earning 8% annually on a tax-deferred basis, and your funds could grow to $68,426 after 30 years before paying any income taxes. (This example is provided for illustrative purposes only and is not intended to project the performance of a specific investment.) No matter how much you think you need the money now, don’t touch your retirement funds for anything other than retirement.
Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation, a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Avenue, Carpinteria CA. 93013, (800) 874-6910. Randall Wealth Management Group and PlanMember Securities Corporation are independently owned and operated. PSEC is not responsible or liable for ancillary products or services offered by Randall Wealth Management Group or this representative. CA Insurance License: #0I08678.
This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.