Should Your 401k Be a Piggy Bank?
If you have been a regular reader of Frugal Rules, then you know I like to talk about saving for retirement. One major part for many Americans to that retirement planning game is their 401k. A 401k, when used the right way, can be a great way for many to move towards the kind of retirement they’re envisioning. That’s also not to mention that you often can get free money for using your 401k. I don’t know about you, but free money is the best kind you can get.
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However, life doesn’t always go as we like and unplanned events come up. It’s inevitable in fact, which is why it’s important to have things like an emergency fund as well as living by some sort of budget so we have things to fall back on in time of need. What is concerning though is the number of individuals who are viewing their 401k as a fall back or piggy bank when times do get tough. I understand that there may be times where it’s the only option, but recent studies show that more funds are being withdrawn prematurely from 401(k)s and often times in small amounts – i.e. amounts under $10,000. These withdrawals, while seemingly harmless in the short term can have significant ramifications in the long run.
If you’d like to read more about why a 401k is not a suitable piggy bank and what it’s truly for, read my latest article at Daily Finance.
Photo courtesy of: Tax Credits