It’s no wonder that a whopping 90% of millennials later regret raiding their retirement accounts early. The truth is that dipping into your 401(k) early-or cashing it out altogether-is going to cost you more than you might imagine. Not only are you going to get hit with taxes and withdrawal penalties, but you’ll also miss out on the long-term benefit of compound growth. We filter out sleazy advisors. See up to five investing pros we trust. More than half of millennials have already taken out money from their 401(k)! 3 More than half! 2 And the picture is even worse for younger workers. A recent study found that one in three 401(k) investors cashed out their retirement accounts before reaching retirement. Don’t believe us? Take a look at the stories below and the consequences of covering big life events with your retirement funds! The Most Common Reasons for Cashing Out a 401(k)įirst, if you’re tempted to make an early withdrawal, you’re not alone. 1 So, when you need cash (or you think you need cash), the temptation to call your retirement plan representative and make a withdrawal can seem overwhelming.įreeze! We want you to put down the phone and step away from the 401(k)! Any financial advisor will tell you it pays to keep your hands off your 401(k) until you retire.
If you have the money in your workplace 401(k) to cover a home remodel or a child’s wedding expenses, you may ask yourself, Why not? After all, the average 401(k) balance right now is $103,700. When a big expense comes up, it can be tempting to turn to your retirement account for extra cash.