Massey & Associates<\/a> Jeff Massey said 6% of workers enrolled in 401(k) plans managed by Vanguard made hardship withdrawals last year.<\/p>\nHe said this has been happening at an increasing rate for six consecutive years.<\/p>\n
Emily Volz reports on if and when you should withdraw money from your 401(k). (WJAR)<\/p>\n<\/p>\n
Massey said there are a few reasons why more Americans are tapping into their 401(k).<\/p>\n
“The average account is up 13% over the last year,” he said. “So people might be looking at that as kind of a windfall and saying, ‘Oh gee, there’s a lot more there than I had last year. Maybe I’ll just take some out.'”<\/p>\n
He says the ever-increasing cost of living is also a factor.<\/p>\n
“If we take into account what happened roughly a year ago with the tariffs and the inflation that that caused, a lot of people were having difficulty meeting their bills,” says Massey.<\/p>\n
Massey said tapping into your 401(k) is usually not advised, for several reasons.<\/p>\n
First, if you withdraw money from your 401(k) early, that money will then be taxed as regular income.<\/p>\n
On top of that, you’ll also have to pay a 10% penalty.<\/p>\n
So, what should you do instead if you need more cash to get by?<\/p>\n
“If you’re a homeowner, what I’d prefer people do is get a home equity line of credit,” Massey said. “And that way you can borrow that money there, and you’re only required to make interest payments on the amount you pull out.”<\/p>\n
He continued, “Now, not everybody owns a home, so they wouldn’t have that option, which underscores the importance of planning and having an emergency account.”<\/p>\n
Massey said emergency accounts should cover six months’ worth of living expenses.<\/p>\n
Another option is to take out a 401(k) loan.<\/p>\n
Massey said a 401(k) loan is different from a hardship withdrawal because, instead of taking money out of your account, you’re borrowing against it through a loan, meaning you’re basically borrowing from yourself.<\/p>\n
These loans do have to be repaid with interest, but since you’re borrowing from yourself, those interest payments are really going back to you.<\/p>\n","protected":false},"excerpt":{"rendered":"(WJAR) \u2014 A growing number of Americans are tapping into their 401(k) accounts to make ends meet, which…\n","protected":false},"author":2,"featured_media":547982,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":["post-547981","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-ca","tag-canada","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/547981","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=547981"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/547981\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/547982"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=547981"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=547981"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=547981"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}