Should you withdraw your retirement funds early? It may seem like a great source of funds to meet your current financial obligations, but the long term effect of an early retirement withdrawal might not be worth doing so to meet short term financial obligations.
Withdrawing from retirement funds early can carry a penalty of 10% or so, and this may be a cut you’re not willing to take. But there are circumstances in which you could make an early retirement withdrawal from your savings and avoid these penalties.
Can You Withdraw Your Retirement Funds Early?
To see if your situation qualifies you for exemption from the penalties generally associated with an early retirement withdrawal, you will need to review your own personal account. There are, however, some situations that generally qualify you for exemption from any account.
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These include situations in which you have become disabled, either permanently or totally, and situations in which you were left unemployed without health insurance. Other situations that may qualify you for exemption could be a need to cover education expenses for you or a dependent, the purchase of a home, etc.
Things to Consider
If you’re not considering making an early retirement withdrawal for any of these reasons, you have to decide whether or not making the early withdrawal is worth the financial penalties associated with doing so.
If you’re in a situation that leaves you no other choice, unexpected hardships, etc., then maybe a 10% loss is worth the security of knowing that you have money available to address your current needs. But if you can avoid leaving this money alone until your legal age of retirement, obviously you will yield the greatest return.
Withdraw Pension Funds Early?
No matter what you decide, you should consult with your account advisor before making your early retirement withdrawal. You may be able to come up with another option you didn’t know you had, or you might find that by going about things in a slightly different manner you could qualify yourself for exemption from the penalties of early withdrawal.
Be prepared to take a loss when you start planning to make an early retirement withdrawal to account for your finances most accurately.
Keep in mind that you have worked long and hard for this money, and consider what an early retirement withdrawal will do to your financial state when you are actually ready to retire. You are sure to make the right decision for your family.
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