The coronavirus crisis has rattled the global economy. Stocks are down, unemployment is up and Americans are worried.
In these desperate financial times, you might be tempted to pull from your retirement early. But is this a good idea?
Financial experts say, if you can help it, don’t tap into your retirement funds early. If you withdraw money before age 59 and a half, you have to pay tax on the withdrawal and an additional 10% penalty.
A new report from the American Investment Institute shows in 2017, the IRS collected around $5.7 billion in penalties from retirement plans.
If you think you might need some fast money, experts recommend setting up an emergency savings account or a loan. If you have a 401(k) plan, you may be eligible to take a 401(k) loan. You can borrow up to half of the vested money in your account -- up to $50,000.
Or, if you’re a homeowner, you may qualify for a home-equity line of credit with a low-interest rate.
The American Investment Institute report showed that the average amount taken in an early, non-exempt withdrawal was roughly $11,100 per tax return.