US News & World Report
Investors Should Not Tap Into Retirement Funds Early
By Kayleigh Kulp
Financial experts generally advise against borrowing from – and especially withdrawing early – from retirement accounts. And for good reason.
Betterment certified financial planner Garrett Oakley puts it this way: “A 30-year-old worker living in Illinois wants to cash out $14,000 from his 401(k). He’ll pay a 25 percent federal income tax based off his salary, a 10 percent early withdrawal penalty fee, and 3.75 percent state tax. So of that $14,000 he wants to borrow from his retirement account, he’ll only net $8,575. If he left it intact, and we assume an average 8 percent annual return, that would grow to over $150,000 by 65.”