| The last few years have seen most of us suffer from | | | | term to describe them. |
| the Great Recession. If you haven't, consider yourself | | | | To keep people from pulling money out of their |
| very lucky. To find much needed cash, many people | | | | retirement accounts, the government uses a time |
| have looked to their retirement accounts in panic. | | | | tested mechanism. It hits you with a penalty. The |
| There are ways to do this without creating lots of | | | | penalty is 10 percent of the amount taken out. This is in |
| problems, but you must be careful or you will run into | | | | addition to the income tax you must pay on the |
| tax penalties. | | | | distribution. This also doesn't take into account state |
| Retirement accounts such as the 401k, IRA, Roth and | | | | taxes and any penalties that your state might also nail |
| so on were created because of a simple problem. | | | | you for. |
| Most people need 70 percent of their usual income to | | | | Is there any way to avoid this? Yes. Many plans allow |
| survive when retired. Social Security does not come | | | | for you to take a loan against the vested amount of |
| close to meeting this percentage for, well, anyone. You | | | | your account. Plans have different rules, but generally |
| should receive a yearly statement of benefits from the | | | | you can take up to 50 percent of the vested amount, |
| Social Security Administration that shows what you | | | | but you must repay it in 5 years. The advantage of |
| can expect to receive. It is usually around $1,000 a | | | | this is a loan is not considered income and the IRS will |
| month give or take a few hundred dollars. Now | | | | not penalize you for taking it. Many people used such |
| consider your monthly expenses. How far is $1,000 | | | | loans to pay off their credit cards because they would |
| going to get you? Not very far in most parts of the | | | | prefer to pay interest to their retirement account |
| country! | | | | instead of some bank. These days, most are just |
| Given the fiscal "retirement problem", the government | | | | taking the loans to survive the current economic |
| has created some heavily tax incentivized platforms. | | | | malaise. |
| These only work, however, if you actually put and | | | | Your retirement account can be a source of cash in |
| leave money in the accounts. Allowing people to raid | | | | trying times. Just make sure you don't turn it into a tax |
| their accounts is the last thing the government wants | | | | problem by withdrawing money. Instead, consider a |
| because you are going to need that money in your | | | | loan. |
| golden years. Without it, "golden" is not going to be the | | | | |