This Common Mistake Can Drastically Impact Your Retirement

Retirement

This Common Mistake Can Drastically Impact Your Retirement

Posted by Infinite Wealth Advisors, LLC
3 years ago | March 8, 2017

Couple discussing home economicsLike a roller coaster, life is full of ups and downs. Unfortunately those “downs” tend to come just as you’ve gotten onto a good track toward a secure future. After you hit the peak of your career and you’re beginning to build up your retirement account, the kids go off to college and now you face a dilemma. You want to help them get a great education, but that means paying a massive tuition bill.

Wanting to give their children the best possible start in life, many well-intentioned parents turn to their retirement funds. Borrowing money from yourself seems to be the only way to foot that five-figure tuition. But before you make this drastic decision, take a moment to consider the consequences.

First, an early withdrawal from your retirement fund will probably trigger a tax penalty. You’ll be paying Uncle Sam for the privilege of paying for college tuition! But the biggest problem is that you will lose not only money, but time from your retirement savings. Remember, even if you can put the money back in the fund later, you can never make up for the time that you’ve lost. Interest compounds over time and there’s no way to get that lost money back.

Depending upon your fund’s rules, you might not be allowed to make regular contributions until the loan is repaid. So now you’re not only losing time and money; you’re also losing a valuable tax advantage for each year that you continue repaying the loan.

It’s no wonder that people who take loans from their retirement funds usually end up retiring later than they had planned. That might not seem like a big deal now, but you might experience major regret later. We can’t always predict things like illness or a poor job market, which can force an early retirement.

Remember this important rule of retirement planning: There are other ways to pay for major expenses like college, but there is only one way to fund your retirement. Avoid taking loans from your retirement fund, and talk to us about other possible solutions for your dilemma. Give us a call, and we will analyze your situation and help you decide on a safer strategy.

Have questions? Need assistance?

Use the form below to schedule an appointment.

Call 877-281-8282 or email kevin@infinitewealthadvisors.com to speak with an agent.