Avoid Withdrawing Money From Your 401K

Times are tough. Many of us are finding it hard to make ends meet. You might be tempted to withdraw money from your 401K. After all, it's your money and you should use when ever you want, right?

While the vested portion of your 401K belongs to you, early withdrawals come with some bad consequences. The reason people start saving for their retirement at such an early age is because it takes a large sum of money to be able to retire comfortably. This will take some time to accumulate. The average person only puts away a few thousand dollars a year for retirement. The good news is the money will grow exponentially if you give it enough time. It's called the "Rule of 72". Google it. You could see your money start to double every few years with you give it enough time.

Early withdrawals from a 401K is like cutting a tree at it's trunk after only a few years of growth. It will grow back it's branches but it's going to take that much longer. Not to mention the fees (and possible taxes) for early withdrawal. On the other hand, if you properly invest, diversify and re balance you 401K, it will grow like a beautiful oak tree. I've seen people retire with over one million dollars. They didn't put away large sums of money. They just put a way a few thousand dollars every year starting at an early age. They picked some good mutual funds (or ETFs) and didn't touch the money until they retired.

Sometimes we find ourselves with limited financial choices. Try to avoid withdrawing your retirement money if at all possible. You will thank yourself at retirement.