I wasn't surprised to read new research from the University of Michigan that shows employees are raiding their retirement accounts. In fact, many experts are worried baby boomers will have to scrimp in retirement, if they are not scrimping already. A Gen-Xer, I am already planning to raid my retirement accounts before I officially retire.
According to a recent article by Fortune, people used to have defined-benefit pension plans, which essentially kept the retirement cookie jar on lockdown. Now, people put their money in 401(k) plans that allow people to sneak a nibble from their retirement cookies. The University of Michigan study found people withdrew money from retirement for reasons ranging from medical expenses to home remodeling projects. However, the No. 1 reason people tapped their retirement savings early was due to mortgage loan distress.
Dying without a penny
A high school classmate of mine recently died of a heart-attack in his sleep. Even though experts say I need to save enough money in retirement to last until I'm 100 years old, I don't think that's realistic. I could die at 40. I want to make some of my retirement money stretch in case I live to be 100 like my grandmother, but I also want to tap into some of it early.
Retiring as early as possible
It's annoying to hear government officials talk about raising the retirement age. As it is now, I can't receive full retirement benefits until I'm 67. I hope to retire at 67 with at least $1.5 million saved up. However, I am not going to live in poverty in my late 50s and early 60s just so I'll have an extra $100,000 set aside for retirement.
Making up for decreased wages
Another reason I expect to have to dip into my retirement savings early is because of the pay cuts and furloughs that have become commonplace in my workplace. It's difficult to pay the same bills every month when my income goes down instead of up. Sometimes I view my stock market gains as a way to counterbalance my substantial decrease in earned income.
Helping children buy a home
I'd like to leave an inheritance for my children. But it makes even more sense to help them now as they get through college, buy their first homes and start families. I rather tap into my retirement at 60 to help them buy their first home than help them from the grave. A lot of experts say that younger people are sabotaging their retirements by helping their adult children. I can withdrawal $10,000 to help each of my children purchase their first homes without any penalty. I'd rather see $20,000 from my Roth IRA go to good use than having it sit there and wait for the next stock market crash.
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