{"id":7796,"date":"2015-04-01T02:28:13","date_gmt":"2015-04-01T06:28:13","guid":{"rendered":"http:\/\/ncdata.wpengine.com\/?p=7796"},"modified":"2017-11-02T14:43:15","modified_gmt":"2017-11-02T18:43:15","slug":"hands-off-dont-raid-your-retirement-accounts-by-fred-banyon","status":"publish","type":"post","link":"https:\/\/nationalcenter.org\/ncppr\/2015\/04\/01\/hands-off-dont-raid-your-retirement-accounts-by-fred-banyon\/","title":{"rendered":"Hands Off: Don&#8217;t Raid Your Retirement Accounts! by Fred Banyon"},"content":{"rendered":"<p class=\"style3\"><img decoding=\"async\" loading=\"lazy\" class=\"size-full wp-image-7797 alignleft\" src=\"https:\/\/nationalcenter.org\/wp-content\/uploads\/2017\/02\/banyon_sm.jpg\" alt=\"banyon_sm\" width=\"100\" height=\"100\" \/>After the Great Recession of 2008, an unpleasant phenomena resurfaced.<\/p>\n<p class=\"style3\">Because of financial distress from the recession, a large number of Americans began tapping into their secured retirement savings. African-Americans and Hispanics were the groups that dipped into these sacred instruments the most.<\/p>\n<p class=\"style3\">According to a 2012 study by Ariel Investments and AON Hewitt, African-American employees took these &#8220;hardship withdrawals&#8221; more than any other ethnic group. Fully, 8.8 percent of African-Americans took hardship withdrawals in 2010 as compared to 3.2 percent of Hispanics, 1.7 percent of whites and just 1.2 percent of Asian workers.<\/p>\n<p class=\"style3\">Because these assets are designed for use in retirement, Americans need to develop sound budgeting and savings strategies that eliminate the need to tap into retirement funds.<\/p>\n<p class=\"style3\">Instead of tapping those retirement funds, it is important to use the prosperous times to create a rainy day fund. Many leading financial planners suggest such a fund equivalent to six months salary set aside for an unforeseen emergency.<\/p>\n<p class=\"style3\">Hardship withdrawals are allowed from 401(k) plans, but \u2014 from what I&#8217;ve discussed with Arthur Don, an attorney affiliated with Ariel Investments \u2014 there are some amazing things people will justify for such a withdrawal:<\/p>\n<ul>\n<li class=\"style3\">a vacation;<\/li>\n<li class=\"style3\">celebrating a wedding anniversary or birthday;<\/li>\n<li class=\"style3\">paying for a wedding;<\/li>\n<li class=\"style3\">buying a new car (while this is possibly a necessity, it can often be little more than keeping up with the Joneses);<\/li>\n<li class=\"style3\">a shopping spree.<\/li>\n<\/ul>\n<p class=\"style3\">There are other reasons, but the point here is that a nonemergency purchase should not come from something as important as a 401(k) plan. Develop better spending and saving habits.<\/p>\n<p class=\"style3\">Not budgeting carefully &#8211; and thus living beyond our means &#8211; is the number-one obstacle toward financial security.<\/p>\n<p class=\"style3\">Below are five questions to ask before initiating an emergency withdrawal from retirement savings:<\/p>\n<ul>\n<li class=\"style3\">What&#8217;s the tax bite on a 401(k) withdrawal as opposed to a loan? Any withdrawal from a qualified retirement plan is subject to a ten percent penalty and one&#8217;s income tax rate. Be cautious.<\/li>\n<li class=\"style3\">Can a tax penalty for an emergency withdrawal be avoided? It&#8217;s possible for those 55 or older, those who have left the employer where their plan was located, the disabled and military reserve personnel called up to active duty.<\/li>\n<li class=\"style3\">There&#8217;s a risk with losing one&#8217;s job. If someone with a 401(k) withdrawal leaves his job or is laid off, any loan balance must be repaid within 60 days.<\/li>\n<li class=\"style3\">Will I mind my account being in the slow lane for six months or more? One is usually restricted from making contributions to a 401(k) for six months after taking a hardship withdrawal, further setting you back in accumulating retirement reserves.<\/li>\n<li class=\"style3\">Is there an IRA alternative? Consider a Roth or traditional IRA. There are income tests to qualify, but those are worth a look. An IRA can be tapped into \u2014 avoiding penalties \u2014 for first-time homebuyers and to pay for college tuition. An old 401(k) can often be rolled over into an IRA.<\/li>\n<\/ul>\n<p class=\"style3\">The best strategy, of course, is to leave a 401(k) retirement savings account alone.<\/p>\n<p class=\"style3\">It is meant to provide for the needs of the future, not the wants of the present.<\/p>\n<p class=\"style3\" align=\"center\"># # #<\/p>\n<p class=\"style3\"><a href=\"https:\/\/nationalcenter.org\/bios\/P21Speakers_Banyon.html\"><strong>Fred Banyon<\/strong><\/a>, a financial literacy advocate, is a stockbroker with American Trust Investment Services in Chicago. Comments may be sent to <a href=\"mailto:Project21@nationalcenter.org\">Project21@nationalcenter.org<\/a>.<\/p>\n<p class=\"style1\"><span class=\"style2 style1 style1 style1\">Published by the <a href=\"https:\/\/nationalcenter.org\/index.html\">National Center for Public Policy Research<\/a>. Reprints permitted provided source is credited. New Visions Commentaries reflect the views of their author, and not necessarily those of <a href=\"https:\/\/nationalcenter.org\/P21Index.html\">Project 21<\/a>, other Project 21 members, or the National Center for Public Policy Research, its board or staff.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>After the Great Recession of 2008, an unpleasant phenomena resurfaced. Because of financial distress from the recession, a large number of Americans began tapping into their secured retirement savings. African-Americans and Hispanics were the groups that dipped into these sacred instruments the most. According to&#8230;<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36,60],"tags":[84],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Hands Off: Don&#039;t Raid Your Retirement Accounts! by Fred Banyon - The National Center<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/nationalcenter.org\/ncppr\/2015\/04\/01\/hands-off-dont-raid-your-retirement-accounts-by-fred-banyon\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"The National Center\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/nationalcenter.org\/ncppr\/2015\/04\/01\/hands-off-dont-raid-your-retirement-accounts-by-fred-banyon\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/nationalcenter.org\/ncppr\/2015\/04\/01\/hands-off-dont-raid-your-retirement-accounts-by-fred-banyon\/\"},\"author\":{\"name\":\"The National Center\",\"@id\":\"https:\/\/nationalcenter.org\/#\/schema\/person\/b8ca6710c21895f6ce418b5cc391bb6f\"},\"headline\":\"Hands Off: Don&#8217;t Raid Your Retirement Accounts! 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