Saving For Retirement: Do Not Make Early Withdrawals

By Patricia Uceda, Spring 2015 Graduate Research Assistant

As tempting as it may be to make early withdrawals out of your retirement savings, don’t.  Money you withdraw from a traditional 401(k) is taxed.  Early withdrawals (before you are 59½ years of age) generally result in a 10% penalty. And, your retirement nest egg will shrink.

Instead of looking to your retirement plan, set up an emergency savings account.  Work emergency savings into your budget – even $50 dollars a month into a separate savings account will keep you from raiding your 401(k) in an emergency.