Comments on: 7 Deadly Sins of Personal Finance: Raiding Retirement

By: Khyron

Khyron — Mon, 18 Aug 2008 04:32:14 +0000

Roth IRA makes a nice savings fund for emergencies and down payments, given that contributions can be taken back out without penalty. Let the 401(k) accrue, use the Roth for both functions until you have enough that you can split the retirement function of the Roth from the emergency and/or down payment function.

Just a thought.

As for “working poor”, yeah, that should be quantified. My roommate probably falls (somewhat closely) into that description. No 401(k) or 403(b) but she has a Roth that she uses instead. How well she manages it now that I don’t help her with it, well, that I can’t answer, but you get the idea.

By: Madame X

Madame X — Thu, 14 Aug 2008 21:28:27 +0000

hear, hear. I know too many people who have done this, and it was never for a true emergency reason.

By: Start-Up

Start-Up — Thu, 14 Aug 2008 20:03:58 +0000

Not only is it bad to raid your retirement funds because $1 today is equivalent to $22 in forty years, but if you take a loan from you 401k and you lose your job, the loan must be paid back within a certain time period or it’s treated as an early withdrawal and is subject to fees and taxes.

By: ToughMoneyLove

ToughMoneyLove — Thu, 14 Aug 2008 16:04:01 +0000

What is your definition of “working poor”? That is a subjective label that really doesn’t tell us much.

By: working poor

working poor — Thu, 14 Aug 2008 15:39:20 +0000

The working poor can’t afford to purchase adequate insurance.

By: ToughMoneyLove

ToughMoneyLove — Thu, 14 Aug 2008 15:22:05 +0000

Good advice but regarding the “major medical emergency” as causing a raid on retirement funds: Plan ahead for that risk now by purchasing adequate major medical insurance and disability insurance. That will protect those valuable funds in tax deferred accounts where they belong.