Is It Okay To Tap Into My Retirement Funds?

The global health crisis has hit everyone in some way. For many, they experienced tremendous loss of income, some with none at all. While unemployment and added government assistance stimulus checks were helpful to some degree, there are many who are still greatly struggling and weighing all income options, including accessing retirement funds early as a matter of survival.

Tips From Our Friends at Choice Investments

Generally speaking, it is always better to leave your retirement accounts alone and pull funds from non-retirement accounts first. This has to do with many factors including the longevity a retirement account requires to make steady gains and compensate for market losses. Over time, these accounts steadily grow. If money is taken out, the compound rate of return structure changes and there are usually pretty stiff penalty fees and taxes for early withdrawal.

Alternatives To Consider

• If you have an Individual Retirement Account (IRA) and are under the age of 59-1/2, rather than withdraw from your IRA, you may want to consider a personal loan, or home equity line of credit (HELOC). This allows you to borrow against yourself at a lower rate, rather than assume the 10% penalty, and have to pay taxes on the money withdrawn.

• If you are over the age of 59-1/2, you could take a monthly withdrawal from your IRA to make the loan payments. This way you are only taking out a portion each month, which can be more cost effective than withdrawing a larger lump sum.

• If you have a 401k you can always take a loan out against that plan too. Again, this is not ideal, but it is a better alternative than withdrawing a larger lump sum.

• If you have no other choice, then by all means withdraw from your IRA. Money is needed for survival and nothing is more important than your life and health. Just be aware of what you may lose in income overall during the long term.

Invest Smarter

Whether you’re a new or experienced investor, we’re here to help with our investing options. We are more than happy to discuss your personal situation as everyone’s is unique, especially during this stressful time.

Call 315-735-8571 to talk about your options or make an appointment with one of our friendly and knowledgeable representatives today. Simply click on the button below, select “Advisory Services” from the menu and choose “Investment Services.”

¹IRA's are offered through First Source FCU and are federally insured by NCUA.

²Stocks/Stock Funds, other securities, and advisory services are offered through Cadaret, Grant & Co., Inc., a Registered Investment Advisor and Member FINRA/SIPC. These products may also be offered by a First Source "dual employee" who accepts deposits on behalf of the credit union and also sells non-deposit investment products on behalf of Choice Investments LLC through Cadaret, Grant & Co. Choice Investments LLC, Cadaret, Grant & Co., Inc. and First Source are separate entities. You can check the background of these financial professionals through FINRA’s BrokerCheck. First Source Federal Credit Union is not a registered broker dealer and is not affiliated with Choice Investments LLC.

NOT FEDERALLY INSURED    •    MAY LOSE VALUE    •    NO CREDIT UNION OBLIGATIONS    •    NO CREDIT UNION GUARANTEE 

Funds invested through Choice Investments are not federally insured, may lose value, and are of no way obligations of First Source FCU. Involves investment risk and may involve loss of principal. First Source has no guarantees of securities and annuities products offered through Cadaret, Grant & Co., Inc. Financial Professionals associated with this site are registered to conduct securities business and licensed to conduct insurance business in certain states. Response to, or contact with, residents of other states will be made only upon compliance with applicable licensing and registration requirements. The information in this website is for U.S. residents only and does not constitute an offer to sell, or a solicitation of an offer to purchase brokerage services to persons outside of the United States.

Planning to make your funds last

As retirement approaches, you’ll look forward to having more free time. You’ll also be putting your retirement plan into action, transitioning from saving to managing and spending. 

Goals

We’re here to help match your retirement goals with a spending strategy. We start by analyzing plans you may already have, and offering advice for making adjustments based on your current resources and needs.

Factors to consider include: when you plan to retire, where you plan to live, and how you plan to spend your time.

Expenses

Once we know your goals, time frame, and plans, we can estimate your projected expenses. We can include items like establishing an emergency fund, ongoing health care, essential living expenses, and entertainment. After taking everything into consideration, we can make plans. 

Income

A retirement plan includes generating income from the assets in your retirement portfolio, and developing a strategy for withdrawing funds from various accounts in a way that maximizes your long-term income management. It may also potentially include reinvesting. 

Making Withdrawals

The goal is to have your savings last through retirement. Some accounts, such as traditional savings, offer complete freedom over the timing and amount of withdrawals. Others, especially tax-deferred accounts, have more restrictions, and some distributions may be reinvested to earn continuing income. We can help you choose the approach that best fits your budget and lifestyle.

Regular Checkups

Once you’re retired, we recommend regular “checkups” to ensure your plan is still meeting all of your needs. If your circumstances change, you may want to adjust your budget and strategy accordingly.

Getting Started

We’re here to help you work on your retirement plans, make informed choices and Retire Smarter. Call 315-735-8571 to talk about your options or make an appointment with one of our friendly and knowledgeable representatives today. Simply click on the button below, select “Advisory Services” from the menu and choose “Investment Services.”

Take steps now to create a plan

When thinking about saving for retirement, a good plan includes some important steps. We can help you get started by considering your income, budget, lifestyle, and goals. Begin with these steps, and you’ll be on your way. 

1. Create a Budget

Regardless of age, it’s a great idea to create a budget to manage your spending and increase your savings. When we have a good savings habit started, we can begin to think about saving for retirement.

2. Set a goal to save a percentage of your income every year

This includes matching contributions from your employer 401(k) if available, IRAs, and any other workplace retirement accounts. A good target: by the time you reach 30, try to have saved a total amount equal to your current salary.

3. Set targets based on your age

If you're in your 40s to early 50s, saving is especially crucial as you approach retirement age. Common recommendations include having at least 3 times your salary saved by age 40, and 6 times your salary saved by age 50. If you haven’t met these goals, it's okay, then try to increase the portion of your income you save in an amount that works for you.

4. Maximize your 401(k), especially with employer matching

If it’s available to you, your first place to put retirement savings should be the maximum allowed in a 401(k) with employer matching. The matching funds are essentially free money. Ask your employer what you’re currently contributing, and consider having more deducted from your paycheck (up to the maximum allowed) if you can. If your employer doesn’t offer it, or you are self-employed, other options are available, such as a SEP IRA, SIMPLE IRA, or Self-Employed 401(k).

5. Take advantage of IRAs

IRAs, both Traditional and Roth, offer tax breaks if you meet certain eligibility requirements based on your income. Each may have a place in your retirement savings mix. Learn more here, and ask us what may work for you.

6. Make your savings automatic

You won’t spend part of your income that you don’t see. We recommend setting up automatic withdrawals for retirement. Making automatic contributions to your retirement accounts with each paycheck makes it easier.

7. Check your progress regularly

It’s a good idea to evaluate your retirement plan once or twice a year, or whenever your income, expenses, or other factors change. We can help you evaluate your savings, your goals, and whether any changes are in order.

Retire Smarter

Whether you’re getting ready to retire or making plans for the future, we're here to help you with the retirement planning process. Once you have a plan in place, you can begin to work toward your goals, and take control of your future.

Call 315-735-8571 to talk about your options or make an appointment with one of our friendly and knowledgeable representatives today. Simply click on the button below, select “Advisory Services” from the menu and choose “Investment Services.”