Mistake no. 5: Taking a withdrawal from their 401(k) plan
It seems that 1 in 4 boomers already took a withdrawal from a 401(k) plan, and one of the main reasons was to pay down debt or cover healthcare expenses. Truth be told, everyone has been in a similar situation at least once in their lives.
However, it seems to be one of the most expensive mistakes you can make, especially if you decide to withdraw money before you reach 59 and a half years old, as you might have to deal with an early withdrawal penalty.
When you have to make such a tough decision, remind yourself of the magnitude of the situation. Withdrawing before you reach the qualified age might become subject to taxation and penalties, and you might be losing half of your asset value just because, at one point, you really needed the money.
So before taking that withdrawal from your 401(k), make sure you’ve eliminated any other options. After all, we’re talking about the long-term savings that you’ve hardly worked for—your entire nest egg. You have to make sure you’re still protecting it, and as it turns out, taking money out of your employment fund and facing penalties and tax charges might prove to be a tough challenge for most people.
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