Is it Ever Wise to Tap into Your 401(k) in Denver? Advice from a Bankruptcy Attorney

Is it ever wise to tap into your 401k?
Image Credit: Pixabay – TanteTati

It can be difficult to save for retirement while living in Littleton, Centennial, or Aurora. Life is expensive: College, having children, buying a house, medical emergencies, starting a business, and putting your kids through college all tend to keep us from saving the money we need for our future. But, no matter what your idea of retirement is, it usually involves saving money. In most cases, setting up a 401(k) is one of the best ways to start saving. And, when employers match your funds, the benefit is multiplied. But, it can be tempting to dip into this substantial chunk of money when the going gets rough. In today’s blog, we’re going to discuss if it is ever wise to tap into your 401(k), and why filing for bankruptcy might be a better option.

I’m In Financial Trouble – Can I Use My 401(k)?

If you have put aside money in your 401(k) and you’ve been hit with an unexpected expense or debt (such as a medical emergency, the loss of a job, etc.), it is extremely tempting to tap into your retirement funds to stay out of debt or avoid bankruptcy. This isn’t a wise option when you won’t be able to repay it quickly. You are only harming your future by tapping into this account without the ability to replenish   the money. Think about it this way: When you take money from your 401(k), you are borrowing from your future self.

Experts Advise Against Tapping into Your Retirement

Financial advisers, budget experts, and bankruptcy lawyers almost always advise you against using retirement funds before you are ready to retire. There are other ways to plan your finances, such as having an emergency fund and setting up a good budget, which can help you avoid using your 401(k) funds. If you do withdraw money from your retirement account, you could lose your tax advantages, be set back years in your savings plan, and incur possible penalties for the withdrawal.

Situations Where Withdrawing from Your 401(k) Makes Sense

In some cases, borrowing money from your 401(k) makes sense. For example, purchasing a home can be a wise investment which will grow in value. Therefore, it may be a good option to use funds from your 401(k) for this purchase. It is also sometimes permitted to withdraw from your retirement account to pay for higher or secondary education for yourself, your spouse, a child or a grandkid. This can make you or a loved one more valuable in the workplace, which could warrant using your 401(k) funds. Always consult an expert financial adviser before you decide to withdraw money from your retirement funds, however. Saving for your future is important.

Filing for Bankruptcy – Your 401(k) Retirement Account is Protected

Preserving your retirement funds and filing for bankruptcy in Colorado makes good sense if your debt is large.

If you were hit by an unexpected emergency, or have become overwhelmed by debt, filing for bankruptcy can be a wiser choice than tapping into your 401(k). Chapter 7 and Chapter 13 bankruptcy both provide a legal way to discharge debt and create a plan for a better financial future. And, because your 401(k) is protected under bankruptcy in Highlands Ranch, Parker, and Lone Tree, you’ll be able to continue saving for your future. Preserving your retirement funds and filing for bankruptcy makes good sense if your debt is large.

If you are overwhelmed by debt and want to tap into your 401(k), consider filing for bankruptcy and getting a fresh start. Contact experienced bankruptcy lawyer Barry Arrington for a free consultation at 303-205-7870. He will help you get the best fresh start possible.

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