Investment Group Vanguard says during Covid Time many of their investors have pulled out an average 12 thousand dollars from their 401ks. Troy Sharpe of Oak Harvest Financial Group says taking a distribution out is not your best choice. "The distribution [permanent withdrawal] from a 401k can create a possibility of a 10% penalty plus income taxes. The TRUE lost cost is the amount of money it could have grown to if you had left it in your plan."
If you live paycheck to paycheck, Sharpe says it's time to prepare for possible bad times by starting to save up 3 months of your household expenses now.
"Sometimes life happens and if you need money, a 401k LOAN can be a viable option. You pay interest back to yourself and repay the loan through salary deferrals."
Some people who live paycheck to paycheck, however, have opted to take out a distribution from their account. Sharpe says this may solve their current problem, but fees and income taxes will have to be paid. Talk to you money expert before you make any 401k decisions.
You can hear Troy Sharpe on The Retirement Income Show on Sundays on Newsradio 740 KTRH