The Coleman Comment May 2009

The Coleman Comment May 2009 Tips on Tapping into Your Retirement Funds Though some leading economic indicators have inched higher and pundits are pondering the possibility of a bear market bottom, the recession and its effects are still obvious. Few have been spared from the wrath of tightening credit markets, rising unemployment, dwindling savings or freefalling home values. With fiscal challenges popping up for people on a daily basis, access to cash is a key survival tactic. But is tapping your retirement fund a good option to get you through a financial crunch? The short answer is...no. Although it is your money, the tax consequences and impact to your long-term savings are very serious. If your need is so pressing that no other option will suffice, proceed with caution and know the rules. The Loan: A loan from your 401(k) allows you to borrow against your savings. The loan must be repaid - with interest! - usually within five years. But, if you lose your job or leave the company and still have an outstanding loan, you are required to pay it back (typically) within one to two months. Failure to repay the loan accordingly is considered a default and the outstanding loan amount is fully taxable. Other restrictions may apply so be sure to talk with your 401(k) adminstrator before making this choice. The Hardship Withdrawal: This option provides you with access to your savings under certain financial conditions, i.e. ...