COVID-19 has created a lot of damages and brought many changes, and these changes have affected almost all sectors, including retirement benefits. Retirement accounts are created mainly to be a lifesaver after someone leaves the labor market, and it is only then that they can be accessed. Thanks to Coronavirus, the US government has made a change in the law governing retirement accounts.
This law has made retirement accounts accessible and more affordable for users. Now while this is a better option for most people than to accumulate debts during this period, what many don’t know is that as positive as the law is, retirement accounts shouldn’t be accessed before retirement at all!
Why accessing retirement account before retirement isn’t right
According to a recent study, after retirement accounts providing early accessibility, people have already started withdrawing from their accounts, and others are considering the move. Remember that retirement accounts are meant for when you are out of service. But people aren’t even looking at their savings account; they are already looting the funds intended for when they won’t be receiving salaries. This might be quite dangerous, and most people will regret this. Why?
Read – How to manage money during COVID 19
Withdrawal from your retirement accounts, like 401 (k) accounts before your prescribed period of withdrawal, will cost you (fees). But it is little damage compared to the amount of money (interest) you will lose when you are withdrawing from a retirement account. For example, if you’re taking out $2000 from your account, which could have yielded an averagely 8% annual return after 30 years, you are potentially losing $14,000! Won’t it be better just to let the money make more money for you?
Resist the urge
Your retirement money could be your easily fetched solution in the current turbulent times. You can use this money wisely at a later point in time for several other purposes. Instead of eyeing your retirement money, you can try one of the following:
- Check if you have unemployment benefits (in case you’ve lost your job).
- You can jump on your savings account if you have one.
- The government knows people are going through hard things so they have provided programs that will help you delay the payment of your debt.
- Pick up a side hustle to reinforce your financial capabilities.
- You can even be a freelancer while sitting at home.
Final words
The world is going through hard times. Some say fingers aren’t equal. Some people are working, and some aren’t. Some are getting paid even while sitting at home, and some don’t even have funds to provide for their families. Don’t withdraw money from your retirement accounts. Remember, you will reap the long-term benefits. But if you have no choice, you can withdraw it and endeavor to start a new retirement account as soon as possible.
