Cashing out your retirement funds to pay off debts? STOP!
Every day individuals in financial difficulty make the choice to take out a retirement loan or to liquidate a 401(k) or IRS in order to deal with debts they have incurred. Depending on how well you are prepared for retirement, this may not be your best option.
Most American’s retirement assets are far short of what they will need to maintain a lifestyle even somewhat close to what they enjoyed when they worked full time. Many people further jeopardize the funds they do have by withdrawing money in order to meet current obligations such as medical debt, credit card bills, or other pressing commitments. Unless withdrawing these funds in no way diminishes your ability to fully fund your retirement, you should consider consulting with a bankruptcy professional to see if there is a way to handle your debts without using precious retirement resources.
What few people know or understand, and even many tax professionals, financial planners, and other retirement advisors, is that most retirement money in ERISA qualified accounts is protected in bankruptcy. There are some limits and restrictions, but very few people with retirement accounts are impacted by these limits and restrictions. There is protection up to $1 million for an IRA account in most circumstances and typically unlimited protection for 401(k) accounts. What this means is that individuals are voluntarily taking money out of their accounts that is completely protected from creditors, thus meeting an immediate need but substantially increasing the odds of them living in poverty in their retirement years.
You might qualify to eliminate or substantially reduce your debts in bankruptcy while completely protecting their retirement funds. The cost of not being able to provide for yourself in your retirement years can have a far greater impact on you and your family than if you choose to resolve the problem in other ways.
It is possible to protect your retirement fund, even if you are looking to file for bankruptcy. You may still choose to use those funds, to pay off debts, but it would be wise to review your options with an experienced bankruptcy attorney prior to doing so. To explore your options and learn more about how we can help you save your 401k and other retirement funds, call us today at 801-305-3702 for your free consultation.