Many people are getting worried and are acting irrationally because of the current economic downturn. I have some advice for people. STOP FREAKING OUT!
People freaking out is what causes economic downturns. Everyone hears things are bad so they stop spending. That causes a long chain of economic events that turn into a recession.
Anyway, I heard about a family that liquidated their 401k to pay off their house. Bad idea. There are many drawbacks of dipping into the 401k. Here is what is wrong with it:
You pay mega taxes on early withdrawals from a 401k. 401k is a special type of account with a special tax code that lets you deposit into the account before taxes. Making a withdrawal before retirement means you pay back those taxes and penalties. It is an expensive “cushion”.
It ruins your retirement. You have that money put away for a reason. Do not take a loan off of it. Do not take any of it. Just leave it until you are done with work.
Those are the big two reasons. They are very big. Do not touch your 401k. I know it is tempting, but there is always another way. That money is there for you to retire. Do not count on anything else. That is it. Leave it there.