It can be tempting to dip into retirement money when no cash is left in the bank and there are bills to be paid, but you must resist the temptation! Retirement funds are for one and only one thing—retirement. They need to be left alone so you can take care of yourself when you're old and gray.
In the event of a bankruptcy, unsecured debts can potentially be reduced or completely wiped out while retirement funds would remain protected from creditors. Furthermore, you would have to pay taxes and penalties that could reach nearly 50% of an early withdrawal, and you would also miss out on years of investment income if the money had remained in your portfolio.
Assuming an 8 percent return on a $10,000 early withdrawal from your 401(k), you would lose over $100,000 in retirement income after a 30-year time period. So protect your future, and leave those retirement funds alone!
