This month, we are talking with a lot of people about working towards being debt free. While it is important to focus on getting out of debt so you can use that money for better things (such as adding to your 401k...wink wink), there are folks who are using their 401k to pay off that debt. If you are considering using your 401k to pay off debt, be sure to check out this video on the dangers of doing so.
As we've said before, the only thing we can control in the market is the amount of time that we are in it. There have been multiple studies showing that those who start saving earlier vastly outperforms those who start later. When you take money out of your 401k, you set yourself up for both short-term and long-term ramifications.
The short term ramifications of pulling money out of your 401k before you are 59.5:
- Taxes
- A 10% penalty
The long term ramifications:
By removing that money you have saved, you are losing time in the market, which is costing you what that money could have compounded in to.
You have worked hard to save for retirement, and it is important to try and keep that money safe. There are other ways that you can try and pay off debt, whether it is by budgeting, being proactive, living within your means, getting a part-time job or lowering other unneeded expenses.
If you need help paying off your debt, we recommend using a debt reduction tool to help you make a plan and stick to it. To download a free copy of the tool, click the button below:
For more information on our custom approach and to discover your pharmacy's optimal plan, click here to download our company census tool or contact us by emailing tyler@pharmacy401k.com or call Tyler Campbell at 843-720-3756.