Don’t Use Your Retirement Savings To Pay Your Bills
It’s very tempting, isn’t it? You are getting phone calls every evening from bill collectors and threatening letters come in your mailbox every day. Meanwhile, you have thousands of dollars in your 401(k) or individual retirement account (IRA) that could put a stop to the misery by just writing out a few checks.
Don’t Pay Off Debt With Your Retirement Savings — And Here Is Why
The best advice regarding protecting your financial future is to never use your retirement savings to pay off your debt. Under the U.S. Bankruptcy Code, retirement accounts are largely exempt under federal and state law. When you file for bankruptcy, creditors can’t take your retirement savings.
Paying With Your Retirement Is A Short-Term Solution
Ideally, you have not yet turned to your retirement accounts as an attempt at debt relief. This is always a bad idea for the following reasons:
- If you take money out of your retirement accounts before retirement age, you will have to pay taxes on those funds.
- You will also owe penalty fees.
- The total amount lost after paying taxes and penalties can be quite significant. And this does not take into account future earnings that you may someday need but are throwing away.
- Retirement accounts are already exempt assets in bankruptcy. Creditors and debt collectors cannot touch your retirement accounts. Neither should you, until the age of maturity.
- The secret to protecting retirement accounts in bankruptcy is to report them accurately but not touch them prematurely.
Start Putting More Of Your Money Toward Your Own Retirement
What will you worry about more: a bill collector today? Or having no retirement savings for your retirement when you can no longer work?
If a debt collector is frightening or harassing you, or if you believe there is no solution to your debt problems other than to break into your retirement accounts, stop in your tracks. Talk to a bankruptcy law attorney. Learn how to account for your retirement accounts when you report your assets — and how to shield them from unwanted consequences.
Free Initial Consultation | Memphis Bankruptcy Lawyer | Protect Your 401(k)
Call 901-730-4958 or send an email to schedule a meeting with a Tennessee bankruptcy law attorney today.
The law office of Ben Sissman is a debt relief agency that helps people file for bankruptcy relief under the Bankruptcy Code.