You may feel like you have to dip into your retirement funds if you’ve been slammed by the economy, but you need to think about it first. If you or your spouse has lost a job, keeping up with bills will be tough – and will make spending retirement funds like 401k’s and 403b’s very tempting. But while that would resolve short-term cash-flow issues, you could be setting yourself up for bigger problems down the road. Before you turn to your retirement fund, consider a few alternatives.
According to the 2008 Bank of America Retirement Savings Survey, more people are turning to their retirement funds to get through the current economic crisis. Of those, 22% cite job loss as the reason. If you’ve lost your job, you might want to brainstorm a few short-term things you can do to avoid spending your retirement savings. Use a retirement calculator to figure out the long-term costs of dipping into your nest egg too early.
-See where you can cut back your spending, and take appropriate measures.
-Take a job – any job – that will bring in revenue. It might be embarrassing to take a “grunt” job in times of hardship, but you’ll be glad you did it once it’s over. After all, which is worse, the embarrassment of stocking supermarket shelves, or knowing your savings have vanished?
-Get creative. Rent out a room in your home, or sell things you don’t use on Internet auction sites like eBay. Again, not fun, but if it gets you through tough times with your savings intact you’ll be glad you took these measures later on.
-Go into reasonable credit card debt. Obviously, this means just for big stuff, like various critical payments – not new clothes!
The good news is this: you’re resourceful, and tough economic times come and go. So take a deep breath, don’t panic, and keep your long-term interests in mind.