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More Americans are dipping into their retirement plans to pay expenses

Americans dipping into retirement funds
Posted at 6:29 PM, Jan 16, 2013
and last updated 2013-01-16 18:29:00-05

TALLAHASSEE, Fla. (WTXL) -- New data out is showing that more people are dipping into 401 k retirement funds just to pay the bills.

For many people the money that's stowed away in a retirement fund is really their only option to make sure the bills get paid.

But it's a move that could come with a big price tag.

“It's a big number and the initial thought that we would all have is whether or not the economy itself is forcing that,” said RAI Investments certified financial planner, Bruce Hagan.

New data shows that one in four Americans are dipping into their 401 k retirement fund just to make ends meet.

“I had to I mean I had major I had no toilets for three months in my house so i had to do something,” said Tallahassee resident Ann Vandermeer.  

Vandermeer says she had to dip into her 401 k two years ago to pay off a plumbing bill and she's still paying for it today.

On top of being taxed as income, the IRS also adds a 10% fee on money taken from a 401 k.

That rule applies to anyone under the age of 59 and a half.

Hagan cautions, if you must withdraw early from the retirement fund make sure it's a last resort. He says borrowing money elsewhere is going to be less expensive.

“If you have to take money out to put food on the table, that's understandable.” Hagan said the mindset people should have when it comes to a 401 k is that it's a short term deduction for a long term investment.

“I like to tell people its money that's going to go up in the sky into a black hole, disappear and it's going to come back one sunny day when you're in retirement to replace your income,” he said.  

For older Americans, many are turning to retirement savings to supplement social security.

But new data showing just one in five workers have a pension.