retirement

6 ways to screw up your retirement plan

Mistake No. 3: cashing out in a job change
Next
Slide 4 of 7
Back
Mistake No. 3: Cashing out in a job change

"I am always amazed by the number of people who cash out their plan when they leave their previous employer," Gordon says. "I hear excuses like, 'It was easier than rolling it over,' 'I needed the money for moving expenses,' or, the best, 'I used the money to fund my vacation before I started the new job.'"

Cashing out at 59 ½ years of age or younger, he says, carries a 10 percent penalty. "It doesn't make sense to take the funds on which you have been earning less than 2 percent and pay a guaranteed penalty of 10 percent," says Gordon.

Of course, this would be in addition to the taxes you would owe.

This also doesn't take into account the returns you forfeit by not staying invested. Even small amounts cashed out when you're young can prevent you from amassing a large nest egg. For example, if you had kept $5,000 in your retirement account 20 years ago instead of cashing it out, that amount could have grown to nearly $14,590 today, assuming a 5.5 percent annualized return.

While the last 10 years or so have been a challenge for investors, the stock market's historical returns have rewarded them.


Next
Slide 4 of 7
Back

 

 

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed 4.08%  0.17 4.25%
15 year fixed 3.17%  0.06 3.23%
5/1 ARM 3.30%  0.07 3.37%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.36% --0.00 4.36%
50K FICO-based HELOC 4.06% --0.00 4.06%
100K FICO-based HELOC 3.91% --0.00 3.91%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.79%  0.10 2.69%
48 month used car loan 2.98%  0.06 2.92%
60 month new car loan 3.23%  0.05 3.18%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.94%  0.04 0.90%
2 Year CD 1.13% --0.00 1.13%
5 Year CD 1.76%  0.02 1.78%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.71% --0.00 15.71%
Cash Back Cards 16.41% --0.00 16.41%
Low Interest Cards 10.86% --0.00 10.86%
 
Next
advertisement
CD & INVESTING NEWSLETTER

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

Blog

Janet Reusch

Thriving in the empty nest

It costs about $245,000 to raise a child to age 18. Do parents feel richer when the kids move out?  ... Read more

advertisement
Partner Center
advertisement

Connect with us