Keeping Your Hands Out Of The Cookie Jar

cookie jar

Hands out of the cookie jar!

Do you hate the idea of putting money into a retirement account and then not be able to get it back out without a penalty?

Well, guess what? That just might be the BEST way to save for retirement.

Researchers now say that using retirement accounts that penalize you for early withdrawals  – like IRAs and 401(k)s – are the most effective ways most people can save.

Professors Shlommo Benartzi of UCLA and John Beshears of Harvard discovered that people seem to understand that their lack of self-control can sabotage their future financial security.

That’s why they often prefer to save in an account that makes it extra hard for them to get their money back out, observing that “it’s hard to save in a world that’s always trying to get you to buy.”

So if you find it’s hard for you to save, consider directing your future saving into retirement accounts that “lock up” your money and charge early-withdrawal penalties if you try to raid the cookie jar too early. That may be what you need to stick to a disciplined savings plan.

Don’t have a retirement plan? Talk to a Certified Financial Planner to set one set up. Plans are available, usually free of cost, to freelancers, small businesses, self-employed people and sole proprietors.

And if you do change jobs, consider rolling those 401(k) funds to an IRA under your control. The worst thing you can do is take that money out and spend it. That can cost you in taxes and penalties, not to mention putting a serious dent in your retirement nest egg.

Check out our previous article: Leaving a Job? Don’t Cash Out The 401(k)



About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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