Pulling money out of your retirement?

If you are under age 59 1/2 and you need money now, you may be tempted to pull it from retirement funds (401K, IRA).  I get it – the money is there just waiting for you to use it.  But it is an EXPENSIVE source of money.  For the typical middle class family with kids, about 1/2 of the money is lost to taxes when you pull it out.  You pay Fed tax, IN tax, the 10% Fed penalty….but the extra income also typically causes you to lose a child tax credit, phase you out of a refundable credit, make you phase out of deductions, etc…all causing you to pay more taxes than you expect and end up with 1/2 of the money that you pull out.

I don’t have any bright ideas on where you are going to get the money that you need to live, but keep this in mind the next time you wonder about accessing this easy money.