Should I use my 401(k)?

The first option people should use when they are struggling financially is their savings, but if that is not available, a retirement account, or your 401(k), may be the next best option, an investment adviser said.

People typically have the option of withdrawing money from the account or taking out a loan on the money, which would allow the person to pay the money back when they get a job, said Janette Koon, a certified financial planner with Waddell and Reed in Greenwood.

But if you take out money, you will pay penalties and taxes, she said.

If you lose your job, you will receive a packet of information with a form that will ask what you want to do with money from your retirement savings, Koon said. The form will include options such as to take a distribution or roll the money into another account.

If you want money from your account to pay expenses, you would choose to take a distribution. That form will then go back to the company, which will work with the firm that manages the fund and a check will be sent to you, Koon said. Money withdrawn from the account is taxed in both your state and federal income taxes as additional income.

A person can choose to pay those taxes with money from the retirement account, she said.

But if a person is younger than 59 years old, they will face a 10 percent penalty from the Internal Revenue Service on the money withdrawn, Koon said.

Withdrawing the money can mean a dramatic hit in your investment when you do plan to retire, she said.

So withdrawing the money should be a last resort, and, if possible, people should invest more money more aggressively to try to rebuild the account when they are able to find another job, she said.

"I don't like it. I hate it, but sometimes the 401(k) is the only place," she said.

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