Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Teach Me

Should I Consider Taking Money From My Retirement Accounts?

November 16, 2018

1 min read

You might need extra cash for any number of reasons—an unexpected car repair, sudden job loss, or maybe a medical emergency. Even a significant drop in the stock market might make you consider taking out the money you’ve socked away for retirement.

But should consider doing that, even if you need it?

Saving for retirement, and only retirement

Your retirement savings should be off-limits as much as possible. Even if you’re in a financial jam. Consider your retirement savings for one thing only: retiring.

While it may be comforting to know that you do have a pile of money locked away in a 401(k) or individual retirement account (IRA), it’s best to try and forget about it, and resist the temptation to withdraw it for immediate use.

Why? Because withdrawing your retirement savings will likely result in two outcomes:

  1. You may be hit with taxes and early-withdrawal penalties. Generally, if you take any money out of your traditional or Roth IRA before the age of 59½, you’ll be subject to income tax, plus a 10% penalty (unless it’s for a qualifying reason, and the account has been open longer than five years). For a 401(k) early withdrawal, the penalties are similar, but there may be some different rules depending on your employer’s vesting schedule.
  2. You may set your retirement back. It’s recommended that you save a little for retirement, regularly. If you pilfer from your retirement accounts, you could delay your retirement by years. Retirement accounts take advantage of something called compounding to grow your nest egg—and if you pull your money out, you may earn less of a return.

One Solution: Create an emergency fund

One of the best ways to keep yourself from looting your retirement accounts is to build a financial firewall so that you don’t have to. That means creating an emergency, or “rainy day” fund equivalent to a few months’ worth of expenses.

An emergency fund is your financial safety net. When you eventually run into some financial difficulty—and you likely will—this is the fund you’ll use to help make ends meet. If you don’t have one, it should be the first item on your financial to-do list.

Make your future money

Learn more about Stash Retire

Start now

By Stash Team

Next for you
It’s Possible to Become an IRA Millionaire

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
market news budgeting Technology love and money Careers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit