Financial expert explains retirement-saving traps to avoid

Americans are feeling the sting of economic hardship and are turning to their golden nest eggs to supplement their expenses. 

However, one financial expert explained why that is a bad idea.

“Your 401(k) is not your piggy bank to dip into,” George Kamel said on “Mornings with Maria,” Tuesday. “That’s why you have an emergency fund.”

A recent Bank of America report found that a growing number of 401(k) participants took hardship withdrawals in the second quarter of 2023.

HARDSHIP WITHDRAWALS FROM RETIREMENT ACCOUNTS INCREASED IN THE SECOND QUARTER: REPORT 

The Ramsey Solutions financial expert stressed that while many Americans “don’t have any money saved,” turning to these “shortcuts” is not a “good plan,” and highlighted the retirement saving traps to avoid. 

“Live on less than you make,” he said. “Too many people are not spending less than they make.”

“They’re, comparing their life to others. They’re trying to keep up with the Joneses. They’re not budgeting. They’re not investing, and they’re trying to do it all by themselves, and that can lead to a lot of mistakes that can cost you big time,” he said.

A stack of retirement account statements. (iStock / iStock)

Kamel pointed out how doing a “few basic things” such as investing in your 401(k) without dipping into it can lead to a retirement with some “dignity.” 

He also explained how contributing to a Roth IRA could be beneficial, but stressed the importance of working with a financial adviser to understand the different strategies. 

“This is after tax money that grows tax-free,” he said. “And what I love about this is if you have $2 million sitting in a Roth account, that’s $2 million that Uncle Sam can never touch again.”

AUGUST INFLATION BREAKDOWN: WHERE ARE PRICES RISING AND FALLING THE FASTEST?

When it comes to facing financial hardships and inflation, Kamel warned over believing “lies from the pit of hell” and explained how he went from “broke to millionaire” in 10 years. 

“We have to actually look in the financial mirror and go, Oh we believed all of these myths that I have to have a car payment. I’ll always have my student loans. Hopefully the government will forgive them. I need my credit score because that’s a financial indicator that I’m winning. The mortgage, I got to keep that around, it’s a tax deduction and only rich people can pay off their mortgage,” he said. 

“It took facing the mirror and going, I can’t believe this stuff anymore. I believed all of these lies from culture. I have to follow a different plan if I want different results,” he added.

Kamel also stressed the importance of starting to build your nest egg “now.” 

“The best time to plant a tree was 20 years ago. The next best time is today,” he said. 

GET FOX BUSINESS ON THE GO BY CLICKING HERE