Why You Shouldn't Tap into Your Retirement Savings Account

A large and growing share of American workers are tapping their retirement savings accounts for nonretirement needs, raising broad questions about the effectiveness of one of the most important savings vehicles for old age.

Reportedly, more than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses. The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year.

A report from the financial advisory firm HelloWallet found that more than one in four workers dip into retirement funds to pay their mortgages, credit card debt or other bills. Those in their 40s have been the most likely culprits -- one-third are turning to such accounts for relief.

Fresh data from Vanguard show a 12 percent increase in the number of workers who took loans against their retirement accounts or withdrew money outright since 2008.

The most common way Americans tap their retirement funds is through loans, which must be repaid with interest.

On today’s episode of Your Money, Your Matters, hosts Linda Webb-Mañon and Rick Grady of the Texas Credit Union League; Courtney Moran, Texas Credit Union Foundation, and Todd Mark, Consumer Credit Counseling Services will talk about the pitfalls of tapping into retirement accounts, as well as share savings strategies that will help consumers get on better financial footing.

Your Money. Your Matters is a weekly show broadcasting every Tuesday from 11 a.m. to noon CST.