Top of Mind

Tips to Avoid Taking that Retirement Plan Withdrawal

In a recent Top of Mind, we discussed how accessing retirement plan funds during the COVID-19 pandemic is not the greatest idea. But how can employees avoid a withdrawal or loan when they really need the money? Here are a few tips to help individuals achieve better financial footing without raiding their retirement plan account:

  • Fix the payroll tax withholding — This tip came as a result of some reader mail from the very knowledgeable Jack Towarnicky of the Plan Sponsor Council of America (check out their blog here). While it may feel good to receive an income tax refund each year, it is basically the result of an incorrect payroll tax withholding. The government returns the individual’s money at the end of the year (with zero interest) that should have been theirs in the first place! However, when withholdings are adjusted so that no refund is necessary, the individual has more money in their paycheck now to pay bills. Of course, this doesn’t work for individuals who have been laid off.
  • Hack credit cards — Through actions such as comparison shopping, balance transfers, or simply negotiating with credit card companies, individuals can often pay less interest than they do right now, which means lower credit card bills and more money in their pockets to survive the pandemic. For individuals in over their heads with debt, the more drastic step of credit counseling allows a firm to negotiate one single, lower monthly payment with all of the credit card companies. However, in this scenario, accounts are closed and access to credit card spending is gone.
  • Hack spending — I’ve yet to encounter a person who was not paying full price for several products and services that he/she could have obtained at a substantial discount, resulting in more cash on hand. From phone bills to groceries, there is an app for just about everything out there that will enable individuals to hack their spending so that they have more money in their pockets, yet still obtain the goods and services needed. Individuals paying full price for just about anything are probably paying too much!
  • Track spending — It’s rare to find a person who doesn’t spend less when they track their spending. There are apps to do this, but a simple Excel spreadsheet or even a pen and paper will do. This is another fairly easy method to come up with some extra money!

Do you have any other tips to avoid raiding retirement plan assets? Let me know on LinkedIn, Twitter or at

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

Investment products available through Cammack LaRhette Brokerage, Inc.
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