How The Early 401k Withdrawal Penalty Helps
The early 401k withdrawal penalty has a lot of disadvantages to it. It does stink not to be able to take out your money early. However it does help a lot of people save for retirement in the following ways.
1. Stops Foolish Spending
A lot of people spend a lot of money foolishly. There is just something we all have that makes us want to buy new things. The fact that most people live paycheck to paycheck without putting away any money into a savings account is the major reason why 401k plans exist at all.
We all have the tendency to want to buy the latest gadget and to justify taking out an early 401k withdrawal by sayings something like; I’ll pay it back later. Even though 9 times out of 10 just saying we will make something up isn’t going to make us actually do anything. It may not even be possible to contribute more if you already contribute the maximum 401k contribution.
By there being a small little penalty out there we may stop and think about it again.
2. Helps People Look For Other Alternatives
Because the money in a retirement plan is not readily available it can force people to think of new ways to get the things they want. No one wants to be forced to think outside of their comfort zone, but it can have a lot of advantages.
For example, if you want more money you might start a business or invest into something else. Each helps to boost the economy and making life a little bit better for the future generations as a side effect.
3. Helps People Realize How Important Retirement is
People live in the present, something that will happen many years down the road therefore is normally forgotten about until it actually arrives. Many people don’t like to think any further then what is going to be their net meal, so something that will happen to them in 40 years doesn’t seem that important.
These plans do what they where created to do and that is to help people save money for retirement and to be aware of how impotant it is. The early withdrawal penalty can help people to think about their future a little before they pull money out prematurely.
