MADISON (WKOW)--Retirement accounts have taken a brutal beating over the past year. Not only have many lost substantial value, what's left is being raided by the people who put the money there in the first place.
"If you really have no other source of savings, tapping your 401k or retirement account may be your best option. But, you should think about that as a loan to yourself and that you're going to pay that back," advises University of Wisconsin financial specialist Michael Collins.
Collins says raiding retirement accounts used to be strictly taboo; a last possible resort. He still cautions against it, but desperate times sometimes call for desperate measures. And it comes with a price. You may be hit with penalties and taxes; not to mention sacrificing interest.
"The thing you're giving up is also any income that money would've gained between now and your retirement. so if you're retirement is still years off, it's definitely in your interest to get that money replaced as fast as you can."
Adding to the problem is the fact that many Americans weren't saving enough for retirement before the financial crisis. So, to take what's left is putting the future at risk.
"That may be the next financial crisis we see, is when people get to retirement and only have two or three years of savings prepared."
And Collins can't stress enough the importance of having a strategy if you're forced to raid your retirement fund.
"If you do find yourself in a position where you want to tap your retirement account for now, think about it as a loan and have a plan to pay it back in four or five years."