This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
SALT LAKE CITY -- Not only are more Utahns taking money out of their 401(k), but many of us are canceling our payments into the account.
AAA Fair Credit Foundation President Preston Cochrane said, "People react quickly and maybe not as rationally as they should, in fear of falling behind. They look at that and feel it's their last option."
Don't react. Be rational and make sure you're doing your homework and looking at all your options.
Cochrane says the money isn't necessarily going to pay for large purchases or to bring down debt. He says people are using it cover regular, everyday expenses like food or bills. He says too many of us are strapped and our credit lines are maxed out.
"You're kind of at the end of your rope," Cochrane explained. "So, you look to see the pot of money that may be sitting in your retirement account and that might start to look very tempting in terms of access to cash."
Cochrane says it would be a much better idea to take money out of our savings accounts instead of our 401(k) to avoid the tax hit that will come from taking money out of the 401(k). Plus, he says it's also a better idea to sell assets, but many of us feel we've already sold what we can.
"Well, it's hard to give up assets if you own them. So, in many cases, people are much more willing to withdraw money out of a 401k."
How can we tell if it's time to borrow from the 401(k)? Cochrane says every case is different. There are times when people are in extreme need; they have to cover their mortgage payment or put food on the table and have no other way to pay for it. The main thing Cochrane warns people to do is not to panic.
"We tell people, ‘Don't react. Be rational and make sure you're doing your homework and looking at all your options and not just taking your friend's word for it."