Don't raid retirement accounts to pay expenses

Don't raid retirement accounts to pay expenses
A growing number of people are raiding their retirement accounts to pay current expenses.

That's a big mistake, even if you're young and have many years to go in the workplace.

Liz Weston, who wrote the book Deal with Your Debt says any time you take money out of your retirement account you are dramatically reducing the money you'll have in retirement.

"People don't think about that. They think about their immediate bills," she says. "They think they're doing the right thing, but it's absolutely the wrong thing."

That's because you're going to pay taxes that will equal a quarter to a half of what you're pulling out of the account. And Weston says, that's not even the worst part.

"Once that money is taken out, it's not earning returns for you and people dramatically underestimate how much that's costing them. I try to tell people that every $1,000 that you take out of your retirement fund is going to cost you at least $10,000 in lost future retirement income."

"If you're young, in your 20's and you do it, you can at least double that amount. So every thousand dollar withdrawal is costing $20,000."

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