Reasons to not cash in your retirement to buy a car

To keep things simple, we've narrowed down the top reasons why you should not cash in your retirement to buy a car. No matter how much you have dreamed of owning a nostalgic muscle car, it is not worth drawing out the funds from your retirement account. In all actuality, you are taking away from your future stability and that is something substantial to consider. Bottom line: that brand new Mercedes-Maybach GLS can wait. It's important to keep things frugal until the time comes. It's a fact of life that a car is a depreciating asset. Particularly, if you plan to buy new. This is the top reason why cashing in your retirement is a bad idea for a car purchase. It's a better idea to let your retirement account reach maturity so you can make the most out of your savings. Then, once you're officially retired, you can decide if that new or used car is worth your time and money. Aside from having a Roth IRA, if you plan on withdrawing a large sum from your retirement account, you must report it when tax season comes around. This means you'll need extra cash to cover the taxable amount. If you're already withdrawing from your retirement, it probably means you don't have the extra cash on hand. Keep this in mind when considering this option. The added tax is inevitable. If you are not fully retired, you will have to pay penalties for cashing out early. It is usually a 10% penalty on any withdrawals before the age of 59 1/2. Although there are some exceptions, buying a new car does not fall under this anomaly. Therefore, it is important for potential buyers to understand the aftermath before making this decision.

Keep adding to your retirement

Life throws you lemons sometimes and the only option is to take from your savings. We know retirement can feel like an eternity away, which means it's hard to resist the accumulated amount. The best advice is to wait it out. Don't become overwhelmed by impulsive decisions or a mid-life crisis. The best thing you can do is keep your savings in place, and wait for the right time to purchase your next car. Plus, most buyers are now holding onto their car for longer periods of time. That means it's trendy to keep your ride for as long as possible. To learn more about the different types of retirement savings, visit the official IRA website today.

Michaella Malone

Michaella Malone is a content specialist and full-time freelancer with 5+ years of experience working with small businesses on online platforms. She is a graduate of Florida State University (Go Noles!) and avid traveller, having visited over 25 countries and counting. In addition to blogging, ghostwriting, and social media content, she has contributed to the development of English as a Second Language (ESL) curriculums for international programs.