Short on Cash? Retirement Funds to the Rescue?

With the unemployment rate rising throughout the country and, in some states exceeding 10%, many people are finding the need to dig into savings to pay monthly bills. Ideally, you'd have an emergency fund of three to six months of living expenses just for this purpose. But, even if you did have that kind of savings at the outset of the recession, you may now have burned through it. While it's never something I recommend, you may now find yourself starting at the possibility of taking money from your retirement accounts to pay for non-retirement expenses.

If you're unemployed, you can't take a 401(k) loan. But if your financial stresses have been caused by your spouse losing his/her job, then you may still have that option. In certain circumstances, you may also be able to tap your Roth IRA tax-free. Tapping any retirement account is not without peril. After all, you forever forgo the earnings and tax advantages of the money you spend today. As such, your first choice is to lower your expenses as far as possible. Nonetheless, if you must tap your accounts, be sure to do so minimally and intelligently.