TL;DR: How to Avoid the 401(k) Leakage Crisis

In this episode of Making Money Manageable, Alan Dembski and Juliana Janson from Buffalo First Wealth Management tackle the growing “401(k) leakage crisis.” With record numbers of people taking loans and early distributions from their retirement accounts, Alan and Juliana break down what is driving this trend and how you can protect your future nest egg.

Watch the full video below, or read our quick summary of the key takeaways to keep your retirement savings intact:

• Build an Emergency Fund: Unexpected expenses are the biggest threat to your retirement savings. Keep cash in a high-yield savings account (currently offering yields over 3%) to cover car repairs, home maintenance, or medical bills without touching your 401(k).
• Navigate Housing Costs Carefully: With rising home prices and higher required down payments, it is tempting to raid your 401(k) to secure a mortgage. However, if you cannot afford the down payment, you may struggle with the monthly mortgage. Run the numbers carefully and wait for a more manageable option if necessary.
• Manage Large Medical Expenses: High-deductible health plans are leaving many people with massive out-of-pocket bills. Instead of draining your retirement account, utilize a Health Savings Account (HSA) if you have one, or negotiate payment plans directly with your medical providers.
• Rethink Education Funding: As the old industry saying goes, “You can take out a loan for education, but you can’t take out a loan for retirement.” Explore private student loans and alternative financing rather than sacrificing years of compounding interest in your 401(k).

Tapping into your 401(k) should always be an absolute last resort. Watch the video above to hear the full conversation, and be sure to like, share, and follow for more financial insights!

Stay tuned for our next post.