Total Financial Solutions President/CEO Arif Halaby is cautioning the public against using money from their retirement accounts for any other purpose due to potential tax implications and penalties.

About one third of Americans with kids under the age of 18 have said they plan to, could or would use their retirement funds to pay for their child’s college tuition, according to Halaby.

“In other words, the exact opposite of what the job is for that account,” said Halaby. “The 401(k) plan; the 457 if you work for a city, county, state agency; the TSP or thrift savings plan if you work for the federal government — the job of those accounts is simple. It is to give you a monthly retirement income when you stop working.”

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Halaby continued that in addition to not being designed to pay for a child’s college tuition, retirement funds are also not supposed to be used to make a big purchase like an RV or a house, or to give to an adult child to use as a down payment on a house of their own, or to pay for an adult child’s wedding.

“It is a retirement account,” Halaby said. “If you use it for other reasons besides that income stream, your tax liabilities could be off the charts.”

If an individual is considering using retirement funds for any other purpose other than retirement income, Halaby recommended not only consulting with a financial advisor first, but also with a CPA.

Halaby noted someone who wants to even just “borrow” $50,000 of retirement funds to give to an adult child so he or she can put a down payment on a house may learn that it will cost them an additional $20-30,000 in penalties and tax liabilities in the long run.

“Now if you want to set aside money in another account, of course — you can give that to your kids, use it to pay for your vacation, whatever it is, I’m okay with that,” Halaby said. “But don’t think that the 401(k) (is for) borrowing… The costs are off the charts if you’re not careful.”

Total Financial Solutions offers assistance with preparing for retirement in Santa Clarita and the surrounding valleys. Santa Clarita financial professional Arif Halaby, a Certified Estate Planner, and Total Financial Solutions staff work with people of all ages, helping them protect, grow and preserve their assets through an individualized approach. As a well-known financial professional, Arif Halaby is also the host of “Total Financial Solutions Safer Money Hour” on KHTS AM-1220. Launched in 2004, the show offers listeners retirement planning tips and guidance for dealing with today’s ever-changing financial needs.  

Total Financial Solutions, Inc.

24322 Main Street

Newhall, CA 91321

661-753-9683

800-990-7344

Total Financial Solutions – Newhall

https://www.youtube.com/watch?v=moM7PCNuR_4

Arif Halaby, Total Financial Solutions, Financial Planning, Planning for Retirement, Retirement Planning