When we find ourselves in in difficukt financial circumstances we often do not take the time to consider the implications of cashing in our retirement savings. The need to cover our expenses and maintain our lifestyle is often a very strong motivation to cash in retirement savings but there are serious consequences to cashing in early.
Not all retirement savings investments allow members to cash them in before a certain age and retirement annuities are one form where this is virtually impossible and will only be entertained under very compelling circumstances.
If you are facing retrenchment, have been made redundant or for some other reason are considering taking your retirement savings in cash before retirement, you are not alone. Many people facing financial uncertainty justify their early withdrawal by convincing themselves that they will make up for what they have taken out in years to come. This very seldom happens and we lose sight of the longer term goal of financial security in retirement and results in the vasts majority of people being unable to retire with any financial security.
We get caught up in our new lives and will more often than not have an internal conversation that justifies a new car or to redecorate a room before we cater for our retirement and make up any shortfalls. This internal dialogue is very dangerous and results in losses and penalties in the long term for short term satisfaction.
It is not a simple calculation to make up a shortfall in your retirement savings and growth, increased contributions and penalties need to be taken into account when calculating what is required to put you back into the same financial position before you made your early withdrawal from your retirement savings.
Use the simple retirement calculator to see the contribution effects should the time to retirement be reduced by 5, 10, 15 or any number of years and then ask yourself the question, “Is it realistic for me to be able to make up the shortfall to ensure I retire comfortable?”
The very best thing to do and the Government has suggested that it be mandatory, is to transfer your retirement savings into a preservation fund, a retirement annuity or in the event of you changing jobs, transferring to your new employers retirement fund.
Get some free financial advice by using the form on the right before you make any decision to take a cash payment before retirement and get some options that will help to minimise the losses and penalties. If you have already made the early withdrawal contact us to receive free financial advice on the most efficient way to bolster your retirement savings and get your funding back on track.