Question 17
Retirement accounts like IRAs and 401(k)s are powerful long-term savings tools because of tax advantages and compound growth. However, they’re usually not appropriate for emergency funds: early withdrawals can trigger taxes and penalties, and using retirement money reduces future compounding. Some plans offer limited loan or hardship withdrawal options, but those come with caveats. Most advisors recommend keeping an emergency fund in liquid, penalty-free accounts and treating retirement accounts as a last resort.
Why are retirement accounts generally a poor place for emergency savings?
Did You Also Know...
By Wise Wallet
Low expense ratios compound into materially larger ending balances over decades, so fees are one of the few things investors can control.