Stealing From Yourself

A recent Transamerica Center for Retirement Studies (TCRS) survey shows a disturbing trend in America. The number of people taking loans, early withdrawals, or hardship withdrawals against their retirement is at an all-time high of 37% (page 114 of the report). The post-pandemic economy that brought skyrocketing inflation and plummeting stocks is hitting people harder than projected. Add that to an insufficient emergency fund and throw in wage stagnation or loss of job, and suddenly, there is a full-blown crisis.

There is No Quick Fix

There’s no doubt we are dealing with tough financial times. But we’ve had them before and will have them again. In my lifetime, I experienced the oil crisis in 1973-74, the 1981-82 recession, as well as the Great Recession from 2007-2009. I know the challenge personally. When dealing with money woes, the temptation is to find the quick fix, the home run, you know, win the lottery. But Proverbs 13:11 gives opposing advice, “Wealth obtained from nothing dwindles, But one who gathers by labor increases it.” I remember meeting with someone in 2008 who wanted some financial assistance. The bank just cut off access to their HELOC (Home Equity Line Of Credit), and they were unsure how they would make their mortgage payment. I was confused by their dilemma until they explained they were using the money from their HELOC to make their mortgage payments, making their financial hole even deeper. 

Stealing Your Future

When I read the TCRS survey, my heart ached for anyone borrowing against their retirement because they are stealing their future without realizing it. I’ve heard the logic over and over again: borrowing against our retirement is much more clever than a loan because we’re paying ourselves interest. What? The interest you pay back will never equate to what your money would earn via compound interest over the life of the loan. Plus, if you leave the job without repaying the retirement loan, you pay the tax and penalty on the borrowed money. Even if you pay it back, you’re paying taxes on the money used for loan repayment, and then (with a traditional 401(k) plan), you’ll pay taxes again when the money comes out during retirement. Ouch!

There is a Solution

While there may not be a quick fix for financial woes, there still is a solution. That’s why for years, I’ve been banging the Ramsey Solution drum emploring anyone who will listen to follow the proven baby steps outlined in Financial Peace University (FPU). The plan is simple, but don’t confuse simple with easy. Changing habits and learning discipline is difficult – especially regarding money. Here are the proven baby steps taught in FPU:

• Step 1: Save $1,000. Building this baby emergency fund gives you enough cushion to eliminate the use of credit cards.
• Step 2: Pay off all debt (except the house) using the debt snowball. The ultimate goal is to become debt-free. Think of what you could do with all the money you currently spend making payments.
• Step 3: Save 3–6 months’ worth of expenses in a fully funded emergency fund. Once out of debt, build a cushion big enough never to have to steal from a retirement fund or take out a loan.
• Step 4: Invest 15% of your household income in retirement. Notice that this step comes AFTER you’re debt free.
• Step 5: Save for your children’s college fund. Student loans are out of control, and no one wants their children to start their adult lives saddled with debt.
• Step 6: Pay off your home early. Imagine what it would be like without rent or mortgage payments.
• Step 7: Build wealth and give. 

Please understand that following the FPU baby steps may bring wealth, but wealth is not the goal – at least not for followers of Jesus. We need to strive for contentment that comes from knowing Jesus. Content people don’t hoard; they use their wealth to be generous to others.

Listen to Paul’s heart in his letter to Timothy “6 But godliness with contentment is great gain. 7 For we brought nothing into the world, and we can take nothing out of it. 8 But if we have food and clothing, we will be content with that. 9 Those who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge people into ruin and destruction. 10 For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.” 

If you’re tired of living under the weight of debt, chasing after get-rich-quick solutions, and wondering if robbing your retirement account is the right decision, it’s time to try something new. Check out our website’s Events section, look for the next FPU session, and find financial peace.