Avoid Early Withdrawals

Here is how to get your retirement plan back on track in 2009

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As unemployment rises and healthcare costs skyrocket, it's more tempting than ever to borrow from your retirement savings to make ends meet. About 18 percent of Americans have prematurely made withdrawals from their retirement accounts because of the recession, according to a Bank of America survey. The top reasons were to pay off credit card debt (26 percent), pay down a mortgage (22 percent), and cope with job loss (22 percent). "Do all that you can to cut expenses and find other sources of cash before breaking the lock on your retirement piggy bank," advises Beth Almeida, executive director of the National Institute on Retirement Security.

Catching up with those early withdrawals will be difficult. "When the money is out of your retirement account, you rob yourself of compounded investment returns. And if you don't pay the loan back, you'll have to pay Uncle Sam taxes on the loan and a whopping 10 percent penalty," Almeida says. Plus, if the worst-case scenario should strike and you're forced to file for bankruptcy, your retirement savings in a pension, 401(k), or IRA are protected from creditors, while most other assets are not.

More New Year's resolutions for retirement:

Delay retirement

Put off claiming Social Security

Get your 401(k) match

Scrutinize 401(k) fees

Determine your risk tolerance

Rebalance your portfolio

Evaluate your target-date fund

Pay off your mortgage

Get a pension

Downsize

Bump up your contributions

More money-related New Year’s resolutions