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Don't raid your retirement to pay your bills

As we kick off this new blog for Michigan readers who may be in need of bankruptcy-related services, it's important to highlight one thing that adults struggling to pay their bills shouldn't do to keep current: dip into their retirement funds.

According to a financial adviser firm, 25 percent of Americans are withdrawing money from their retirement funds early in order to stay up to date on their bills. Many people may not know that this could come with many financial penalties for withdrawing money before the account holder reaches retirement age. Many are likely doing it to resist filing for Chapter 7 or Chapter 13 bankruptcy.

That's what motivated one family to cash out their retirement funds. The woman, whose husband was laid off, said the only other option to pay credit card and medical bills while providing for their children was to file for bankruptcy.

It's important for readers of this blog to realize that there should be no shame in filing for bankruptcy. While it may not be the right option for everyone, many people, especially during and after the recession, have faced difficulty making ends meet while trying to retire old debts. For many, filing for bankruptcy may be the best option, because it provides you with a decent plan for discharging debts without having to liquidate all of your assets.

One thing that financial experts agree on is that dipping into your retirement early is almost never the best option. If you are approaching retirement age and you cash out early, you won't have the nest egg you need when it comes time to actually retire.

Many advisers recommend starting an emergency fund that can cover expenses if a regular source of income dries up.

Source: CNBC, "More Americans Raid Their 401(k)s to Pay Bills," Chris Jansing, Jan. 16, 2013

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    He helped me thru my 1st bankruptcy and now the second. I had no idea what to expect , but they kept me informed and answered all my questions. Mr. Schneider is the most experienced and knowledgeable lawyer I have ever met. If you have to file call this attorney first!

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