Are you afraid to look at your finances?

Credit counselor Linda Humburg understands why many of her debt-burdened clients don’t want to open their mail. What bothers her, though, is the sheer volume of untouched bills and collection notices that some bring to their first counseling appointments.

“The shoeboxes (full of bills) don’t make my heart drop as much as the grocery bags and garbage bags,” says Humburg, counselor manager for FamilyMeans Financial Solutions in Stillwater, Minnesota.

Not wanting to confront unpaid bills is a perfectly understandable, if unfortunate, reaction to a bad financial situation. And it’s not just people in extreme debt who might be afraid to look. Many people avoid checking their credit scores or using retirement calculators because they’re afraid of what they might find.

The problem is that delaying action usually makes matters worse.

In my latest for the Associated Press, the high cost of living in denial.

One way around early withdrawal penalties

Dear Liz: My son is 52 and has been unemployed for three years. He has been forced to withdraw money from his 401(k) and pay early withdrawal penalties on it to pay his mortgage and other bills. Is there such a thing as a hardship exception to avoid this tax bill?

Answer: There’s a way to avoid the 10% federal penalty, but not income tax, on early withdrawals from retirement accounts when someone is under 591/2 (the usual age when penalties end). The distributions must be made as part of a series of “substantially equal periodic payments” made using that person’s life expectancy. When these distributions are taken from a qualified retirement plan, such as a 401(k), the person making them must be “separated from service” — in other words, not employed by the company offering the plan.

Your son wouldn’t be able to withdraw big chunks of his savings, however. Someone his age who has a $100,000 balance in a retirement plan could take out about $3,000 per year without penalty. Revenue Ruling 2002-62, available on the IRS site, lists the methods people can use to determine these periodic payments. If he might benefit from this approach, it would be smart to have a tax pro review his calculations.