Here’s what bad financial advice costs you

Good financial advice leaves you better off. Bad advice does the opposite, and may even enrich someone else at your expense.

In my latest for the Associated Press, some areas where you need to be particularly careful to seek out good advice, since bad advice can be so costly.

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  1. All Employees: Please become familiar with the rules for your retirement plan(s) before you retire or withdraw money early. One of my former co-workers decided to withdraw money from her retirement account in order to make a down-payment on a house. She did not realize that withdrawing money early, before the age of 59-1/2, would require her to pay a 10% penalty to the IRS. And, because she did not have enough money to pay this penalty at tax time, she ended up having to borrow money in order to pay her income tax! A very unwise move. How did she decide to withdraw her funds, without reading all the information about her retirement plan in advance? I was astounded when I found out what she had done.

    • Liz Weston says

      I don’t think that’s an isolated case. It would be great if all retirement accounts had warning labels that said, “Don’t touch this until you consult a tax pro. And Google is not a tax pro.”

  2. Joyce Aldawood says

    I have looked on the irs website to see if giving a timeshare back to a developer can be written off as a long term capital loss since I received a deed for the purchase when I originally bought it. The developer took it back in 2019 since I no longer travel and it had been fully paid for for years. Can I deduct this as a long term capital loss ?

    • Liz Weston says

      I believe the IRS classifies timeshares as personal use property, so losses can’t be written off, but you’d be smart to consult a tax pro.