Generally speaking, you should never touch your retirement savings if at all possible. There is no telling how long Social Security will be around, and either way, you will most likely need more than what Social Security will pay you to maintain your current lifestyle.
In addition, whatever money you take out of your retirement plan will no longer have the potential to make money for you in the form of investment returns, and when compounding interest is factored in, it really makes taking money out feel painful.
On the flip side, what is the point of having money in the bank if you are not around to spend it due to obesity-related health problems?
After you crunch the numbers and compare interest rates and long-term costs (and potential lost retirement plan returns depending on how aggressively you are invested), you may discover that this is the best option for financing bariatric surgery.
Your first step is to contact your HR department or your retirement plan provider to find out whether you plan allows hardship withdrawals. Hardship withdrawal provisions allows you to to take out money from your retirement plan for unreimbursed medical expenses for you, your spouse or your dependents.
The IRS discourages these withdrawals by imposing a 10% early withdrawal penalty (they keep 10% of whatever funds you withdraw) and by applying your withdrawal amount to your taxable income.
However, you may be able to get the 10% penalty waived in certain situations such as:
- Becoming totally disabled.
- Being in debt for medical expenses that exceed 7.5% of your adjusted gross income