While recent stimulus checks and deferred payment help from creditors has helped stave off more extreme financial distress until now, finances could get much tighter for many Long Islanders soon.
If you are feeling the pinch, should you use your savings or money in 401k or IRA retirement accounts to pay your annual property tax bills?
New changes in rules are making it easier and more attractive to tap into these sources of funds to pay your taxes, but it pays to know the real pros and cons.
New Rules Make It Easier To Access Your Money
Between the new CARES Act and other extensions and rule changes US taxpayers have even more chances to access their money.
The limits on transferring money between checking and saving accounts have been lifted. This means being able to access more of your money in bank savings accounts to cover your bills and expenses.
401k and IRA rule changes mean you can borrow up to 100% of your retirement account balance or $100,000. All without paying the usual high penalties.
You may also be able to re-contribute all of this money later without the usual annual caps.
Plus, you may have until July 15th to make new contributions to these accounts and gain tax benefits.
The Cons Of Tapping Your Precious Savings
Of course, if you don’t pay your property taxes you can lose your home and have many other fees and penalties to pay. You’ll need to tap your savings to find somewhere new to live.
Leaving your money in public stocks right now could be very risky. Even if the Dow Jones only fell back to where it was in 2015 and 2016, that would be catastrophic and heart breaking for many. It may be better to use that money to save your current home, vacation home or investment properties.
However, if you are tempted to tap this money, the truth is that you still really need to
fix your income or expenses. Or this is just prolonging the inevitable. If you don’t, when you run out of savings, you’ll still lose the house and have no savings left either.
Step Number One
Either way, whatever you choose, before you pay, make sure you challenge your property tax assessment and bill. Otherwise the odds are that you are overpaying, and are bleeding your savings dry, unnecessarily.