Saving for retirement is on the rise. That’s good news. But too many seniors are undercutting their own retirement plans by treating their retirement accounts as an emergency fund. This recent article on the CNBC website points out the dangers in this shortsighted lack of planning.  As the opening sentence of the CNBC article succinctly puts it,“Building an emergency fund might just keep your retirement plans on track.”

According to statistics quoted in the article, about one-fifth of workers report that they are saving more for retirement this year than they did last year. Balances in 401(k) accounts are up two percent year to date to a nationwide average of about $90,000. Again, that’s the good news. The bad news is that too many workers are treating their retirement accounts as an emergency savings plan. One-tenth of all workers say they have taken a hardship withdrawal from a retirement account, and another 13 percent have borrowed from retirement accounts. Both these practices, borrowing and withdrawal, carries with them some significant consequences, as we’ll see.

First, why do people dip into funds that are supposed to be part of their long-term financial security?  CNBC gives a troubling answer. The leading reasons for borrowing are unplanned, major expenses and credit-card debt.  When it comes to hardship withdrawals, the leading reasons are medical expenses and, sadly, payments to prevent an eviction from a primary residence. Financial planners say this is an ominous sign that people are unprepared for the unexpected. “The reasons people take [withdrawals] suggest they lack emergency savings,” said Catherine Collinson of Transamerica Insurance. “Unfortunately, a plan loan [from a 401(k)] may be their best alternative or their last resort.”

Financial planners quoted in the CNBC article acknowledge that borrowing from a retirement plan may seem advantageous. These loans typically carry low interest rates and when you pay the money back you’re paying it to yourself. In a very few cases, say the planners, these loans might be advantageous. But for emergencies and other unplanned reasons, the strategy has many problems. You have to repay the loan according to plan terms or it becomes a taxable withdrawal. Borrowers also typically stop saving when they take out a loan or withdrawal – so not only is your retirement balance earning less interest, it’s also not getting any new deposits. You may be setting yourself back several years in your retirement date without realizing it.

The sad reality revealed by this borrowing phenomenon is that some people are desperately short of emergency savings. The Federal Reserve, in a 2015 report quoted in the CNBC piece, cites a somewhat shocking statistic: half of all Americans report that they don’t have sufficient emergency savings to cover an expense as low as $400. For these people, borrowing against a retirement fund may seem like the only option, but the odds are that the loan will never be paid back and they will face unpleasant tax consequences as a result, not to mention permanent loss of retirement earnings. This so-called option just digs the hole deeper.

If you’ve made up your mind to save for retirement and leave those funds alone, that’s a good beginning. But to stick to your resolve, you’ll need a strong retirement plan. This article points out to us once again the wisdom of our AgingOptions LifePlanning approach to retirement. We have used this methodology with hundreds of clients to help them protect their assets in retirement, avoid unplanned institutional care, and free them from the worry of becoming a burden to those they love. Having adequate savings on hand and a well-planned investment strategy is just the beginning of the process. Retirees need to make certain their medical coverage is in place and their legal affairs in order. A good plan also lays out the retiree’s housing options and even covers communication with your family, so that your wishes and plans are well known. All of these aspects of a safe, secure, fruitful retirement, and much more, become part of your personalized LifePlan.

If facing your retirement future with greater confidence and joy sounds like the approach you’re looking for, we invite you to discover more about LifePlanning at a free no-obligation LifePlanning Seminar. You can get a complete list of dates, times and locations, and register for the seminar of your choice, on the Upcoming Events tab on our website. You can also call us during business hours and register by phone. We guarantee you that the few hours you spend at a LifePlanning Seminar will provide you with a wide range of useful information. Then if you wish we can meet together for a personal consultation at your convenience.

Together let’s work to plan a better retirement future. It will be our pleasure to serve you.

(originally reported at www.cnbc.com)