The article focuses on the personal finances of Minnesota governor and vice-presidential candidate Tim Walz, comparing them to those of his Republican rival, Senator J.D. Vance. Walz and his wife earned about $300,000 in 2023, while Vance disclosed an income between $1.2 and $1.3 million in 2022. Walz made a $135,000 early withdrawal from a workplace retirement account to fund his daughter’s college education, a move financial advisors would typically caution against.
Walz’s situation is unique due to his retirement savings exceeding $1 million, with ample pension income expected in retirement from his years as a teacher, national guardsman, and politician. About $135,000 of the Walzes’ $300,000 income in 2023 came from pensions or annuities. However, his decision to make an early withdrawal from his retirement account is still considered risky, especially for the majority of Americans who will rely heavily on their investments for retirement.
Taking money out of a retirement account limits the growth potential of that money, as it won’t have the chance to compound over time. Early withdrawals also incur tax penalties and reduce financial flexibility. While it may seem necessary to fund immediate needs like education, there are typically alternative funding options available for things like college expenses. The risks of an early withdrawal are emphasized due to limited options available for financial assistance in retirement compared to other needs.
The article highlights the importance of financial planning and saving for retirement, particularly in today’s landscape where pensions are less common, and Social Security stability is a concern. Walz’s situation is described as a throwback to a time when retirement spending was based on a “three-legged stool” of pensions, Social Security, and personal savings. However, the shift towards individual saving for retirement has made early withdrawals from retirement accounts more detrimental to financial independence.
Overall, the article suggests that while individuals like Tim Walz may have unique financial circumstances that allow for certain financial actions, such as early retirement withdrawals, for most Americans, it’s best to avoid such risky moves. Seeking alternative solutions, like student work programs, tuition aid, or loans to fund education, is recommended over tapping into retirement savings. The article serves as a reminder of the importance of sound financial planning, savings, and investment strategies to secure a stable financial future.
