NEW YORK (TheStreet) -- It's not often a national political figure emerges as a poster child for what not to do with your finances.
As The New York Times reported this week, Sen. Marco Rubio, (R, Fla.) has been plagued by money problems for much of his career. Some of the GOP presidential candidate's troubles were of his own making, which serves as a cautionary tale for the rest of us. Here's a rundown of some of the bigger fiscal do's and dont's committed by Florida's junior senator.
Looting His Retirement Accounts
On one of his biggest mistakes, Rubio liquidated a $68,000 retirement account to pay for a refrigerator, among other expenses, the Times says. Financial advisers rail against this type of thing all the time. Yet the sad fact is many Americans tap into their retirement savings all too often.
Here's why it's a bad idea.
First, if you withdraw money directly from your 401(k) -- or a traditional IRA, for that matter -- you face an immediate tax hit. And if you're under age 59½, you'll generally pay a 10% penalty as well. (There are exceptions to that.) The Internal Revenue Service collected $5.7 billion in penalties in 2011, according to this Bloomberg story, so it would appear lots of people are making this mistake.
Even worse, that money is gone, meaning you'll lose the growth you could have had over the years from leaving the funds in the account.
Assuming you have to pull cash from your retirement savings, the lesser of two evils would be to borrow from your 401(k), if your plan allows it. At least in that case, it's a loan in which you are paying yourself back, though you'll still lose out on your growth for as long as the money is out. The downside is that if you leave the company before the loan is fully repaid, it may be treated as a distribution and become subject to those tax penalties. Plus, the IRS caps the amount you can borrow at $50,000.