NEED TO KNOW
-
Verela emphasizes avoiding blanket financial advice and encourages people to calculate their own unique financial plans
-
She gained popularity for offering practical, non-sensationalist financial tips based on her IRS experience and tax knowledge
Natasha Verela hears a lot of financial advice — both good and bad.
The former IRS agent and current content creator, 47, tells PEOPLE that “some of the worst advice I’ve ever heard is never touch your 401(k).” Verela believes that if someone is in serious debt — whether it’s consumer debt, student loans, etc. — it’s smarter to use a portion of their retirement funds to pay it off than watch the number grow.
“A lot of advice I hear is — I want to say, ignorant of age, because ageism is real — if somebody’s in their 40s, I would never tell them, ‘Oh, just work and pay off your debt.’ I would say, ‘No. Sell your house. Sell your $80,000 cars. Pay off everything, go rent and then contribute to your 401(k) afterwards.’ “
Verela understands how hard the decision can be firsthand, as she pulled money out of her 401(k) to pay off $85,000 in student loans. She recommends the method to others as a way to regain some financial control.
“Take the money out of your 401(k), especially if you are in your mid to late 30s. You have time to recoup regardless of what you might think. Pull it out. Pay any taxes if you can,” she shares. “If you have real estate or any business losses, you can offset those with the tax liability, and take the hit now.”
“I would take the hit, because when you’re older, you’re not going to want to work nine, 10 jobs just to pay off debt,” she continues. “Your strongest earning years are not at 50 years old. You’re physically stronger when you’re in your 30s, you’re mentally stronger on average, and the last thing you want is to have to play catch-up in your 40s.”
She emphasizes that she is financially free now because she “took the very opposite advice that everybody would give you online.”
“I wasn’t afraid to touch my 401(k). I wasn’t afraid to leave my primary residence. I wasn’t afraid to sell it. I just couldn’t. And I’ve sold it since then, but I’m never afraid to let go of something for something bigger and better,” Verela says. “I would rather pay the IRS a payment plan than pay interest or what I could on a student loan, because at least you can contribute to your max now and get on a payment plan with the IRS or pay with savings.”