1 in 4 young people dip into 401(k)s to pay off debt—here's why that's a problem

Survey after survey shows that Americans want to become debt-free. But a significant number of young people are going about it the wrong way, experts say.

Debt can feel overwhelming: The average young adult under the age of 35 has a credit card balance of over $5,800. A 401 is a great way to save for retirement because it offers significant tax savings. You can put in money directly from your paycheck before taxes are withdrawn, which reduces your taxable income. That means you will pay less in taxes each year. And because your contributions are automatically deducted from your pay, you won't be tempted to spend those funds. Some employers even match contributions, which is essentially free money.

Long term, taking an early withdrawal also means you"lose one of the advantages, as an early adult, that's on your side when it comes to investing, and that's longevity," says Lisa Margeson, head of retirement client experience and communications at Bank of America. "Near term, it may seem like a really good idea to pull that money out and bring down your debt, but it likely has real, significant, long-term implications," Margeson says.

All Americans, regardless of age, are feeling the squeeze. Salaries just don't go as far as they once did to cover the necessities. In fact, the average paycheck has the same purchasing power it did 40 years ago, Pew Research found. When adjusted for inflation, the average hourly earnings peaked more than 45 years ago, according to Pew. A $4.03 hourly wage in 1973 had the same purchasing power that $23.68 would last year.

MakeIt The debt cycle can be tough. Although a bad longterm financial move it can give one immediate relief.

MakeIt It teaches responsibility. It's thier debt not the tax payers.

MakeIt If everything was free there wouldn’t be any debt and thus no one would ever have to dip into there 401k omgggggg how come no one came up with this idea before

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