US Vice Presidential candidate Tim Walz, 60, worked in multiple professions over the decades before becoming the 41st Minnesota Governor in 2019. He holds a master's degree in education leadership and has implemented several progressive policies, including free school meals and better worker leave terms. The financial impact of these policies and Walz's records on fiscal challenges are attributes voters would look up to. However, Walz's recent interview with The Wall Street Journal revealed that his personal finance choices might not be the best for his retirement goals.
Walz disclosed he made an early withdrawal of almost $135,000 from a workplace retirement account in 2023 to finance his daughter's college education, which most financial advisers would say is a grave personal finance mistake. The amount was nearly 10% of his estimated retirement savings, north of $1 million. Certified financial planner Gerika Espinosa reportedly said Walz's decision is "not advisable" because withdrawals are at the expense of his retirement.
Meanwhile, CFA and senior adviser Jamie Bosse highlighted that retirement spending models have changed from a "three-legged stool" of pensions, savings, and Social Security to a "pogo stick." She explained that concerns around Social Security stability over the next decade and an uptick in pension plans being cancelled or frozen directly link your financial independence to how much you can save from your income for retirement. While Walz's financial situation could be unique, prematurely withdrawing from a retirement account might have severe consequences for most Americans who depend heavily on their investments for retirement income.
Tim Walz Declined A Pay Hike In 2023
Walz and his wife, Gwen, almost earned a combined $300,000 in 2023, of which $135,000 came from pensions or annuities. Given his diverse background as a teacher, a US Army National Guard member, and now a politician, Walz stands to earn a decent pension income when he starts collecting them in full.
According to Minnesota Legislative Reference Library records, Walz earns $127,629 annually. Last year, he received an offer for a pay hike to $149,550 annually. However, he refused the offer, and his pay remains the same. If the current US Vice President Kamala Harris and Walz win the 2024 elections, his income could increase by over 80% to $235,100. Walz also reportedly sold their home in 2019 for over $300,000 after moving into the Minnesota Governor's Mansion. Elsewhere, Senator JD Vance disclosed earnings of up to $1.3 million for 2022.
Early Retirement Withdrawals Could Push Back Progress By Years
Both individual retirement accounts (IRAs) and employer-sponsored retirement plans, such as 401(k)s, offer multiple tax benefits on contributions, which help grow your capital gains on investments tax-free with the power of compounding. Pulling out $135,000 from a 401(k) would massively impact the portfolio's compounding growth rate and cost you taxes on the amount withdrawn. Meanwhile, 401(k) withdrawals before the age of 59½ also incur penalties on top of taxes, increasing the financial burden. "Taking money out of your retirement accounts to use for something else means, by definition, that money won't be available for retirement," said Yusuf Abugideiri, a CFP and chief investment officer at Yeske Buie. "You're putting yourself in a really challenging position in most cases."
Although individuals can think that premature withdrawals from retirement funds are justified when it comes to funding a child's education, Bosse said there are several options to pay for college, like working as a student or receiving tuition aid alongside loans. However, since options become limited in retirement, you lose financial flexibility. "You can't get a loan for retirement," she concluded.
