BOSTON (TheStreet) -- If you spend time at the beach this summer, you may notice the "current conditions" flags that warn swimmers about the water currents or surf. A red or black flag generally means it's too rough and one should avoid swimming; a yellow or orange flag typically signals light surf and advises swimmers to use caution; a green flag usually means calm waters.
With finances, we can use the same flags to help identify when it is a good idea to use a particular financial strategy or when the circumstances suggest it's best to avoid it.
Tapping into your 401(k) prematurely may be one of those "yellow/orange" flag circumstances. To avoid drowning in debt or another emergency situation, it may be tempting to access funds originally set aside for retirement. Proceed with caution, though. Before using your 401(k) as your life vest, review the conditions carefully to assess whether you should dive into your retirement savings funds or perhaps swim elsewhere.
First, you need to know the specifications of your particular plan to see what kinds of options you have. Some plans actually prohibit any type of distribution unless one terminates employment. Other plans are more flexible and allow participants to take loans and borrow against the plan or take advantage of "hardship distributions."