Think long and hard before draining your retirement accounts to cover day-to-day living expenses -- even if you're facing foreclosure.

We know the price of everything is going up faster than most paychecks and you need a way to bridge the gap between what you earn and what you need to spend.

That's especially true for homeowners with adjustable-rate mortgages who are trying to cope with dramatically higher monthly payments.

But if this is the last $25,000 or $35,000 you have, you don't want to squander it postponing the inevitable. You don't want to spend your retirement savings and still lose your home.

Taking money from your 401(k) account is expensive, too. The rules are designed to discourage you from tapping that savings until you're 59 1/2 years old.

A hardship withdrawal is the most costly option.

You're allowed to use your retirement savings for medical bills, college and funeral expenses and to keep yourself from being evicted. But the investment company running your company's 401(k) plan will require you to prove that you're out of money and have no other way to pay those bills.

What's really bad is that you'll only get about 60 cents of every dollar you withdraw. The rest you'll lose to local, state and federal taxes and a 10% penalty if you're not 59 1/2 and are in the 28% tax bracket.

You'll pay even more over the long run. A $10,000 withdrawal could have grown to $81,000 in 30 years, assuming that it was invested in a mutual fund that earned a modest 7% a year.

If your mutual fund did a little better than that and averaged a 9% annual return you'd be missing out on $147,000.

Taking a hardship withdrawal often will preclude you from making further contributions to the retirement plan for a period of time, further shrinking your potential earnings.

Borrowing against your 401(k) account is only a slightly better option.

If your plan allows loans, you probably can borrow as much as 50% of your balance, or $50,000, whichever is less.

The big advantage in borrowing against your account is that you won't pay taxes on the loan as long as you repay it as scheduled.

But that's not enough to make it a good idea, because there are other risks and costs.

Cost 1. Leaving your job means it's time to pay up.

Whether you're laid off or you quit, you must repay the balance of the loan within 60 days. Otherwise, the loan balance will be reclassified as an early distribution with all of the taxes and penalties discussed above.

Cost 2. Your future savings take a serious hit.

Even if you repay the loan, the interest is often less than what your retirement savings would have earned if it had remained in a mutual fund.

Let's say, for example, you borrowed $25,000 at an interest rate of 7%. Your payment would be $495 a month for the next five years. When you've repaid the loan, you'll have returned $29,700 to your account. If that money had remained in your account and earned 8%, you'd have about $37,200 after five years.

Cost 3. You're paying taxes twice on your loan payments.

Unlike your original contributions, your 401(k) loan payments must be made with after-tax dollars. So if you're in the 28% tax bracket, you actually have to earn $687 to net enough for that $495 monthly loan payment. Plus, you'll have to pay taxes again when you retire and start withdrawing money from your account.

Cost 4. Contributions may be temporarily barred.

You may be ineligible to make tax-deferred contributions, or benefit from matching contributions by your employer, for a period of time.

Cost 5. It could worsen your financial situation.

You'll have a new monthly payment to make, and it will be a substantial new payment, because almost every 401(k) loan must be repaid in five years. If you fail to make the payments and default on the loan, the balance will deemed an early distribution and you'll be charged taxes and penalties on it.

Bottom line: Don't borrow against your 401(k) plan unless you can answer yes to all of the following questions:

• Are you about to lose your house or only car?
• Have you exhausted all other options?
• Do you plan to stay at your employer for another five years?
• Are you fairly certain your company won't lay you off over the next five years?
• Is the end to whatever caused your financial problems truly in sight?

Be brutally honest with yourself when you answer that last question.

If you or your spouse can't work because of an illness or family emergency that will resolve itself over a few weeks or months, that's one thing.

But if you have a mortgage you'll never be able to afford, and owe more on your house than it's worth, don't spend your retirement savings in a vain attempt to postpone foreclosure or bankruptcy by a few months or even a few years.

If you file for bankruptcy, your creditors can't touch most employer-sponsored retirement plans. Don't squander that advantage and your chance of retiring someday.

For more help, take a look at our advice on how to:

Avoid foreclosure.

Decide if bankruptcy can save your home.

Know if it's time to walk away from a home.

By Tracy Needham

Interest.com Contributing Editor

Have a question about your finances? Ask us at editors@interest.com.