Millennials might be better than Gen X at saving for retirement in the first place, but their willingness to use that money elsewhere doesn't bode well

Getty ImagesMillennials may not be as financially savvy as it seems.Nearly the same share of millennials and Gen Xers are actively saving for retirement.But a new survey from TD Ameritrade found that millennials would sooner raid their retirement account for non-urgent purchases, such as a vacation, wedding, or to pay off debt. Early withdrawals from 401(k)s can be particularly damaging because you often have to pay a 10% penalty and income taxes on the amount. Loans from a 401(k) are not ideal either.IRAs are often more flexible and allow penalty-free withdrawals for a first-time home purchase or college expenses.Still, early withdrawals from retirement accounts should always be a last resort. It's difficult to make up lost time in the market.Read more personal finance coverage.By some measures, millennials are putting Gen X to shame when it comes to saving for retirement - but there may be more to the story.According to a recent Morning Consult and Insider survey, about 33% of millennials are actively saving in a retirement account, such as a 401(k) or IRA, compared to 36% of Gen Xers. Considering the oldest Gen Xers are nearly three decades closer to retirement age than the youngest millennials, this doesn't reflect well.However, new data from TD Ameritrade suggests millennials may not be as financially savvy as they seem. The bank surveyed over 1,000 Americans with at least $10,000 in investable assets about their retirement savings.Respondents were asked whether they would dip into their retirement savings, and if so, in which scenarios. The survey presented 12 options, and respondents could choose as many or as few as they liked. Both Gen Xers and millennials were most likely to say they would make early withdrawals from their retirement accounts to cover medical bills, recover from job loss, and cover a child's education.But the results also show that millennials are more likely to tap their retirement savings for far less urgent needs.Forty-two percent of millennials would dip into a 401(k) or other retirement savings vehicle to pay for a vacation, compared to 26% of Gen Xers; 41% of millennials would spend retirement funds on wedding-related costs, compared to 20% of Gen Xers; 48% of millennials would tap their account to pay off credit-card debt, compared to 36% of Gen Xers; and 47% of millennials would use the money to buy a house, compared to just 30% of Gen Xers.The situations in which a person can withdraw money from a 401(k) are fairly limited. 401(k)s do allow penalty-free early withdrawals in certain circumstances, including disability, excessive medical expenses, and divorce settlements, but in most other cases - like paying for college tuition or a down payment on a home - you'll be slapped with a 10% penalty if you're under age 59 and a half, in addition to paying income taxes on the amount. Beginning in January 2020, however, withdrawals won't be limited to your contribution amount. New 401(k) rules enable plan participants to take out employer contributions and investment earnings as well.Some 401(k) plans also permit loans, which the IRS limits to 50% of your vested balance, up to $50,000. The loan generally must be repaid within five years and can be used for just about anything, but it's not ideal.If you anticipate early withdrawals, consider saving in an IRAIt should be noted that if you anticipate needing to take money out of a retirement account, an IRA may be a better investment option for you, Molly Passantino, senior specialist of retirement at TD Ameritrade, told Business Insider in an email.Anyone can open an individual retirement arrangement, or IRA, at a bank or brokerage, but the annual contribution limits are lower than a 401(k) - $6,000, or $7,000 if you're over 50, in 2019. That's compared to a 401(k)'s $19,000 a year, or $25,000 if you're over 50, in 2019.With an IRA, you can take penalty-free early withdrawals for [immediate financial need] as well as if you are using the money for a first-time home purchase (up to $10,000) and for qualifying education expenses, Passantino said. While you are still losing out on the opportunity for compounding interest, education and purchasing a home can also benefit your earning potential and ability to comfortably retire in the long run, she said. If your IRA is a Roth account, you can withdraw your contributions (but not any investment earnings) at any time, penalty-free, as long as you've held the account for at least five years.If there are no other options but to withdraw money from a retirement account, as a millennial, you are in a better position to do so than someone who is in Gen X or a baby boomer, Passantino said. You still have time on your side to make up whatever you took out (as well as the penalty/taxes on that money). That being said, this shouldn't be a habit that you get into or be seen as anything other than a last resort.More savings and retirement coverageHow to retire earlyHow to save more moneyAre CDs a good investment?When to save money in high-yield savings NOW WATCH: Here's where you should really go to stay safe during an earthquake function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener(message, receiveMessage, false);