Objective information about financial planning, investments, and retirement plans

Comments

  1. JoeTaxpayer says:

    Bad idea. As you suggested, the 25% (marginal rate) young earner will have the 10% penalty in addition to the tax. $15,385 needs to be withdrawn to net $10,000. 30 years of lost growth, this money could potentially have grown to $120K or more (napkin math, 7% doubling every 10 years).

    Instead, a $10,000 loan at 5% would be about $188/mo for a 5 year payoff. The payment on the same debt on a 24% credit card is $288. At the same time, I would argue with cutting the 401(k) deposit to just grab the match, and use the funds to save a bit of emergency money, so the next expense doesn’t just load the card up again. Other bloggers remind me it’s not only about numbers, it’s about motivation. I’m thinking a plan that doesn’t hack your retirement account, drops your interest burden by as much as 3/4, and puts you on track to clean up your debt in less than 5 years should fit the bill.

    • Roger Wohlner says:

      Joe thanks for the comment and your analysis. As always an excellent suggestion for folks to consider.

  2. Good insight Roger. I would definitely tend to agree and think in general that it’s a bad idea. You can almost always find more ways to make some extra money to pay off debt, but retirement is a one shot deal. That 14% stat, though not surprising, is very problematic.

    • Roger Wohlner says:

      John thanks for your comment. Every retirement readiness study I read is sobering to say the least.

  3. JStC says:

    taxes….seems to be a stymier……if you do this…taxes…if you do that…taxes……taxes taxes taxes……getting oneself out of debt…stymied….the book of ways is small……very small

    • Roger Wohlner says:

      Thanks for your comment. When dealing with retirement plans, taxes for better or worse are a key consideration when contemplating an early withdrawal. This can make doing so prohibitively expensive in many cases.

  4. Carl says:

    Hi,
    We are 65 years old and retired. $ 50,000 in cc debt. I have 65,000 in an Ira. My wife has 400,000. Pensions and ss equal 4600 per month. I really want to use my 65 to pay off the debt…..the stress relief alone would be a blessing….yes or no?

    • Roger Wohlner says:

      Carl thanks for your comment. While I can’t tell you definitively what to do, here are a few things to consider:

      If you take the money from the IRA you will need to take out more than is needed to pay off the debt due to taxes. Additionally once the $50,000 is paid off the money is gone and also are you certain that you will be able to stay out of debt? Between your wife’s account and your pension and SS is this enough to fund your monthly expenses?

      I can understand you desire to pay off this debt but I suggest you look at all aspects of this action before withdrawing the money from your IRA.

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