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color of money chat q: they have about 10k in credit card debt. should they use 401k money to pay it all now or do it with $500/mo extra?

Posted by lord tubbington (aka chris) May 5 '11, 11:15

WITHDRAWING FROM A 401(K)

Hi Michelle, I hate debt, but I've found myself with $10,000 on a credit card due to some unexpected expenses, child care, etc. We make good salaries and our child care expenses will be going down soon, but our expenses are still high, leaving us with $500/month to put toward the credit cards. I don't want to take two years to pay them off- I want the debt gone now! I know about the 10 percent penalty for early withdrawal on 401ks, but I want a fresh start financially. We have about $80,000 in several different 401ks, plus we each have a pension and will have a fairly decent inheritance by the time we retire. All of that makes me think that since we're in our mid 30s, we're in decent shape for retirement and it might actually be okay to take out the money to pay off our debt now. What do you think?

Responses:

is there a slut involved here? -- nm - CQ May 5, 11:26
No no no. Rotate that money around on 0% intro APR cards and pay it off. - Dr.Vermin May 5, 11:24
Is the APR 300 per cent? Absolutely. -- nm - con_carne May 5, 11:21 1
- in fact, they should get a payday loan to pay it off. -- nm - loosilu May 5, 11:21
oy, of course not. -- nm - loosilu May 5, 11:20
You are not okay for retirement. You are okay with paying $500/month. -- nm - Amy May 5, 11:19 9
- True. For a couple in their mid 30s to have only 80K in retirement, not so hot. -- nm - ty97 May 5, 11:22 3
  - Actually, that's not shabby at all - Will Hunting May 5, 11:27 1
    - wow -- nm - lileve May 5, 11:28
  - Pension and SS, but they will have to work longer. -- nm - Amy May 5, 11:23
- [deleted] 4
  - Right, if they had a home equity loan or something that would make sense. -- nm - Ender May 5, 11:24
  - Or, roll it around a few introductory rates. -- nm - Amy May 5, 11:23 1
    - [deleted]
  - or transfer to a 0% card. -- nm - loosilu May 5, 11:22
No. -- nm - lileve May 5, 11:18
[deleted]
no no no no no no no no no no. leave the 401k alone. no. -- nm - ty97 May 5, 11:17 1
- Especially since you haven't fixed the root case of the debt. 'Unexpected expenses, child care'. You're overspending, time to adjust. -- nm - ty97 May 5, 11:21

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color of money chat q: they have about 10k in credit card debt. should they use 401k money to pay it all now or do it with $500/mo extra?

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