I'm 37 years old and I just went through a divorce where I assumed 15k in credit card debt at 12% interest from my ex. I have 175k in a retirement account through Fidelity. Should I withdrawal 15k out of my retirement account and eliminate this debt or pay 1,500 a month until the debt is gone?
2007-09-19 04:48:19 · 10 answers · asked by cd 1 in Business & Finance ➔ Personal Finance
Do not take money out of your retirement account. You will pay a 10% penalty plus income tax, and probably in a higher tax bracket.
Transfer the credit card debt to a new account that offers 0% on balance transfers. Then pay $1500 until the debt is gone.
Or take out a 2nd mortgage, and pay off the credit card debt, since the 2nd mortage interest is tax deductable.
2007-09-19 04:54:24 · answer #1 · answered by Feeling Mutual 7 · 1⤊ 0⤋
I'm sorry about the divorce. The question is a "no brainer" because if you took the money out of your retirement account, you would have to pay the tax on in AND an additional ten (10%) per cent penality. Even if you had a ROTH, you could be nailed the ten (10%) per cent penality. Besides the taxfree growth that money will enjoy until you do retire will more than make up the interest expense.
If you need to slow down new deposits into your retirement account, that would be better than withdrawing from the retirement account. Be sure to restore the deposit rate as soon as you can. Pay the debt out of earnings. Get a second job if you must, but DO NOT use retirement money at Fidelity or anywhere else to pay the debt.
2007-09-19 04:59:52 · answer #2 · answered by Jeff H 5 · 1⤊ 0⤋
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2007-09-20 22:14:01 · answer #3 · answered by Anonymous · 0⤊ 0⤋
At 15% interest you will be paying over $1,000 in interest, and it will take you a year to set rid of this debt. How much will you pay as a penalty for withdrawing from your retirement account? Choose whichever option is cheaper.
Divorces can ruin finances and credit. Be sure to meet with a financial advisor to ensure that there aren't any nasty surprises waiting for you.
And cut up the credit card. :)
2007-09-19 05:21:58 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Don't take the money out of your account - you'll end up losing a lot more than 15k. You'll pay hefty penalties and taxes for taking it out early, so you'll lose quite a bit of money, not to mention the lost earning potential of that money. Don't rob yourself of both principal and interest.
Instead, take the money from your paycheck that you would usually invest into your retirement, and use it to pay off your credit card debt instead.
2007-09-19 05:25:15 · answer #5 · answered by teresathegreat 7 · 1⤊ 0⤋
Pay the 1500 a month. The penalty for the withdrawal will outweigh the 12% interest. What you should do is apply for a new credit card (or cards) that have a 0% introductory rate for balance transfers.
2007-09-19 04:52:00 · answer #6 · answered by cashmaker81 6 · 1⤊ 0⤋
Well it all depends on what other bills you have to pay and such. If you have the extra money, You should probably just pay it without taking the money out of Fidelity. I wouldn't take the money out, but if thats what you want to do, then you won't have that debt to worry about. It all depends... Just look at the big picture.
2007-09-19 04:56:17 · answer #7 · answered by Anonymous · 0⤊ 0⤋
I just wouldn't do it. You may pay everything off, but when I worked at the IRS I saw a lot of people do this, and they would pay the Pension imposed penalty of 20% and think that was also the 20% the IRS requires, but it wasn't; so in the end they payed off credit cards, but owed the IRS. You are already be
2016-05-18 05:58:30 · answer #8 · answered by ? 3 · 0⤊ 0⤋
pay it off slowly if you can afford it. over the long haul your $15k in the account will potentially grow to be upwards of 50. if you remove that you could lose a lot of money in the long run that you would have had. but to be sure you should ask a financial advisor.
2007-09-19 04:57:05 · answer #9 · answered by somebody's a mom!! 7 · 0⤊ 0⤋
if you can take a loan out against your retirement then pay yourself back with interest you might be better off borrowing from yourself and getting rid of the high interest debt
2007-09-19 04:56:46 · answer #10 · answered by Anonymous · 0⤊ 1⤋