I have $55k in my 401k. I am also unemployed with a $20k credit card debt. i can't make the payments. Should i (early) withdrawl $20k from my 401k to pay the credit card debt? i'd really like to get this credit card out of my life.
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ANSWERS: 11
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You would have to pull out more than 20k because of the taxes and the penalties you will be charged for cashing in.
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I am not sure what the penalties would be for w/d it early but it would probably be less in the long run than paying the expensive outrageous interest rates on the credit cards.you just have to figure that out but if you are going to keep using the credit cards, why bother.
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YES, absolutely, take the 401K money, pay whatever penalties, etc. Get out of credit card debt and stay out. You will come out better. You will feel better about yourself and your situation, and you can feel good about having that behind you. Hopefully you will have learned your lesson and stay out of credit card debt; that does not have to be - learn how to live within your means - if you want more then challenge yourself to learn more, improve your skills, and earn more - lots of people can/have done it. Like me! I raided my 401 to pay off my house and I'm so glad I did - I paid back my 401 and started putting that house payment in my 401 and IRA's and individual stocks and ... Today I am nicely retired.
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I would.
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I wouldn't, call your credit card company and close the account and then settle your debt with a much lower interest rate.
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You'll probably have to loan yourself the money which will leave another note to pay off, granted with a lower interest rate, but it would still be debt. If you are in the position to withdraw the money AND you aren't dependent on the credit cards to live (meaning you've learned your lesson), then I'd advise you do it. You'll need to pull out more money than the 20K, though.
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I think, it is not good idea to take a hit on your 401k. save it for future. get a debt consolidation loan instead. It is lower your interest rate and make life little easier. Here is a list of companies and govt. organizations that can help you get out of your credit mess. http://www.fairloanrate.com/2009/05/23/top-10-debt-consolidation-companies-to-help-you-in-debt-settlement/
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That 20k is likely costing you around 22% interest and god knows how much for late fees and over limit fees (and if you're not over limit now - if they sense you're in trouble they're quite likely to lower the limit so you are). Find out how much it is going to cost you in penalties and taxes to actually get 20k, and compare that with the cost of keeping the credit card balance. Another possibility may be to take a loan from your 401k. You'd get the 20k, pay yourself interest, and get the credit card off your back. If that's possible it sounds like a winner to me.
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i would, but don't you pay a heavy tax penalty for early withdrawals? if unemployed , should allow for that too!!
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There is a 10% penalty for withdrawing any money. You will also pay federal and state tax at the regular rate on the withdrawal. If the money is in a CD there can be further penalties from the bank. It can be way over a 30% loss. ₪ ɦəlʞɹÉq ₪
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Work out a deal with your CC company. Never pull money out of your 401k retirement. Consumer Credit is a good place to start. Most CC companies would rather work with you so you can continue to make a payment on your credit card.
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