Is it worth the taxes and penalties incured by early withdrawal of a 401k to pay off a credit card debt. I owe about 7500 and my credit card is carrging 20%.
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ANSWERS: 4
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It depends on how long its going to take you to pay of the 7500. That's a *lot* of interest, and certainly you don't want to pay it slowly at CC minimum payment rates, that will bloat to a huge amount. Somewhere there's a CC payoff calculator on the web, but I can't remember the url (google does, I bet). If the total cost of paying down the cards with your income is greater than the total cost of the 401k+penalties+taxes+projected growth over the same period, then yes it makes monetary sense. But that ignores the psychological issue of using your 401k for something other than retirement: that's not a good habit to get into, I think.
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Definitely not. You have to pay regular taxes on it (as in, it raises your income by whatever you take out). You also have to pay a 10% penalty. This would work out to about 40% penalty depending on what you make. 40% is a lot higher than 20% and you will be losing many months/years of earning interest on your 401k money. PLEASE DO NOT DO THIS.
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no, don't do it, first cut expenses, stop saving money (if you are doing it) and put all that money against your debt. I'm assuming you are no longer charging that CC.
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Here's another suggestion. Reduce your 401K deposits for awhile and use the money to put towards your credit card debt. Then you won't owe any penalties and you'll pay down your debt faster.
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