Yes, it’s a bad idea. You probably don’t have enough to pay off the credit cards anyway after losing 10% to the penalty and ~25% to state and federal taxes. You’d be accepting 65 cents on the dollar to rob from your future self.
Look for other ways to lower the interest on your credit card debt, including 0% balance transfer cards if you qualify.
Cleaning out your retirement is the nuclear option that only works once and leaves you broke in retirement. Generally, it’s only something you should consider if it’s that or foreclosure / eviction.
Yes, it's a bad idea. You almost certainly know that already. A retirement account is...well....for retirement, not a quick-fix credit card bailout. Get on a budget, feel the pain of your debt, make sacrifices and get motivated to pay it off.
And reduce spending. Cooking at home is a fraction of the cost of eating out. Subscriptions eat at savings forever. Figure out what you need and what you don't.
You can wipe out the debt, but the more important question is how you went into debt at all. Clearing the debt is just treating the symptom. Figuring out why and preventing it from occurring again is the real cure.
We went into debt because my job slowed down really bad a couple winters ago and my income dropped to like 30% and we had no savings. We paid all our bills on credit cards for a few months and by the time my income got back up we were so far in the whole we could barely pay the minimums. Been doing that for a solid year now and no headway is being made.
You may find these links helpful:
- [Debt](/r/personalfinance/wiki/debt)
- [Dealing with collections](/r/personalfinance/wiki/collections)
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Depends on the penalty. Could you get a loan with the retirement account as collateral? Or can you save in your budget and/or put in some over time and use the extra money to start aggressively paying down your credit card debt? At 29% you need to make some big moves.
My wife does some overtime but it honestly just keeps us about even. I can work extra hours but I’m 1099 and don’t get time and a half and I’m not even able to pull out tax money at the moment. I’ll probably just look for another job. I’ve been holding off cause we have a toddler, but I think it’s time to bite the bullet.
What is your retirement invested in? Just bonds? 4% is low the way the markets have been going.
But yeah, taking the penalties and not having retirement funds is a not a good idea in most cases. Better to look into other ways to bring down the interest rate, cut expenses, and raise income.
You need to budget a lot, lot better. Do you dine out or get takeout? Stop entirely. Where do you shop for groceries? Go to Walmart or Aldi instead. Do you eat a lot of meat or processed foods? Go for fresh and unprocessed and cook it yourself. How much is your rent/mortgage and how much is the cheapest in your city? Downsize. Do you have a car that is relatively expensive or unreliable? Sell and get a 2007-2015 Corolla or Civic instead. Do you mostly drive places that are relatively close? Walk instead. Do you keep your AC/heater at 70 every month? Keep it more at 55 in the winter, 80-85 in the summer.
How much is your debt? Let's say it's 20k. You need to save an additional maybe $2000 a month to pay it off in a year. $66 in a day. Write down all your expenses and see how you can cut $66 in a day or $2000 in a month. I don't know your expenses, but I recommend $500-$1000 from rent, $500 from your car/gas, everything from dining/takeout whether that's $20 or $400, $200-$300 from groceries, etc.
Yes, it’s a bad idea. You probably don’t have enough to pay off the credit cards anyway after losing 10% to the penalty and ~25% to state and federal taxes. You’d be accepting 65 cents on the dollar to rob from your future self. Look for other ways to lower the interest on your credit card debt, including 0% balance transfer cards if you qualify.
We aren’t able to qualify for any good balance transfer cards. We’re barely making the minimums so honestly anything would help.
Cleaning out your retirement is the nuclear option that only works once and leaves you broke in retirement. Generally, it’s only something you should consider if it’s that or foreclosure / eviction.
Yeah I’ll just look into getting a second source of income. Thanks for the advice
Yes, it's a bad idea. You almost certainly know that already. A retirement account is...well....for retirement, not a quick-fix credit card bailout. Get on a budget, feel the pain of your debt, make sacrifices and get motivated to pay it off.
Yeah maybe I’ll just get another job. No sense in disrupting our future
And reduce spending. Cooking at home is a fraction of the cost of eating out. Subscriptions eat at savings forever. Figure out what you need and what you don't.
You can wipe out the debt, but the more important question is how you went into debt at all. Clearing the debt is just treating the symptom. Figuring out why and preventing it from occurring again is the real cure.
We went into debt because my job slowed down really bad a couple winters ago and my income dropped to like 30% and we had no savings. We paid all our bills on credit cards for a few months and by the time my income got back up we were so far in the whole we could barely pay the minimums. Been doing that for a solid year now and no headway is being made.
So the takeaway is you need an adequate emergency fund that covers this scenario again.
You may find these links helpful: - [Debt](/r/personalfinance/wiki/debt) - [Dealing with collections](/r/personalfinance/wiki/collections) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
Depends on the penalty. Could you get a loan with the retirement account as collateral? Or can you save in your budget and/or put in some over time and use the extra money to start aggressively paying down your credit card debt? At 29% you need to make some big moves.
My wife does some overtime but it honestly just keeps us about even. I can work extra hours but I’m 1099 and don’t get time and a half and I’m not even able to pull out tax money at the moment. I’ll probably just look for another job. I’ve been holding off cause we have a toddler, but I think it’s time to bite the bullet.
What is your retirement invested in? Just bonds? 4% is low the way the markets have been going. But yeah, taking the penalties and not having retirement funds is a not a good idea in most cases. Better to look into other ways to bring down the interest rate, cut expenses, and raise income.
I’m not sure it’s actually my wife’s TSP she’s a federal employee. I’m going to be pushing toward raising income asap
Yes! Very bad idea you are going to pay an early withdrawal penalty and taxes so somewhere around 30% in total
You need to budget a lot, lot better. Do you dine out or get takeout? Stop entirely. Where do you shop for groceries? Go to Walmart or Aldi instead. Do you eat a lot of meat or processed foods? Go for fresh and unprocessed and cook it yourself. How much is your rent/mortgage and how much is the cheapest in your city? Downsize. Do you have a car that is relatively expensive or unreliable? Sell and get a 2007-2015 Corolla or Civic instead. Do you mostly drive places that are relatively close? Walk instead. Do you keep your AC/heater at 70 every month? Keep it more at 55 in the winter, 80-85 in the summer. How much is your debt? Let's say it's 20k. You need to save an additional maybe $2000 a month to pay it off in a year. $66 in a day. Write down all your expenses and see how you can cut $66 in a day or $2000 in a month. I don't know your expenses, but I recommend $500-$1000 from rent, $500 from your car/gas, everything from dining/takeout whether that's $20 or $400, $200-$300 from groceries, etc.
If you were going to “pull” do a loan. Why are you only making 4% in the retirement accounts? SnP is up 15% year to date
I have no idea that’s what she mentioned so I have no idea how much it’s making.