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Anybody ever say "screw it" & cash out retirement while relatively young to pay off debt?
Posted on 2/26/19 at 2:46 pm
Posted on 2/26/19 at 2:46 pm
I have a good 30-35 years left of working age. Even with the tax hit, would it ever been a good idea to cash out retirement and sort of do a hard reset with a clean slate of no student loan or credit card debt?
23
Posted on 2/26/19 at 2:53 pm to GetCocky11
Short answer, it's 99.99% of the time. a TERRIBLE idea.
And the other 0.01% is Luck, not by design. Unless those loans are like 50% interest rates.
If it's that bad, try thing a loan against it, if your plan allows that... instead of taking a distribution. And that too, has plenty of negatives.
And the other 0.01% is Luck, not by design. Unless those loans are like 50% interest rates.
If it's that bad, try thing a loan against it, if your plan allows that... instead of taking a distribution. And that too, has plenty of negatives.
This post was edited on 2/26/19 at 2:55 pm
Posted on 2/26/19 at 2:56 pm to GetCocky11
So long as your retirement bank doesn’t with hold any taxes and you forget to pay them and the IRS forgets too, then it would be a nice idea.
Posted on 2/26/19 at 2:58 pm to GetCocky11
I have known two people who took loans against their 401k, and one that cashed out. They all got fricked in the end.
Posted on 2/26/19 at 2:59 pm to GetCocky11
I can't think of a single situation where this is a good idea, unless it's a Roth you have plenty of basis in you can withdraw from without penalty.
Look into a consolidation loan through a bank for the credit cards. I wouldn't touch the student loans unless the monthly payment was just crushing you.
Look into a consolidation loan through a bank for the credit cards. I wouldn't touch the student loans unless the monthly payment was just crushing you.
Posted on 2/26/19 at 3:27 pm to GetCocky11
Money in the market cannot overcome time in the market. Leave the retirement alone. Figure out how to earn more money--get a side hustle--and pay down the debt. Repeat, do not touch retirement.
Posted on 2/26/19 at 3:51 pm to GetCocky11
Yes! If your retirement account CAGR is going to yield less than the interest you're currently paying on debt with early withdrawal penalties accounted for, it is a no-brainer. So if it's credit card debt that's at like 25%, almost always the math makes it a yes. But if it's student loans, which are generally between 5%-10%, then it generally doesn't make sense. Just build an excel spreadsheet and do the the math.
And given all the Wall Street overlords talk about inflated asset prices and an impending recession, it might make even more sense right now...
Edit: as stated above- if you can get a loan to pay off your CC debt at like 10%, then withdraw probably doesn't make sense.
And given all the Wall Street overlords talk about inflated asset prices and an impending recession, it might make even more sense right now...
Edit: as stated above- if you can get a loan to pay off your CC debt at like 10%, then withdraw probably doesn't make sense.
This post was edited on 2/26/19 at 3:55 pm
Posted on 2/26/19 at 3:51 pm to GetCocky11
If anyone knows anything, you’re only going to get one answer...do not do that. Find another way doing whatever you have to do. Eat pbj sandwiches, stop going to bars, find a side hustle, etc.
Posted on 2/26/19 at 3:54 pm to GetCocky11
Yes, done it to start up a business. The two worst decisions of my life.
This post was edited on 2/26/19 at 3:55 pm
Posted on 2/26/19 at 4:03 pm to GetCocky11
quote:
Even with the tax hit, would it ever been a good idea to cash out retirement and sort of do a hard reset with a clean slate of no student loan or credit card debt?
I did it twice and, no, it's never worth it. You have other issues if that is the choice.
You'll never get that time in the market back. You'll find yourself looking at your retirement account when they build back up just a little bit.
So, don't do it. Ever. Frankly, if you do it, you're saying you would rather work until you die than declare bankruptcy.
100% serious.
Posted on 2/26/19 at 4:11 pm to GetCocky11
Dave Ramsey (I know people on this board don't like him, but hang on) says to not contribute ANYTHING to retirement (not even enough to get a match) until all your debt is paid off.
If you can pay debt off quickly, and then take all that money you were using to pay debt and instead invest it, you will be fine forgoing a year or two of contributions.
The problem, though, is you are discussing doing it with money already saved. And that involves taking a tax and penalty hit that may end up costing you close to half of the balance. If you could replace 100 percent of that money in say two years, maybe, maybe, maybe might be worth it.
But odds are you won't replace it, and that's where the hurt comes in.
If you can pay debt off quickly, and then take all that money you were using to pay debt and instead invest it, you will be fine forgoing a year or two of contributions.
The problem, though, is you are discussing doing it with money already saved. And that involves taking a tax and penalty hit that may end up costing you close to half of the balance. If you could replace 100 percent of that money in say two years, maybe, maybe, maybe might be worth it.
But odds are you won't replace it, and that's where the hurt comes in.
Posted on 2/26/19 at 4:17 pm to GetCocky11
Cashing out causes a large tax mess along with penalties, so I wouldn't recommend that.
Personally, I hate the idea of not meeting the match because you are giving up free money. Are we talking about a 401K? Many 401Ks allow you to take a loan against your account. Interest rate may be 6%-7%, but you are paying yourself back, and it doesn't cause a taxable event. If we are talking credit card debt with a 20%+ rate, then it could be well worth it.
Personally, I hate the idea of not meeting the match because you are giving up free money. Are we talking about a 401K? Many 401Ks allow you to take a loan against your account. Interest rate may be 6%-7%, but you are paying yourself back, and it doesn't cause a taxable event. If we are talking credit card debt with a 20%+ rate, then it could be well worth it.
Posted on 2/26/19 at 4:25 pm to GetCocky11
This post was edited on 2/26/19 at 5:41 pm
Posted on 2/26/19 at 4:28 pm to GetCocky11
Terrible idea.
Also, do you really want to 30-35 years longer? I’m 35 and God willing, I want to retire no later than 55 to do other things.
quote:
30-35 years left of working age
Also, do you really want to 30-35 years longer? I’m 35 and God willing, I want to retire no later than 55 to do other things.
Posted on 2/26/19 at 4:51 pm to Tigerbait2323
quote:
Yes, done it to start up a business. The two worst decisions of my life.
I love those commercials like the Dominos pizza one where the woman says I used all my retirement account money to start this store, blah blah, blah. hey great IF you can make it work but i am not risking my real estate or stock assets for a side business. Do some kind of side business that does not risk everything else. get a loan. took me too long to have what i do i sure am not putting it all in one basket like that. I want it to where if my business goes under i still have the other assets. No guarantee i would have the time or money making opportunity/ability to get back to where I am now if i lost it all on one damn business. Posted on 2/26/19 at 7:27 pm to GetCocky11
quote:
have a good 30-35 years left of working age. Even with the tax hit, would it ever been a good idea to cash out retirement and sort of do a hard reset with a clean slate of no student loan or credit card debt?
Would need to know more info. How much in retirement? How much do you make? What are your debts and amounts?
Posted on 2/26/19 at 7:28 pm to Double Oh
Only way it makes sense is if it's juice loans and your arse is about to go for a swim with concrete boots if you don't pay it off by the weekend.
Posted on 2/26/19 at 8:08 pm to TopFlightSecurity
Borrowing against a 401k is a much better option than just taking it for good.
Posted on 2/26/19 at 8:19 pm to GetCocky11
No!
Suck it up and get aggressive paying off your cut.
Cut your expenses. Otherwise, you’ll just end up in the same boat.
Suck it up and get aggressive paying off your cut.
Cut your expenses. Otherwise, you’ll just end up in the same boat.
Posted on 2/27/19 at 7:03 am to LSUFanHouston
quote:
Dave Ramsey (I know people on this board don't like him
Wonder why
quote:
says to not contribute ANYTHING to retirement (not even enough to get a match) until all your debt is paid off.
Oh yeah
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