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Posted on 5/23/22 at 1:19 pm to Newrow
quote:
Why be a slave to debt if you can pay it off in the short term?
Because it sounds like he can't pay it off without cashing in his 401k.
Posted on 5/23/22 at 1:20 pm to Newrow
What company is he leaving? What Company is he joining? What are his initials?
Posted on 5/23/22 at 1:24 pm to jchamil
quote:
Because it sounds like he can't pay it off without cashing in his 401k.
Sounds to me like he wants to pay off student debt and credit card debt with extra cash on the side. After all, he said:
quote:
He wants to pay off student debt and credit card debt with extra cash on the side.
Maybe he's thinking a 401(k) is "extra cash on the side" but I'm thinking a second job, say Ubering, is more like "extra cash on the side".
It sure would make a lot more sense to take on a second job - at least until the debts are paid down/off, than it would be selling investments short and exposed to taxes and penalties.
Posted on 5/23/22 at 1:26 pm to Newrow
first question is why does he have credit card debt. fix the spending problem before you throw retirement money at it.
Posted on 5/23/22 at 1:27 pm to Newrow
quote:
I said it’s a good idea.
You were wrong.
Posted on 5/23/22 at 1:29 pm to Newrow
quote:
Why be a slave to debt if you can pay it off in the short term?
He will go back to adding credit card debt.
It's a bad idea. Tell him to work extra time at work or a second money making job to go towards debts. Do not touch those retirement accounts. This is not an emergency, it is a change of habits and determination to pay off bad debt.
Posted on 5/23/22 at 1:32 pm to WildTchoupitoulas
quote:
It sure would make a lot more sense to take on a second job - at least until the debts are paid down/off, than it would be selling investments short and exposed to taxes and penalties.
My exact thought. Door dash as well, or something like that. Pick up 40-60.00 a night 4-5 days per week, and put it all towards debt and you can pay that down quickly.
Posted on 5/23/22 at 1:32 pm to Newrow
I haven't read the entire thread so it may have been said already, but would borrow money at 30% to pay off debt?
Posted on 5/23/22 at 1:38 pm to WildTchoupitoulas
quote:
Sounds to me like he wants to pay off student debt and credit card debt with extra cash on the side. After all, he said:
I think he meant the proceeds of the 401k and PTO would be the "cash on the side", otherwise, why in the hell would he be cashing in the 401k if he has enough cash on the side to pay down all of his debt?
Posted on 5/23/22 at 1:41 pm to jchamil
quote:
otherwise, why in the hell would he be cashing in the 401k if he has enough cash on the side to pay down all of his debt?
I don't know.
But I have never, in 33 years of working in the professional world, thought of my investments in any way as "cash on the side".
Posted on 5/23/22 at 1:42 pm to Newrow
That money in the retirement account can't be replaced and the compounding factor of savings from your early 20s is huge. Leave that shite alone and like others said tighten your belt and pay it off from regular income.
Posted on 5/23/22 at 1:45 pm to Newrow
Cash out and buy all crypto and NFTs
????
Profit
????
Profit
Posted on 5/23/22 at 1:46 pm to WildTchoupitoulas
quote:Exactly
But I have never, in 33 years of working in the professional world, thought of my investments in any way as "cash on the side".
Cash on the side is spending money, disposable income.
Your retirement fund is not that.
Posted on 5/23/22 at 2:15 pm to Newrow
I'm not sure you know what predicament means. 
Posted on 5/23/22 at 2:20 pm to REB BEER
quote:
would borrow money at 30% to pay off debt?
If he's leaving his job, he wouldn't be able to borrow against it. Ever 401k plan I have seen require you to pay back the loan upon separation from the employer or it gets treated as a withdrawal with the penalties & interest
Posted on 5/23/22 at 2:23 pm to Newrow
quote:
Why be a slave to debt if you can pay it off in the short term?
Because doing so, could very well cause him to be a slave to a paycheck for the rest of his life.
Put it this way, $25k in a retirement account at 27 w/ an average rate of 10% a year (adding nothing else to the account) could have him right around $1M at 65. NO matter how many say they will, no one ever catches back up with their retirement accounts. As another poster said, stop contributing to the retirement accounts, use extra cash to pay off credit card and private student loans; continue with payment plan on gov't back student loans for now.
Posted on 5/23/22 at 2:39 pm to Weekend Warrior79
I think REB BEER meant paying 30% tax & penalty is similar to borrowing at 30%. If you think that's dumb then dont liquidate 401k either. No one is suggesting a 401k loan.
This post was edited on 5/23/22 at 2:41 pm
Posted on 5/23/22 at 2:47 pm to Newrow
Why would you pay a penalty for early withdrawal of 401k / IRA AND take the loss on the sale of assets with the market down 20%?
Posted on 5/23/22 at 2:52 pm to Newrow
How is his credit? Could he get a personal loan from local credit union or online lender for better rate to pay off the CC then aggressively pay the loan off?
Liquidating 401k or ROTH and paying tax/penalty is foolish except in dire circumstances. If he throws all his excess cash at the CC and depletes his emergency reserves (assuming he has any), worst case he could pull ROTH IRA contributions in a true emergency penalty free or even resort to using CC again temporarily.
Liquidating 401k or ROTH and paying tax/penalty is foolish except in dire circumstances. If he throws all his excess cash at the CC and depletes his emergency reserves (assuming he has any), worst case he could pull ROTH IRA contributions in a true emergency penalty free or even resort to using CC again temporarily.
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