Cashing IRA to pay off Credit Card debt

Garysnober · Joined: 17 Mar 2009 Posts: 455 15.40 Dollars($)

Please dont cash out and ira to pay of debt. Taxes will be alot of money and your risking your retirement money. Worse case you can claim a BK.

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.77 Dollars($)

Again, whats new in thsi answer??

Guest

I am in a similar situation with $26K in credit card debt and $105K in IRA and $10K in 401k. Despite spotless credit, all three of my major credit cards jacked rates on me recently. My wife and I decided no more credit cards!!! If we are making 10% on our investments but paying 17% on debt, it does not take a genius to figure out this makes sense EVEN with a penalty. Besides, it is highly likely that when I retire in 25 years, our tax rates will be much higher to pay for the massive entitlements!!

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.77 Dollars($)

Guest

That's good question!

But you cannot avoid taxes. You did not pay taxes on that money when you contributed, so need to pay that now

Good luck and feel free to ask

Guest

OK I am 44, doubtful I'll ever retire. If I cash out my miniscule $4800 IRA I will get what about $3700 cash?? OK I take $3K of that to pay off one one my credit cards (that paid for medical bills over the summer). Paying off that will make me eligible to refinance my mortgage, saving me about $200/ month. Which will me pay of my other credit card with $9K on it. Tell me what to do. I am betting most here that keep saying hold onto your IRA do not feel their back against the wall.

gmakerley · Posted: Sun Oct 25, 2009 7:51 pm Post subject:

phil, i feel your pain - truly. for the piddling amount you have in your ira, maybe it's in your best interests to liquidate it and pay off what you feel you need to pay. it's certainly not the best situation to be in, and i think that's where most everyone is coming from. nevertheless, it's a situation that you're in, and you're pinched and kind of lost in the wilderness.

don't let me be the person who says "liquidate the ira" but at the same time, i can't tell you not to, based on what you've just said. you may be quite right that those who say don't do it are not in the same position you're in, and it's easy for them to say what they've said. if you had $50K in an ira and talked about liquidation, i'd be on their bandwagon. but since you've got less than $5000, i can say i don't see it as a financial nightmare for you to do it.

it's your decision, ultimately, isn't it...we don't know your age - maybe you're 60 and $4800 isn't going to do you much good anyway. or maybe you're 30 and you can easily begin to sock money away again after a short while, so the funds will be replenished eventually.

in 2009, unfortunately, we are being forced to do what we've gotta do to survive, and that involves some hard decisions.

smckaybiz · Posted: Fri Nov 06, 2009 6:46 am Post subject:

Alright I'm just going to say it...

CASH IN THOSE IRA'S!!!!!

I did and I couldn't be happier. If you think about it, unless you're almost ready to retire, most investments are going down while credit card rates are going up. Say you hav about 50,000 in cc debt and your monthly payments are just the 1.5% most cc companies make you pay. That's $750/month or $9K/year. So if you were to cash in $50K worth of IRA's to pay it off you could save that money back up in just 5-6 years. Where as if you just continued to make your min. payments on your cc's, the balances would be going nowhere and you would probably find yourself using all of your IRA payments at retirement just to pay your cc debt!

It may just be me but I don't see how sitting on money when you are so far in debt can be a good thing. If you are needing to borrow money to get by than maybe you shouldn't be putting so much of it into retirement and use that money to keep you from getting in the hole to begin with!

What says you??? Very Happy

gmakerley · Posted: Tue Nov 10, 2009 10:52 am Post subject:

i agree with that logic, scott. i suppose it depends on someone's age, too. but the bills don't go away, that's for sure.

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