Posted on: 13th Sep, 2009 01:21 am
Hello,
We are a couple in our late 50's.
Our problem, we bought a house two years ago, payments $1700. we have $15000 in CC debt all in collections, we had a cut in income....we bring home $3100 a month. We have exhausted all savings, we cannot pay insurance, expenses, cc, etc. in full. We do not save any money, we do not have an emergency fund. We do have small 401K's. One of ours $31000. with a $10000. loan against it. Is it wise to cash it in to pay off our debt. We have no equity in the house, we paid $275000, it's worth now $180000. The loan was for $256000, we owe $253000.
We have no money extra to do anything with. There is no room in the budget for emergencies.
Should we cash out our 401K to pay off debt and put the remainder aside for an emergency fund.
Thank you
We are a couple in our late 50's.
Our problem, we bought a house two years ago, payments $1700. we have $15000 in CC debt all in collections, we had a cut in income....we bring home $3100 a month. We have exhausted all savings, we cannot pay insurance, expenses, cc, etc. in full. We do not save any money, we do not have an emergency fund. We do have small 401K's. One of ours $31000. with a $10000. loan against it. Is it wise to cash it in to pay off our debt. We have no equity in the house, we paid $275000, it's worth now $180000. The loan was for $256000, we owe $253000.
We have no money extra to do anything with. There is no room in the budget for emergencies.
Should we cash out our 401K to pay off debt and put the remainder aside for an emergency fund.
Thank you
it is not advisable as 10% of withdrawal amount will be charged to you as penalty.
you can plan for loan against it but in that case interest rate charged will be prime rate+ 2%.
you can plan for loan against it but in that case interest rate charged will be prime rate+ 2%.
it is never recommeded. you have saved money for several yrs. there is no point in loosing hard earned value as penalty.
instead of that it would be better for you take partial loan, pay back some portion of mortgage & then refinance so that your current financial condition be in your control.
you can withdraw amount after reaching age 59 and 1/2 years without paying the penalty. so it is a question of few years.
instead of that it would be better for you take partial loan, pay back some portion of mortgage & then refinance so that your current financial condition be in your control.
you can withdraw amount after reaching age 59 and 1/2 years without paying the penalty. so it is a question of few years.
AS you have stated that you do not have enough equity in the home and thus can not think about the option of loan against property so lot will depend on the single factor whether are you behind on your CC debt?
If the question is yes then I will advice you to go for the 401 K monet withdrawal (even with 10 % penalty) and pay off the CC debt.
But in this case you should make a vow that you will save atleast 500 USD per month for your future.
If the question is yes then I will advice you to go for the 401 K monet withdrawal (even with 10 % penalty) and pay off the CC debt.
But in this case you should make a vow that you will save atleast 500 USD per month for your future.
It is always a bad idea to withdraw from 401K. In addition to loosing on your retirment amount you also loose the extra money in penalty.
At the end you wil be looking at only 50% of the money what you plan to with draw in your hand
Looking at options like if you can get loan from your 401K is a good idea
At the end you wil be looking at only 50% of the money what you plan to with draw in your hand
Looking at options like if you can get loan from your 401K is a good idea