Posted on: 30th Apr, 2010 01:52 pm
Hello, I am 39 years old and due to eligibility just started contributing to my company's 401K. I also have an IRA worth about 25K. However I have CC debt totaling 25K.
My question is should I liquidate some or all of the IRA to cut the CC debt or come close to eliminating it? Now that the economy is beginning to pick up, I feel if I had the extra money saved from not having to pay the CCs that I would be able to take that same money and contribute to either the 401K or a new IRA and build that fund back up and still have time to get a good nest egg for retirement.
Being that I won't retire for another 25 years, is it worth it. I know about the penalties, taxes, etc. I have 2 mortgages on my home and make just enough each month to cover all of my expenses, but really have nothing left over. So my emergency fund is a whopping 500 bucks. I'm living paycheck to paycheck and really want to be debt free and have some peace of mind.
Any and all help is greatly appreciated.
Thanks,
Andrew
My question is should I liquidate some or all of the IRA to cut the CC debt or come close to eliminating it? Now that the economy is beginning to pick up, I feel if I had the extra money saved from not having to pay the CCs that I would be able to take that same money and contribute to either the 401K or a new IRA and build that fund back up and still have time to get a good nest egg for retirement.
Being that I won't retire for another 25 years, is it worth it. I know about the penalties, taxes, etc. I have 2 mortgages on my home and make just enough each month to cover all of my expenses, but really have nothing left over. So my emergency fund is a whopping 500 bucks. I'm living paycheck to paycheck and really want to be debt free and have some peace of mind.
Any and all help is greatly appreciated.
Thanks,
Andrew
Hi rew,
I don't think you should use your Individual Retirement Account (IRA) to pay off your credit card debt. You can rather opt for debts settlement, or debt consolidation to pay off the debts.
In debt consolidation you need to take out a single loan to make a single monthly payment on all the debts, and the interest rate gets lowered. In a debt consolidation program the company does all kinds of negotiations on your behalf.
In debt settlement the outstanding debt amount gets lowered, at least by 40-60%. You can try negotiating a settlement with your creditors. With debt settlement it becomes much easier to pay off your debts.
However, while debt settlement may affect your credit negatively, debt consolidation will have no such negative effect on your credit.
Thanks,
Sandra
I don't think you should use your Individual Retirement Account (IRA) to pay off your credit card debt. You can rather opt for debts settlement, or debt consolidation to pay off the debts.
In debt consolidation you need to take out a single loan to make a single monthly payment on all the debts, and the interest rate gets lowered. In a debt consolidation program the company does all kinds of negotiations on your behalf.
In debt settlement the outstanding debt amount gets lowered, at least by 40-60%. You can try negotiating a settlement with your creditors. With debt settlement it becomes much easier to pay off your debts.
However, while debt settlement may affect your credit negatively, debt consolidation will have no such negative effect on your credit.
Thanks,
Sandra
Hi Rew,
It is good to know that you are planning something positive. I would also suggest not to use your IRA account to pay off your debts. You can opt for debt settlement as it will not only lower down the principle amount but also waive off the late fees. There are companies who helps in consolidating the debts. They will negotiate with the creditors and you need to make a single monthly payment as per your convenience. However it will effect your credit score. But once you are out of debt, you can rebuild your credit. You can even call the creditors and try to negotiate with them directly. And the last option is, go for debt management where your principle will remain same but APR will get reduced. Now it is up to you to select the best option.
It is good to know that you are planning something positive. I would also suggest not to use your IRA account to pay off your debts. You can opt for debt settlement as it will not only lower down the principle amount but also waive off the late fees. There are companies who helps in consolidating the debts. They will negotiate with the creditors and you need to make a single monthly payment as per your convenience. However it will effect your credit score. But once you are out of debt, you can rebuild your credit. You can even call the creditors and try to negotiate with them directly. And the last option is, go for debt management where your principle will remain same but APR will get reduced. Now it is up to you to select the best option.