Posted by admin on 29 Feb 2008 2:06 am. Filed under Personal Finance.
BP asked:
I have $27,000 in various investments ranging from 401K, Common Stocks, and Mutual Funds. I also have $26,000 in credit card debt. Should I liquidate my investments and pay off my credit card debt. What would be better in the long run. Credit card interest spans from 4.99% to 17.99%.
9 Comments to “Should I pay off my debt with my investments and retirement funds?”
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irspecialbb said:
On February 29th, 2008 at 8:30 am
Don’t get rid of your retirement funds and 401k, just continue to make your payments so you don’t ruin your credit and your retirement at the same time
Tim said:
On March 1st, 2008 at 12:59 am
You’ll probably have penalties for cashing out and tax implications.
Stop using the credit cards, and pay as much as possible towards the high interest cards first, with just minimum payments on the lower interest cards.
AlexAtlanta said:
On March 3rd, 2008 at 6:58 pm
Hell no.
Liquidating a 401k fund is an immediate 10% penalty and often a 20% penalty. Plus you are not gaining on the investment. So you take a double whammy.
Make minimum payments on the lowest fee cards and pay the most on the high rate cards. Close cards as they are paid off. Stop charging anything you cannot afford to pay for NOW.
en camera said:
On March 4th, 2008 at 12:57 pm
Don’t use your investments. You will never get them back. The cash will be gone, and you might just start over charging things up on your cards. Quit using the cards, pay off that debt and add to your 401. Easier said than done, but worth the effort.
natefish said:
On March 6th, 2008 at 8:51 am
Cut up the cards now (if you haven’t already) and then close them as you pay them off.
Consider consolidating your loans. With the fed cutting rates, you should be able to find a good loan rate. Pay the same amount or more than you would have had to pay each month if you kept all the cards.
Don’t dip into your investments unless you have to.
Good luck!
invisiblepedestrianchaser said:
On March 9th, 2008 at 1:55 am
Check out Dave Ramsey’s Total Money Makeover, he helped us get out of debt.
Cashing in your investments isn’t usually a good idea, especially if you’d be liquidating your 401k, that’s a HORRIBLE idea. Not only will you have insane penalties, you will not have any retirement savings. Dave Ramsey’s debt snowball definitely works, but you may not appreciate some of his methods. Check it out, it’s helped millions of people.
Nelson_DeVon said:
On March 10th, 2008 at 3:38 am
I would probably pay off everything that was over 10%, but you can probably make more than 4.99% so don’t get rid of that just pay it off over time.
Jeff said:
On March 13th, 2008 at 3:08 am
The only reason to cash out retirement accounts (IRA, 401K, Roth IRA) is to avoid bankruptcy. I know Suze Orman likes to use the Roth as an emergency fund, but I disagree and think it’s a bad idea.
If you have stocks and mutual funds in a regular brokerage account, those should be liquidated to pay off as much of the $26,000 in debts as possible.
Once you’re free of the burdens of credit card debt, you’ll have plenty of money to invest.
BUT, BEFORE YOU SELL ANY STOCKS TO PAY OFF DEBTS, YOU MUST ELIMINATE DEBT FROM YOUR LIFESTYLE.
Cut up the credit cards, close the accounts, and never open up another credit card account.
If you plan to use credit cards for an emergency, STOP IT.
Keep $1,000 in the bank, before you start paying off the credit cards. Just let it sit there. You’ll need a rainy day fund in case the transmission blows up, or the dishwasher breaks.
bluefishbig said:
On March 15th, 2008 at 4:17 am
If you have any room on the card with the lowest interest rate move the money from the highest to lowest, then close the card with the highest rate and cut the card up.
Pay as much as you can on the lowest rate until you paid it off.
Then move to next lowest.
If you are getting a tax refund use that also to reduce your credit card debt.
On February 29th, 2008 at 8:30 am
Don’t get rid of your retirement funds and 401k, just continue to make your payments so you don’t ruin your credit and your retirement at the same time
On March 1st, 2008 at 12:59 am
You’ll probably have penalties for cashing out and tax implications.
Stop using the credit cards, and pay as much as possible towards the high interest cards first, with just minimum payments on the lower interest cards.
On March 3rd, 2008 at 6:58 pm
Hell no.
Liquidating a 401k fund is an immediate 10% penalty and often a 20% penalty. Plus you are not gaining on the investment. So you take a double whammy.
Make minimum payments on the lowest fee cards and pay the most on the high rate cards. Close cards as they are paid off. Stop charging anything you cannot afford to pay for NOW.
On March 4th, 2008 at 12:57 pm
Don’t use your investments. You will never get them back. The cash will be gone, and you might just start over charging things up on your cards. Quit using the cards, pay off that debt and add to your 401. Easier said than done, but worth the effort.
On March 6th, 2008 at 8:51 am
Cut up the cards now (if you haven’t already) and then close them as you pay them off.
Consider consolidating your loans. With the fed cutting rates, you should be able to find a good loan rate. Pay the same amount or more than you would have had to pay each month if you kept all the cards.
Don’t dip into your investments unless you have to.
Good luck!
On March 9th, 2008 at 1:55 am
Check out Dave Ramsey’s Total Money Makeover, he helped us get out of debt.
Cashing in your investments isn’t usually a good idea, especially if you’d be liquidating your 401k, that’s a HORRIBLE idea. Not only will you have insane penalties, you will not have any retirement savings. Dave Ramsey’s debt snowball definitely works, but you may not appreciate some of his methods. Check it out, it’s helped millions of people.
On March 10th, 2008 at 3:38 am
I would probably pay off everything that was over 10%, but you can probably make more than 4.99% so don’t get rid of that just pay it off over time.
On March 13th, 2008 at 3:08 am
The only reason to cash out retirement accounts (IRA, 401K, Roth IRA) is to avoid bankruptcy. I know Suze Orman likes to use the Roth as an emergency fund, but I disagree and think it’s a bad idea.
If you have stocks and mutual funds in a regular brokerage account, those should be liquidated to pay off as much of the $26,000 in debts as possible.
Once you’re free of the burdens of credit card debt, you’ll have plenty of money to invest.
BUT, BEFORE YOU SELL ANY STOCKS TO PAY OFF DEBTS, YOU MUST ELIMINATE DEBT FROM YOUR LIFESTYLE.
Cut up the credit cards, close the accounts, and never open up another credit card account.
If you plan to use credit cards for an emergency, STOP IT.
Keep $1,000 in the bank, before you start paying off the credit cards. Just let it sit there. You’ll need a rainy day fund in case the transmission blows up, or the dishwasher breaks.
On March 15th, 2008 at 4:17 am
If you have any room on the card with the lowest interest rate move the money from the highest to lowest, then close the card with the highest rate and cut the card up.
Pay as much as you can on the lowest rate until you paid it off.
Then move to next lowest.
If you are getting a tax refund use that also to reduce your credit card debt.