jerry_won3772 asked:
I have $10,000 credit card debt and I have about $20,000 in 401 k. I just want to pay this off and start off fresh again. If I do want to do this, how much do you think this will cost me?
I have $10,000 credit card debt and I have about $20,000 in 401 k. I just want to pay this off and start off fresh again. If I do want to do this, how much do you think this will cost me?
dont do it- write to suzie orman and shell give u a houndred reasons why u shouldnt do that.
I think there is a 10% penalty for early withdrawel and then you have to pay state and federal taxes as well – so how much it costs you depends on your tax bracket and the state where you live.
Don’t do it. You’ll just run your credit card bill back up now that it’s paid off and you’ll be back here, but upon retirement be ~100-200k worse off.
40%
not worth it
you should listen to dave ramsey on am radio and fox business he gives advice on your situation everyday
don’t do it!
its not a smart idea unless you can repay your 401k within 60 days
you will get hard with penalty taxes.
just work out a budget to pay off your credit cards. AND CUT THEM UP or you will find yourself 20,000 in debt before you know it.
its about a lifestyle change.
Usually it isn’t a good idea.
The loan will not cost you very much as far as interest rate goes. It depends on your provider.
However, the big loss comes in your money not being invested for you. The market averages 10+% annually, and all of those funds will not be invested for you.
Might be better off to just take the money that you would be paying the loan back with from you check – and putting it on your cards.
Typically you can borrow 1/2 of the funds, so you will be right at the limit.
PS It is not true that you’ll get hit with penalities or taxes for a loan, unless you leave your job and can’t repay it.
dont do it it will cost u so much more, first penalty is 20%, so if u take 10000 kiss 2000 more to uncle sam, second the 12000 will be taxed as ordinary income in whatever tax bracket u r, so if u are in the 20% bracket uncle sam gets another 2400, ouch that totals 4400, unless u r 59 1/2 years old than u can draw without penalty, just adds to income, still cost u 2400, BETTER IDEA, STOP ANY CONTRIBUTIONS TO YOUR 401K FOR A PERIOD OF TIME AND PAY DOWN THE CREDIT CARD WITH THAT, BUT DONT TOUCH THE 401K NOT A WISE MOVE. U COULD ALSO PLAY MOVE THE BALANCE GAME TO CARDS WITH ZERO INTEREST IF YOU HAVE GOOD CREDIT AND GET THOSE KIND OF OFFERS WHILE U R PAYING IT DOWN.
It is a huge withdrawl fee! Say that you have 200,000 in it and are in the 25% tax bracket (or that you’d pay 25% on average of the income prematurely taken from the 401k), you’d pay $50,000 in taxes and another $20,000 in penalties. I’d recommend you explore all other options fully before raiding your 401k, including borrowing.
I’d recommend you discuss the issue with your lawyer.
You will have to pay taxes on the 401 k money you take out. Your tax will be based on your current tax rate%. Then you will have to pay the 401k off with pre taxed money. You lose twice. NEVER NEVER borrow from your 401k, you will regret it later for sure. The 401k is for RETIREMENT!!!!!! Not a 2nd savings account. Payoff your credit card off in payments or borrowed money. Not from your 401k. Bite the bullet and start paying it off.
You will incur a 10% penalty on early withdrawal as well as pay federal and state taxes as this withdrawal would be considered income. You’re looking at anywhere from 20-35% being withheld as taxes. So you’d have to withdraw at least $15,000 just to pay off $10,000. Does that sound like something you really want to do?
Your best option is to change your spending habits and try to increase your income coming in. Have you set up a budget? Do you know how much money you have coming in each month and how much is going out? You have to set paying off your credit card debt as your number one priority and start saving more money to be able to do that. Using a budget helps in that regard – as a tool to decide what you need to do.
10% penalty plus income tax on the gross withdrawal amount.
I’ll agree with almost everyone here–I’ve covered this issue for various business publications. The taxes and penalties make this a very bad idea.
It may end up costing more. Check out the pros and cons of it.
I did it before and I paid dearly for it.
If you MUST have the money now, try getting a partial withdrawal through a “loan” and remember that any money that you take out, will be exposed to TAXES now.
You will be charged an interest rate to pay it back. Plus any fees.
If you decide to do it, take the money you were paying on your credit cards and the minimal amount of the payment for the loan, and pay ALL of it back. The sooner the better. Keep one account open that has the highest available limit for EMERGENCIES ONLY.
To those that talk of the penalties, he is asking about a LOAN not a DISTRIBUTION.