Cashing Out 401K, Pay Off Debt
Posted on November 2, 2009 at 8:20 pm
Hi to all. I am thinking of cashing out 401k to pay off debt. For starters I have a $20k credit card debt and I have $25k saved up on my 401k. I wonder if this is a good move on my end or I should look for other alternatives elsewhere. Thanks for the answers and hope you have a good one.
Posted on November 3, 2009 at 1:05 am
Cashing 401k to pay off debt is not a very good idea. Unless you are 59.5 years of age, you would be charged a 10% penalty for prematurely encashing the bill. Other charges would also be added, such as federal taxes, and income tax fees.
Posted on November 3, 2009 at 1:38 am
Many people think that cashing 401k pay off debt is a viable solution, but it's not very wise indeed. Lurker's right in saying that there are lot of fees to be paid on top of the amount that you'll have to borrow.
Why not consolidate your debt instead?
Posted on November 3, 2009 at 1:53 am
I dunno, I'm just a little apprehensive about consolidation that's why cashing out 401k pay off debt is the option I'm going for... With all the scams I hear about, I don't wanna take the risk, I'd just rather do it myself.
Posted on November 3, 2009 at 2:01 am
That's pretty understandable. True, there are indeed a lot of scams on debt consolidation, but that's really where research comes in. Not a lot of debt consolidation companies are after your money. It's essential to really do your homework and do service-shopping so that you would be able to get the best deal possible and get your debt taken care of.
Also, cashing your 401k to pay off debt may not be very beneficial for you in the long run. You can read this article for more information:
http://www.time.com/time/business/article/0,8599,1929119-1,00.html
Posted on November 3, 2009 at 2:19 am
What you can also do jolie.fann is to speak with a qualified provider who can help you out on your situation... All you have to do is fill out a form on DestroyDebt.com and you're good to go.