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List your reasons of when you would consider cashing in one of your retirement accounts early?

 

 

If it was necessary to put food on the table and not be homeless.

If it was the only way to pay for life saving medical treatment.

 

I would not cash it for discretionary spending, and also not to finance my kids' college education - you can borrow for education, you can't borrow for retirement.

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List your reasons of when you would consider cashing in one of your retirement accounts early?

 

My dh and I kind of disagree.

 

Well I'm prejudiced by my view that bailing out U.S. and foreign banks to the tune of $29 trillion has set up the global economy for a BIGGER systemic failure/collapse than the one we had in 2008. Because once this second collapse occurs, you won't get your retirement money, you'll "have what you have." So I'd take it out and get things you really need/want with it.

 

If you're taking a peek at all at what's happening in Europe, Implosion Day gets closer and closer. (sadly enough)

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The only one off the top of my head is "necessary medical procedure for family member." Other than that, I would throw a gigantic tantrum (and get three jobs and rework our lifestyle aggressively) before approving access to a retirement fund.

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List your reasons of when you would consider cashing in one of your retirement accounts early?

 

My dh and I kind of disagree.

 

Is it a tax sheltered account? Then only under extreme measures.

 

If you have a Roth, you can withdraw payments you made (but not the interest generated) without penalty. If circumstances forced me to tap into retirement, I'd go first into the Roth.

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We have one big debt still to be paid other than our mortgage. We have paid off our school loans, car loans, credit cards (and closed them!).

 

We had a second mortgage that matured and when it did we put it on a 0% cc because the second mortgage rate was insane. Of course we knew that after a year the cc rate would not be 0% anymore. We have been sending a very big chunk of change to the cc each month. Great.

 

However, dh just accepted a new job making less. We will not be able to continue sending our large monthly payment. It would be considerably less, but we would at least be sending the minimum. This is going to set us back quite a bit in paying it off.

 

As for me getting a job, dh says that my main priority is the kids and homeschooling. Although I would like to get a work at home job....I'm not putting my eggs into that basket. Let's assume I will continue to not make any income.

 

My dh sick of this lingering debt. He wants it gone. Then we would have nothing but the mortgage. So he wants to take one of his retirement funds and cash it in. He stresses about this debt. He says he just wants to be done with it. He's stressing even more about it now that his income will be lower.

 

I'm hesitant. It's not an emergency, and I figure retirement should only be used for emergency.

 

Dh argues that if we pay this off we can actually put money into savings and it will add up faster as we will be gaining interest instead of losing interest.

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We have one big debt still to be paid other than our mortgage. We have paid off our school loans, car loans, credit cards (and closed them!).

 

We had a second mortgage that matured and when it did we put it on a 0% cc because the second mortgage rate was insane. Of course we knew that after a year the cc rate would not be 0% anymore. We have been sending a very big chunk of change to the cc each month. Great.

 

However, dh just accepted a new job making less. We will not be able to continue sending our large monthly payment. It would be considerably less, but we would at least be sending the minimum. This is going to set us back quite a bit in paying it off.

 

As for me getting a job, dh says that my main priority is the kids and homeschooling. Although I would like to get a work at home job....I'm not putting my eggs into that basket. Let's assume I will continue to not make any income.

 

My dh sick of this lingering debt. He wants it gone. Then we would have nothing but the mortgage. So he wants to take one of his retirement funds and cash it in. He stresses about this debt. He says he just wants to be done with it. He's stressing even more about it now that his income will be lower.

 

I'm hesitant. It's not an emergency, and I figure retirement should only be used for emergency.

 

Dh argues that if we pay this off we can actually put money into savings and it will add up faster as we will be gaining interest instead of losing interest.

 

Is it possible to borrow money from a retirement account to pay off your CC? The interest rate on a retirement account loan may be lower than the ridiculous rate that credit cards charge.

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You have to factor in whatever taxes and penalties you'll have to pay on it. If you lose 50% to taxes and fees, is it really worth it? On the other hand, I'm of the mind that if dh REALLY wants to do it, I'd have my final say then be quiet and let him do what he thinks is best.

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I would absolutely NOT do it for this purpose, though I would slow down, or even eliminate adding new money to retirement (other than company-matched amount) as a compromise.

 

 

Sigh. This is what I say. Dh is of another mind. He has more than one retirement account if it makes a difference.

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Dh argues that if we pay this off we can actually put money into savings and it will add up faster as we will be gaining interest instead of losing interest.

 

 

 

If the numbers make sense on paper, and you both have the discipline to follow through putting the $ into savings...I would lean towards going with dh. His stress level over the debt would be my main motivator.

 

 

 

Sigh. This is what I say. Dh is of another mind. He has more than one retirement account if it makes a difference.

 

 

 

I think that does make a difference.

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Is it possible to borrow money from a retirement account to pay off your CC? The interest rate on a retirement account loan may be lower than the ridiculous rate that credit cards charge.

 

:iagree: You'd be paying yourself back, and it would be more hands off than a savings account- which would be easy to dip into and therefore more likely to be spent. But how much do you owe, how long until dh retires, and how much of his retirement would be tied up in this?

 

Or even apply and transfer the amount to a new credit card with 0%. Since you're not using the card to accumulate new debt, it seems a reasonable way to gain another year of interest free payments. If you're not paying much more than minimums, eliminating the interest can make a big difference.

 

Or even a very part time job, depending on how large the loan is and how busy you are right now.

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He has more than one retirement account if it makes a difference.

 

I don't think the number of accounts matter. What matters is how much are in the accounts how this will impact your overall financial goals - including retirement.

 

We dipped into our Roth to buy our first house. I wouldn't do it again, but at that point we had oversaved and were continuing to oversave on a large income. We live a much different life now, and we are much closer to retirement. I wish the cash + growth was back in the account. I don't know about you, but we manage to spend anything that isn't restricted.

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It would take a major financial emergency before I'd cash out a retirement account, and I'd try to borrow from family first (which I'd absolutely hate doing BTW).

 

I wouldn't do it to save our house. Now if I needed to do it to keep us from being out on the street with absolutely no place to go, that's a different story. Knock on wood, we're not upside down on the mortgage so we could presumably sell it, pay off the bank, and still have some equity to afford the rent for a while on a less expensive apartment while we get back on our feet (though we'd have lost a chunk of our down payment).

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Assuming you can do it, a loan on the retirement account seems to me the best way to go. You're paying yourself back just like in your DH's original scenario, but you don't lose a big chunk to penalties as you would if you withdrew the money early. I can relate to your DH's dislike of loans, but pulling money from a retirement account to pay one off isn't a sound financial decision IMO.

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You have to factor in whatever taxes and penalties you'll have to pay on it. If you lose 50% to taxes and fees, is it really worth it? On the other hand, I'm of the mind that if dh REALLY wants to do it, I'd have my final say then be quiet and let him do what he thinks is best.

 

:iagree:

 

This.

 

I have had 2 different family members who had to make an early withdrawal, both with serious (thousands of dollars) taxes/tax penalties after the fact.

 

I would make triple sure --- as in, speak to an accountant/tax attorney/someone --- that the withdrawal + taxes/penalties would still work out to be the better deal (ie, he needs to subtract the tax penalties from the "we could put X into savings" fund and be sure it still is worth it even after that).

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As the others have said, not for "paying off debt." Yes, for a crises that will make you homeless/without transportion/without food.

 

Trust me, you have *no* idea how soon retirement may come. I'm at the age were some of my friends have lost their DH's and several were quite ill and couldn't work during their last year or so. We're facing probable early retirement right when the college bills hit, and that was *not* in the plan, believe me.

 

And it isn't worth the tax penalties either.

 

We have a relative who paid all of the penalties and cashed out his retirement to open a business two years ago. The business failed, and he has nothing saved for retirement.

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I'd take a job before using retirement funds to pay off debt. My priority is the kids and house too, but the kids and house would be just fine if I took a temporary job to pay off a debt. Since you can make payments I'd consider other ways to get cash (sell something? tutor?). As to retirement plans - I'd consider them for a serious emergency (ie life-saving medical procedure that cannot be funded any other way), but not for CC debt that I can make payments on.

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I tried to read all the posts but I still have a few questions, sorry if I missed something -

 

How old is your husband? Does he have many years to replace the money taken out of retirement?

 

You say he is considering cashing in one of his accounts. Does he really need to take it all out? How many accounts he has doesn't matter - it's how much is in them. What percentage of total retirement funds is he planning to withdraw? 5%? 50%? 75%? That makes a difference too.

 

If he is young and has many working years ahead, and is planning to take a rather small percentage, run the numbers and see how much it would cost in tax and penalties vs the amount of the interest on the debt. It might be worth it, in particular if the debt is causing great distress.

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If you are younger than age 59 1/2, an early withdrawal will likely cost you almost 40%!!! This includes a 10% early withdrawal penalty plus normal income taxes.

 

I did take an early withdrawal when I was in my 20s and now I am kicking myself. I keep imagining what that money could have grown to!!! Now, I would not take an early withdrawal to pay off debt - no way, no how!

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If he feels you're disciplined enough to put the money back into savings, then use that discipline to pay off the house rather than using the retirement money.

 

It would have be to catastrophic disaster for me to dip into retirement. I am capable of working now. When I'm old and grey I am not. Even at 50 or 60, you can run into medical problems that affect your ability to earn an income. Save your money now in case you truly can't earn it later.

Edited by Garga
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If he feels your disciplined enough to put the money back into savings, then use that discipline to pay off the house rather than using the retirement money.

 

It would have be to catastrophic disaster for me to dip into retirement. I am capable of working now. When I'm old and grey I am not. Even at 50 or 60, you can run into medical problems that affect your ability to earn an income. Save your money now in case you truly can't earn it later.

 

I think this is a good point too. It's one of the reasons I'd go back to work if possible rather than cashing in retirement. Retirement money is for when I can't work anymore, I don't want to cash it in to make me more comfortable now.

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I have not read the thread, but I wanted to respond with why I cashed in my retirement. I had about 20k in a retirement account when I quit working to raise my dc about 18 years ago. I cashed it all in to make a business investment. Now, all business investments are not equal. Some are much riskier than others. Ours was about mid-level risk. I'm so glad I did. It started dh and I on our dream of ranching. That 20k has made a lot more money for us in cattle than it ever would have sitting in a 401k. Money is basically worthless right now. The Fed is trying to get people to spend, spend, spend, which is why interest rates are being kept so artificially low. This WILL have to change, and you will begin to earn interest on savings again. But who knows when. Politics.

I would NOT cash in a 401k to meet living expenses. I would work at McDonalds first. I would only cash it in to make it work harder for me.

Cheers, Jackie

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If it was necessary to put food on the table and not be homeless.

If it was the only way to pay for life saving medical treatment.

 

I would not cash it for discretionary spending, and also not to finance my kids' college education - you can borrow for education, you can't borrow for retirement.

 

:iagree: To save the house, or life saving medical emergency. Otherwise, never.

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We once stopped contributing to retirement for a year to pay off debt. No regrets there.

 

For the most part, I wouldn't cash out retirement to pay off debt unless it was an emergency and it was between that and being on the street ... I've been thinking about this issue recently, though, because DH is being offered a lump sum pension buyout from a previous employer. Smallish amount that we haven't been counting on for retirement and we'll likely roll it to an IRA to avoid the taxes. Depending on where things are at years down the line, we *might* consider cashing that specific amount out, penalty-free, to go towards DD's college. But I wouldn't touch our primary retirement accounts unless it was a dire situation. I suspect that we'll need that money down the line and it provides comfort to know that it is there.

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