Comments on: Don’t raid 401(k) to pay off credit card debt

By: 5 Investments That Build Wealth | Budget Musings

5 Investments That Build Wealth | Budget Musings — Sat, 13 Feb 2010 15:05:03 +0000

[...] (RRSP for Canadians): 401(k)s are designed for retirement, not for short-term saving or paying off debt. Ideally, you will always work for an employer who [...]

By: lizweston

lizweston — Fri, 12 Feb 2010 21:32:07 +0000

If there’s no risk you’ll lose your job, or if the plan allows you to pay back the balance over time even if you do, then I’d agree a 401(k) loan may be an option to consider. Too many people aren’t in that enviable position, though, so they risk having the loan become an inadvertent withdrawal should they lose their jobs.

By: Howard Phillips

Howard Phillips — Fri, 12 Feb 2010 17:44:09 +0000

An answer re: using 401(k) money to pay off credit cards is incomplete if you don’t include the obvious positive result of borrowing from your 401(k) to extinguish credit card debt. Replacing an 18% borrowing cost with one at prime (plus a small fee), with prime paid to oneself, is not only fiscally responsible, but will free up funds to increase retirement savings. The argument that repaymemnts of 401(k) borrowing are double taxed is a myth, since it ignores the fact that the loan is tax FREE.

By: lizweston

lizweston — Mon, 08 Feb 2010 20:30:21 +0000

Search “debt settlement” on MSN to find some articles about this, but debt settlement with original creditors can trash your credit scores and lead to lawsuits. It may be an option 1) if you can’t pay the debt yourself (best option), qualify for legitimate credit counseling (www.nfcc.org) (next best option) or file Chapter 7 bankruptcy.

By: Kurt n Litton

Kurt n Litton — Mon, 08 Feb 2010 20:05:01 +0000

Wow, great info. My retirement account isn’t so well endowed, but I have been considering depleting it to eliminate about 40K in CC debt. Glad to know this is a bad move. I wonder about credit card (debt) settlement companies and the after effect.